Business 9609/32 May/June 2025: question paper and mark scheme

Mark scheme

1 Analyse two benefits to PAIR of contingency planning. 8 Level AO1 Knowledge and AO2 Application AO3 Analysis understanding 2 marks 2 marks 4 marks 2 3–4 marks Developed analysis • Developed analysis that identifies connections between causes, impacts and/or consequences of two points. • Developed analysis that identifies connections between causes, impacts and/or consequences of one point. 1 1–2 marks 1–2 marks 1–2 marks • Knowledge of two relevant • Application of two relevant Limited analysis points is used to answer the points to a business context. • Limited analysis that identifies question. • Application of one relevant connections between causes, • Knowledge of one relevant point to a business context. impacts and/or consequences point is used to answer the of two points. question. • Limited analysis that identifies connections between causes, impacts and/or consequences of one point. 0 0 marks 0 marks 0 marks No creditable response. No creditable response. No creditable response. 1 Note: 8 • If more than two benefits are identified reward the best two. • Only reward benefits. • L2AN (3 marks) is possible for just one point made. • All annotation ( ) should be in the left margin. Responses may include: AO1 Knowledge and understanding Definition of relevant terms (max K 1 mark) • Contingency planning is a plan for preparing an organisation’s resources for unlikely events. • Knowledge of benefits to PAIR of contingency planning (max K 2 marks) • Minimises the negative impact on the business of a major disaster or event. • May reassure stakeholders that concerns for safety are a priority. • Public relations response to a disaster is more likely to be quick and effective. • Contingency planning process can help reduce the chances of disasters happening. AO2 Application Application is making use of relevant case information not just repeating it. Limited application, applies knowledge to PAIR once. Developed application, + applies knowledge to PAIR twice. Max one for application of the first benefit and max one for application of the second benefit. • Pandemic impact on business. (Rapid increase in sales following end of pandemic). • The battery fire – potential impact on reputation of PAIR. • Delayed response of Kaarina to the battery fire. • Inappropriate response of PAIR by just blaming the supplier. • Linking fire to quality assurance. • Disruption to global trade such as imposition of tariffs. (KB1 is a successful export for PAIR). • Contingency planning could have reduced chances of fire by including cut-off device in the robot. 1 AO3 Analysis 8 Limited analysis - candidate shows one link in the chain of analysis. Developed analysis - candidate shows two or more links in the chain of analysis. Chains of reasoning highlighting likely benefits of contingency planning • A contingency plan would have enabled a more effective response from PAIR to the battery fire thus reducing the risk of lost sales from hotels and therefore result in a less serious effect on profits. • Knowledge that PAIR carries out contingency planning would reassure customers making them more likely to lease robots from PAIR thus increasing profits. • The lack of a contingency plan resulted in a delayed response from PAIR to the battery fire this could harm their reputation for quality and result in a loss of sales. • A contingency plan would reassure investors and make it more likely that a public flotation of shares would be successful therefore helping Kaarina with her future growth plans. Accept all valid responses.

Mark scheme

2 Analyse two benefits to PAIR of its organisational structure. 8 Level AO1 Knowledge and AO2 Application AO3 Analysis understanding 2 marks 2 marks 4 marks 2 3–4 marks Developed analysis • Developed analysis that identifies connections between causes, impacts and/or consequences of two points. • Developed analysis that identifies connections between causes, impacts and/or consequences of one point. 1 1–2 marks 1–2 marks 1–2 marks • Knowledge of two relevant • Application of two relevant Limited analysis points is used to answer the points to a business context. • Limited analysis that identifies question. • Application of one relevant connections between causes, • Knowledge of one relevant point to a business context. impacts and/or consequences point is used to answer the of two points. question. • Limited analysis that identifies connections between causes, impacts and/or consequences of one point. 0 0 marks 0 marks 0 marks No creditable response. No creditable response. No creditable response. 2 Note: 8 • If more than two benefits are identified reward the best two. • Only reward benefits. • L2AN (3 marks) is possible for just one point made. Responses may include: AO1 Knowledge and understanding Definition of relevant terms (max K 1 mark) • Organisational structure is the internal, formal framework of a business that shows the ways in which management is organised and linked together. • Flat organisational structure has few levels of hierarchy and wider spans of control. • Matrix structure brings expertise from different functional departments together for a project. • Functional structure splits an organisation into departments based on areas of responsibility such as marketing and operations. Knowledge of benefits of flat organisational structure and/or matrix structure (max K 2 marks) • May empower/motivate employees as delegation is more likely. (flat) • Quicker communication from top to bottom of the organisation. (flat) • More responsive to changing market conditions (matrix or flat). • Matrix: Emphasis is placed on the team rather than the place of the individual in the hierarchy. • Matrix structure utilises employee skills to contribute to the project. • Functional encourages employees to become specialists and can increase efficiency • Functional departments are led by managers who are specialists in the functional area 2 AO2 Application 8 Application is making use of relevant case information not just repeating it. Limited application, applies knowledge to PAIR once. Developed application, + applies knowledge to PAIR twice. Max one for application for the first method and max one for application for the second benefit. Linking structure to contextualised benefits: • Low labour turnover of 4%. • High productivity (2125 in 2023 and 2100 in 2024). • Innovation success of KB1. • 18-month development period for Delbot. • Speed of bringing products to market eight versions of KB1 by 2023. • Growth of the business since 2012, leading market share by 2024. • R&D more likely to be successful using matrix structure. AO3 Analysis Limited analysis - candidate shows one link in the chain of analysis. Developed analysis - candidate shows two or more links in the chain of analysis or balance of argument. • Matrix structure brings expertise from different functional areas to work together on projects resulting in a reduction in the development time of new products therefore this results in PAIR being more responsive to changes in the market and increases sales. • More likely that there will be delegation to employees which will increase their motivation therefore this will increase productivity and increase profits. • Increased employee motivation results in lower labour turnover and therefore a reduction in costs leading to an increase in profit. Accept all valid responses

Mark scheme

3(a) Using the data in Table 1.1, calculate the labour productivity for 2024. 2 Labour productivity = annual output / employees OR output per worker in a given time period OR output per worker hour (1 mark if no rewardable calculation) = 105 000 / 50 (1) = 2100 (units) (2) 2023 productivity = 2125 (units) (1) To award zero marks, there must be at least one 3(b) Using the data in Table 1.1, calculate the labour turnover of production employees in 2024. 2 Labour turnover = Number of employees leaving the business / Average number of employees × 100 (1 mark if no rewardable calculation) 2 / 50 × 100 (1) = 4 % (2) Note: • Labour turnover = 4 (1) • Labour turnover in 2023 = 4 / 40 × 100 = 10 % (1) • 2 / 50 = 0.04 (0) To award zero marks, there must be one 3(c) Evaluate whether the decision to introduce quality assurance is likely to be beneficial for PAIR. 12 Level AO1 Knowledge and AO2 Application AO3 Analysis AO4 Evaluation understanding 2 marks 2 marks 2 marks 6 marks 3 5–6 marks Developed evaluation in context • A developed judgement/conclusion is made in the business context. • Developed evaluative comments which balance some key arguments in the business context. 2 2 marks 2 marks 2 marks 3–4 marks Developed knowledge of Developed application Developed analysis Developed evaluation relevant key term(s) of relevant point(s) to the that identifies connections • A developed and/or factor(s) is used to business context. between causes, impacts judgement/conclusion answer the question. and/or consequences. is made. • Developed evaluative comments which balance some key arguments. 3(c) Disadvantages of (introducing) quality assurance 12 • Cost of training for employees to fulfil responsibilities. • Initial drop in output. • Employees may demand higher wages for greater responsibility. • Increased pressure on employees. • Employees may be resistant to change. AO2 Application Limited application, applies knowledge to PAIR once. Developed application, + applies knowledge to PAIR twice. Links case material to quality assurance • PAIR sells B2B. • Effective QA might prevent disasters such as the battery fire. • Robots are leased to customers. • Competitive industry – reputation is important. • Decrease in labour turnover from 10 % in 2023 to 4 % in 2024. • Productivity has decreased from 2125 units per worker in 2023 to 2100 in 2024. • Productivity in 2024 was below the target of 2200. • Increase in the percentage of KB1 output failing to meet quality standards in 2024. • Commitment to R&D spending above the industry average. AO3 Analysis Limited analysis - candidate shows one link in the chain of analysis. Developed analysis - candidate shows two or more links in the chain of analysis or balanced argument. • Faults with products will be identified ensuring that quality standards are met which will increase customer satisfaction and this will increase the number of customers who choose to extend their lease for robots resulting in an increase in revenue • As employees are responsible for checking the robot cleaners for faults there will be less waste of materials which will reduce costs resulting in an increase in profits • Employee checking of quality will reduce costs and therefore enable PAIR to offer more competitive prices resulting in an increase in sales and therefore profit 3(c) • Greater responsibility for quality may increase the motivation of employees which will lead to an increase in work effort 12 and productivity and therefore increase output of KB1s • Introducing QA will require training of employees leading to an increase in costs • Adapting to QA may reduce the productivity of employees due to resistance to change resulting in less production of KB1s and therefore reduce profit AO3 Evaluation Limited evaluation - limited supported judgement and/or a weak attempt at evaluative comment. Developed evaluation - supported judgement and/or reasonable evaluative comment. Developed evaluation in context - supported judgement in context and/or reasonable evaluative comment in context. • Supported judgement as to overall benefit of quality assurance to PAIR. – Critical to PAIR as robots are leased to customers and therefore if the robots are substandard business will end their lease resulting in a loss of sales and profits for PAIR. • Factors that the impact might depend on: – Extent to which customers value quality above price. – The cost to PAIR of substandard production – significant costs as PAIR has a target to solve customer problems within 24 hours. Therefore, PAIR must always have technical staff on hand to deal with customer problems. – The quality of the workforce in terms of skills and training and its willingness to adapt to the changes that QA requires. – Quality assurance needs to be part of an integrated approach with other functional departmental decisions. 3(c) Exemplar evaluation and levels 12 L1 Limited evaluation Quality assurance should reduce the number of defective KB1 robots in the long run, outweighing the short-run cost of training employees. Comment: Judgement made but with limited supporting comment even though there is context. L2 Developed evaluation Overall, introducing quality assurance will be beneficial to PAIR as employees will benefit from being empowered to take responsibility for quality resulting in a decrease in faulty output. This means PAIR can gain long-term benefits from an improved reputation for quality leading to greater sales of their products. This will outweigh the short term training costs of ensuring employees can take responsibility for quality. Comment: EVAL is sufficiently developed but could apply to any business as there is no context, so limit to L2. L3 Developed evaluation in context. In the short-term introducing quality assurance will be more costly to the business as employees need training there could be an initial reduction in productivity as shown by the data in 2024 compared to 2023 and an increase in faulty KB1 robots as employees adjust to the new demands of taking responsibility for quality. However, in the longer term, as quality assurance becomes embedded at PAIR there should be a reduction in faulty output of robots and less chance of the sort of failure that led to the fire at a school due to a KB1 overheating. Overall maintaining quality standards is essential to the reputation of PAIR and maintaining its market leadership so quality assurance if implemented effectively can support continued success. Comment: Balanced EVAL with points firmly in the context of the case material leading to an overall supported judgement. This would be 6 marks for evaluation. In awarding EVAL marks examiners should take a holistic approach to the answer considering its balance and judgement.

Mark scheme

4(a) Using the data in Table 1.2, calculate the dividend cover for 2024. 4 Indicative content: Note Answer Marks Correct answer: method does not need to be shown 4 / 0.56 = 7.14 OR 7.1 OR 7 (times) 4 Incorrect units OR $7.14 OR 7.14 m OR 7.14 % OR 3 Correct method but incorrect or no final answer OR Dividend cover = 4 / 0.56 Dividend cover for 2023 Dividend cover = 1.8 / 0.56 = 3.21 Calculation of profit for the year OR Profit for the year = 10.4 m – 6.4 m = $4 m OR 2 Calculation of profit for the year AND Profit for the year = 10.4 m – 6.4 m = $4 m AND Relevant dividend cover formula Dividend cover = profit for the year/dividend paid Relevant correct formula Dividend cover = profit for the year/dividend paid OR 1 OR Profit for the year = operating profit – interest and tax Profit for the year 2023 Profit for the year 2023 = 5.85 – 4.05 = $1.8 No creditable work 0 To award zero marks, there must be at least one Note: Own Figure Rule applies Incorrect calculation using operating profit rather than PFY 10.4 / 0.56 = 18.57 (2) 4(b) Evaluate whether PAIR should increase dividends to shareholders in 2025. 12 Level AO1 Knowledge and AO2 Application AO3 Analysis AO4 Evaluation understanding 2 marks 2 marks 2 marks 6 marks 3 5–6 marks Developed evaluation in context • A developed judgement/conclusion is made in the business context. • Developed evaluative comments which balance some key arguments in the business context. 2 2 marks 2 marks 2 marks 3–4 marks Developed knowledge of Developed application Developed analysis Developed evaluation relevant key term(s) of relevant point(s) to the that identifies connections • A developed and/or factor(s) is used to business context. between causes, impacts judgement/conclusion answer the question. and/or consequences. is made. • Developed evaluative comments which balance some key arguments. 4(b) 12 Level AO1 Knowledge and AO2 Application AO3 Analysis AO4 Evaluation understanding 2 marks 2 marks 2 marks 6 marks 1 1 mark 1 mark 1 mark 1–2 marks Limited knowledge Limited application Limited analysis Limited evaluation of relevant key term(s) of relevant point(s) to the that identifies connections • A judgement/ and/or factor(s) is used to business context. between causes, impacts conclusion is made answer the question. and/or consequences. with limited supporting comment/evidence. • An attempt is made to balance the arguments. 0 0 marks 0 marks 0 marks 0 marks No creditable response. No creditable response. No creditable response. No creditable response. Responses may include: AO1 Knowledge and understanding Limited knowledge will be demonstrated through knowledge of one relevant point Developed knowledge + will be demonstrated through knowledge of two relevant points. • Shareholders provide capital for the business. • Dividends are the reward for risking investment in the business. • Knowledge of relevant shareholder ratios including dividend cover and dividend per share. Reasons for increasing dividends • To attract future investors. • Keep existing shareholders happy. Reasons for not increasing dividends • Lack of profits. • Lack of working capital • Future growth plans. 4(b) AO2 Application 12 Limited application, applies knowledge to PAIR once. Developed application, + applies knowledge to PAIR twice. • Dividend cover has increased significantly from 3.2 in 2023 to 7.1 in 2024. • Revenue and profits have increased. • Increase in OPM from 9 % to 10.95 %. • Possible flotation of PAIR on stock market. • Liquidity problems suggested by deterioration in current ratio. • Gearing has increased by 5 % points. • PAIR’s commitment to R&D expenditure. • Shareholder dissatisfaction with dividends. AO2 Analysis Limited analysis - candidate shows one link in the chain of analysis. Developed analysis - candidate shows two or more links in the chain of analysis. • PAIR may wish to raise finance for expansion by going public. It is therefore important to attract potential investors to invest This can be achieved by increasing dividends to make share ownership more financially attractive and increase the initial share price offer. • The dividend cover has increased from 3.2 to 7.14 which indicates that PAIR can afford to pay more dividends to shareholders • The current ratio is only 0.8:1 indicating that PAIR may be unable to pay its short-term liabilities and therefore faces a potential liquidity crisis therefore PAIR cannot afford to pay higher dividends to shareholders as it will put further strain on its working capital. 4(b) AO3 Evaluation 12 Limited evaluation - limited supported judgement and/or a weak attempt at evaluative comment. Developed evaluation - supported judgement and/or reasonable evaluative comment. Developed evaluation in context - supported judgement in context and/or reasonable evaluative comment in context. • Justified conclusion whether PAIR should pay higher dividends. – Can’t afford to due to limited working capital. – Kaarina owns 70 % of shares so she can ignore other shareholders. – Continued investment in R&D is essential to maintain PAIR’s leading market share therefore need to keep retained profits high. • Supported judgement as to the most important factor in the decision. • Financial data is limited for making the decision. • Attitude and goals of Kaarina is critical to the decision as she is the major shareholder. She appears to be more interested in other goals rather than maximising her short-term returns. Accept all valid responses. Exemplar evaluation and levels L1 Limited evaluation Overall, the dividend payment to shareholders should be increased as shareholders are unhappy which will negatively impact the ability of PAIR to raise further capital from shareholders in the future. Comment: Judgement made but with limited supporting comment and limited context. L2 Developed evaluation PAIR should not increase dividends to shareholders as this would reduce retained profits and therefore reduce funds available for expansion. However, increasing dividends now could result in shareholders being more willing to invest in PAIR in the future. Overall, the decision depends on the financial health of PAIR and whether shareholders are likely to be the main source of finance in the future. Comment: EVAL is sufficiently developed but could apply to any business as there is no context, so limit to L2. If you took the name out of this paragraph it could apply to any business. 4(b) L3 Developed evaluation in context 12 PAIR should not increase dividends to shareholders as this would reduce retained profits and therefore reduce funds available for Kaarina’s plans for PAIR enter new international markets. However, increasing dividends could result in shareholders being more willing to invest in PAIR in the future, especially as the dividend cover has more than doubled. This would support the possible change of PAIR to a public limited company which is being considered by Kaarina. However, overall, the decision depends on the financial health of PAIR and the decreasing current ratio in 2024 suggests that the business may not be able to afford to pay shareholders more due to insufficient working capital. Comment: Well balanced answers using the case context to develop argument. In awarding EVAL marks examiners should take a holistic approach to the answer considering its balance and judgement.

Mark scheme

5 Evaluate the importance of Research and Development (R&D) to PAIR’s future success. 12 Level AO1 Knowledge and AO2 Application AO3 Analysis AO4 Evaluation understanding 2 marks 2 marks 2 marks 6 marks 3 5–6 marks Developed evaluation in context • A developed judgement/conclusion is made in the business context. • Developed evaluative comments which balance some key arguments in the business context. 2 2 marks 2 marks 2 marks 3–4 marks Developed knowledge of Developed application Developed analysis Developed evaluation relevant key term(s) of relevant point(s) to the that identifies connections • A developed and/or factor(s) is used to business context. between causes, impacts judgement/conclusion answer the question. and/or consequences. is made. • Developed evaluative comments which balance some key arguments. 5 12 Level AO1 Knowledge and AO2 Application AO3 Analysis AO4 Evaluation understanding 2 marks 2 marks 2 marks 6 marks 1 1 mark 1 mark 1 mark 1–2 marks Limited knowledge Limited application Limited analysis Limited evaluation of relevant key term(s) of relevant point(s) to the that identifies connections • A and/or factor(s) is used to business context. between causes, impacts judgement/conclusion answer the question. and/or consequences. is made with limited supporting comment/evidence. • An attempt is made to balance the arguments. 0 0 marks 0 marks 0 marks 0 marks No creditable response. No creditable response. No creditable response. No creditable response. Note: References to market research must relate to the R&D process. Responses may include: AO1 Knowledge and understanding Limited knowledge will be demonstrated through knowledge of R&D or its impact. Developed knowledge + will be demonstrated through knowledge of R&D and its impact. Definition of R&D • The scientific research and technical development of new processes and products. Benefit of R&D • Increased sales. • Competitive advantage. • Greater control over prices. 5 Limitations of R&D 12 • Risk of failure. • Cost. • Impact on cash flow. • Time taken to develop new products. AO2 Application Limited application, applies knowledge to PAIR once. Developed application, + applies knowledge to PAIR twice. • Contribution of KB1 series to growth of PAIR. • Cost: 7% of revenue is $6.65m in 2024. • New market opportunities from Delbot in hospitality industry. • Competitive market for cleaning robots. • Linking R&D to liquidity problems indicated by current ratio. • PAIR’s R&D spending is relatively more than the industry average. AO3 Analysis Limited analysis - candidate shows one link in the chain of analysis. Developed analysis - candidate shows two or more links in the chain of analysis. • Development of new products opens up new market opportunities which may lead to an increase in sales and therefore increase profit • R&D can improve products sold by PAIR thus giving the business a competitive edge and therefore increase sales • R&D can improve brand image of PAIR and therefore justify an increased leasing charge to customers potentially resulting in higher profit • The short run impact of R&D is to cause cash outflows which will reduce PAIR’s liquidity requiring financing which may cause an increase in gearing and risk 5 AO3 Evaluation 12 Limited evaluation - limited supported judgement and/or a weak attempt at evaluative comment. Developed evaluation - supported judgement and/or reasonable evaluative comment. Developed evaluation in context - supported judgement in context and/or reasonable evaluative comment in context. Identification and/or development of factors that the success of R & D will depend on: • Understanding of needs of customers. • Marketing of new products to customers. • Extent to which R&D results in PAIR being able to differentiate itself from competitors. • Time taken to bring new products to market due to short life cycle of technology products. • Ability of PAIR to finance the expenditure without causing liquidity problems. • Competitor actions. • Extent to which PAIR can protect its intellectual property with patents. Identification and/or development of other influences on success • The state of the economy. • Financial health of the business. Supported judgement as to importance of R&D Exemplar evaluation and levels L1 Limited evaluation Overall, R&D could help PAIR to develop new products and improve its competitiveness in the market, but the effectiveness depends on the quality of employees and the actions of competitors Comment: Judgement made but with limited supporting comment. L2 Developed evaluation Investment in R&D does not guarantee success. Although R&D can increase the chances of bringing new products to market which could differentiate PAIR from its competitors the success ultimately depends on whether competitors develop better products which consumers prefer. However, not investing in R&D would be a very high-risk decision in a technologically driven market. 5 Comment: EVAL is sufficiently developed for L2, but the context is too limited to justify the award of L3 marks. 12 L3 Developed evaluation in context. Investment in R&D does not guarantee success. PAIR’S relatively high spending on R&D which is above the industry average has contributed to its market leadership in 2024. However, although R&D could increase the chances of bringing new robots to market and thus differentiate PAIR from its competitors the success ultimately depends on whether competitors develop better cleaning robots which consumers prefer. However, not investing in R&D would be a very high- risk decision in a technologically driven market such as the cleaning robot market where there is lots of competition. Comment: Well-balanced conclusion in context of case L3. In awarding EVAL marks examiners should take a holistic approach to the answer considering its balance and judgement.