Business 9609/33 May/June 2025: question paper and mark scheme

Mark scheme

1 Analyse two ways the external influences referred to in lines 8–12 may impact on WCP. 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 impacts are referred to, reward the best two. All annotation ( ) should be in the left margin. Responses may include: AO1 Knowledge and understanding Definition of external influences (max K1) might include: • External influences are outside the control of the business and act as both a constraint and an enabler for WCP’s activities. • Definition of external influences such as inflation, economic growth, interest rates and social trends. Knowledge of impact of external influences might include (max K2): • Increased running costs • WCP may have to increase prices • Increased borrowing costs • Increased consumer interest in ethically produced products • Decreased sales of premium priced products • Cost of living increase impacting low and middle income consumers AO2 Application Limited application, applies knowledge to WCP once. Developed application, + applies knowledge to WCP twice. Max one for application for the first external influence/impact and max one for application for the second external influence/impact. Note: Application is making use of relevant case information not just repeating it. 1 • WCP products are premium/high priced due to ethical sourcing and production. Cheaper substitutes available. 8 • Cost of sustainable resources likely to increase. • High income earners less impacted by inflation and interest rates and these are the target market. • WCP products; toilet paper is an ‘essential’. • Ethical/environmentally consumers’ interest in support for improving sanitation in low-income countries. Use of data on price elasticity of demand and income elasticity of demand. 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 offers a two-sided analysis • High inflation leading to increased production costs may reduce profit margins resulting in reduced profit • Increased interest rates will lead to higher borrowing costs and may constrain lending and firms willingness to borrow thus leading to lower growth of WCP . • Ethical production and support for sanitation in developing countries may lead to price inelastic demand and therefore demand would be relatively unaffected by increased prices which may limit impact on profits of WCP • Higher income earners will be less affected by ‘cost of living’ pressures, so sales may not decrease • WCP products are ‘essentials’ and they have a loyal customer base so sales may not decrease but even high-income customers may ‘trade down’ to cheaper paper products (two-sided analysis) Accept all valid responses.

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2 Analyse two possible effects on WCP’s efficiency of an increase in its scale of operations. 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 • Only reward effects on WCP. • If more than two effects are referred to, reward the best two. All annotation ( ) should be in the left margin. Responses may include: AO1 Knowledge and understanding Definition of scale of operations or efficiency or economies of scale (max K1) might include: • Increasing scale of operations means that the firm has the ability to produce at a higher level. • Efficiency means the ability of the firm to convert inputs into outputs • Economies of scale are factors which cause average costs to decrease as output increased, such as purchasing, managerial, technical, and marketing. Knowledge of impact on efficiency might include (max K2): • Wider range of products to sell. • Ability to meet the needs of more customers. • Ability to benefit from economies of scale, such as technical, managerial, purchasing, marketing, financial. • Risk of diseconomies of scale, such as poor communication and industrial relations problems. AO2 Application Max one for application to the first effect on efficiency of increasing the scale of operations and max one for application to the second effect on efficiency of increasing the scale of operations. • WCP use sustainable resources • If WCP take over GC this will be an increase in the scale of paper cleaning products operations • GC could add to range of eco-friendly paper products, increasing its product portfolio. • Potential economies of scale such as purchasing recycled paper or paper for recycling • Potential diseconomies of scale due to difficulties of communicating over long distances geographically • GC is based in the US, so there may be a chance of extending WCP’s market there 2 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. • Increase in scale increases output and may add to WCP’s portfolio, meaning wider product range and more potential customers increasing revenue and therefore may increase profit . • Increased output leading to economies of scale and decreased average costs may lead to WCP able to decrease price and increase revenue if demand is price elastic • Increasing scale of operations will enable the company to diversify and grow, increasing sales • Diseconomies of scale may lead to increasing average costs due to communication problems, decreasing profit. Accept all valid responses.

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3(a) Using the data in Table 1.2, calculate the operating profit margin for WCP in 2025. 2 Table 1.2 Extracts from WCP’s financial statements Year ending 30 April 2025 ($m) Year ending 30 April 2024 ($m) Revenue 21 17.5 Cost of sales 12 10 Operating profit 3 2 Profit for the year 1.5 1.5 30 April 2025 ($m) 30 April 2024 ($m) Non-current liabilities 10 8 Capital employed 16 15 OPM = operating profit / Revenue × 100 (1 mark if no correct calculation) 3 / 21 × 100 = 14.29 % OR 14.3 % or 14 % (2 marks) 2024 figures 2 / 17.5 × 100 = 11.4 % OR 11.4 % OR 11 % (1 mark) Notes Allow 14.28 % (2) 14.28 (1) 3(b) Using the data in Table 1.2, calculate the gearing ratio as at 30 April 2025. 2 Gearing = Long term liabilities / capital employed × 100 (1 mark if no correct calculation) 2025 10 / 16 × 100 (1) = 62.5 % OR 63 % (2 marks) 2024 8 / 15 × 100 = 53.3 % OR 53 % (1 mark) Notes 62.5 (1) 3(c) Evaluate whether WCP should finance the proposed GC takeover with long-term bank loans. 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 Developed application of Developed analysis Developed evaluation of relevant key term(s) 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) 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 takeovers or possible sources of finance Developed knowledge + + will be demonstrated through knowledge of takeovers and possible sources of finance Responses may include: AO1 Knowledge and understanding Limited knowledge will be demonstrated through knowledge of takeovers or possible sources of finance Developed knowledge + + will be demonstrated through knowledge of takeovers and possible sources of finance 3(c) Knowledge of takeovers 12 Definition of takeover, external growth, when one firm buys a controlling share in another or integration when one firm buys another. • May eliminate a competitor • May spread risk External growth is faster than internal growth Knowledge of sources of finance • Crowd funding • Bank loans • Venture capital • More finance from shareholders in a private limited company • Becoming a plc, equity finance Knowledge of factors in the decision • Control • Cost Gearing – risk AO2 Application Limited application, applies knowledge to WCP once. Developed application, + applies knowledge to WCP twice. • Takeover will cost $8m much higher than profit for the year $1.5m. • Profit for the year has remained stable 2024/2025. • 50% of profit donated to foundation to improve sanitation in developing countries. • Gearing is over 50% (quite high) and has increased by nearly 10%. • Crowdfunding part of the amount from WCP’s loyal paper products customers may be an opportunity. • Difference of opinion over source of finance between Aldin and Finance Director. 3(c) AO3 Analysis 12 Limited analysis - candidate shows one link in the chain of analysis. Developed analysis - candidate shows two or more links in the chain of analysis. • Takeover is costly and the relatively high gearing of WCP increases risk of further borrowing causing cash flow problems for WCP if GC is not immediately profitable. • Finance from a venture capitalist may mean Aldin and other shareholders giving up a % of WCP leading to a possible loss of control . • Given the current gearing of 62.5% further borrowing of $8m would increase gearing to 18m/24m 75% which is very high and would decrease profits due to repayments . Converting to a plc may raise more finance that does not need to be repaid so less impact on profit but also risks loss of control if more than 50% of WCP is sold AO4 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. • A judgement about whether a bank loan is the best source of finance. • Elements that the evaluation/judgement might depend on: – Cost issues, repayment versus loss of control to venture capitalists – If current shareholders are all willing to go through sale of company/conversion to plc – How quickly the finance is needed • Other factors to consider e.g. – Social objectives of WCP, to what extent will donations be affected – Depends on availability of finance linked to relatively high gearing and interest rate. – Crowdfunding unlikely to raise a significant amount – Opportunity cost of this project. What other future plans may WCP have? • Weighing up of the factors and their relative influence on WCP’s decision on the most suitable source of finance. • Converting to a plc may raise more finance that does not need to be repaid so less impact on profit but risks loss of control if more than 50 % of WCP is sold Accept all valid responses.

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4(a) Use the data in Table 1.1 and Table 1.2 and assume no other changes. Calculate the expected revenue for the year 4 ending 30 April 2026 if WCP increases promotional spending from $2.5million to $3 million. PrED = % change in quantity demanded / % change in promotional spending (1 mark if no correct calculations) Change in promotional spending = 20 % (1) % change in quantity demanded / 20 % = 0.7 (2) 20 % × 0.7 = 14 % (3) $ 21 m × 1.14 = $ 23.94 m (4) Note: 23.94 m (4) but $ 23.94 (3) 4(b) Evaluate the most important element of a new marketing plan for WCP to sell its toilet paper through 12 supermarkets. 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 Developed application of Developed analysis Developed evaluation of relevant key term(s) 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 a definition of a marketing plan or understanding of the role of one element of a marketing plan Developed knowledge + will be demonstrated through a definition of a marketing plan AND the role of one element of a marketing plan OR through understanding of the role of two elements of a marketing plan. Knowledge of a marketing plan. • A coordinated marketing strategy integrates all aspects of the marketing mix, objectives and budget. • Marketing plan is part of marketing strategy to achieve marketing objectives within a budget. • Marketing mix as part of planning consists of price, place, promotion and product 4(b) Knowledge of elasticity of demand 12 • Understanding of different elasticity concepts: – promotional elasticity measures responsiveness of demand to changes in promotional spending – price elasticity measures responsiveness of demand to a change in price – income elasticity measures the responsiveness of demand to a change in income. • Understanding of inelastic - not responsive and elastic - responsive to change in price/promotion/income. AO2 Application Limited application, applies knowledge to WCP once. Developed application, + applies knowledge to WCP twice. • Supermarkets are a new sales outlet for WCP products. • Different supermarkets may target different groups, such as low- or high-income customers. • Current marketing plan focuses on on-line selling and loyal customers, who order in large quantities. • WCP are effective in customer relationship marketing, as evidenced by loyal customer base. • Estimated PED is −1.2. This is price elastic. An increase in price will result in a greater % decrease in demand. • Estimated promotional elasticity of demand is 0.7. Demand is promotion inelastic i.e. relatively unresponsive. • Answer from (a) (allow OFR) a 20 % increase in promotional spending will lead to a 14 % increase in revenue. • Estimated YED is 1.6 so elastic and a normal good • Levels of income and unemployment will vary by sales region. This will impact elasticity measures. • Ethical customers may have an impact on elasticity as willing to pay premium prices. 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. • Knowledge of PED is useful to WCP making decisions about pricing. For example, elastic PED would indicate that an increase in price would decrease revenue and therefore decrease profit . • Supermarkets will sell many substitute products therefore the WCP brand will need to stand out therefore packaging will need to attract customer attention in order to encourage them to try WCP’s product . 4(b) • Selling through supermarkets will mean that some change in packaging is needed, as customers will not want to buy in 12 large quantities, perhaps increasing production costs and therefore decrease profit . • Increase in spending and a PrED of 0.7 will lead to an increase in demand but a lesser % than the increase in spending suggesting that promotion is less effective . • As WCP sell a premium priced product choosing the right supermarkets to distribute through will be important in order to reach the high-income customers and maximise sales . 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. • A judgement about the most important element of the marketing plan. • In a marketing plan, WCP will also consider other factors e.g. changing products and customers’ view towards ethical trading. These changes to the marketing mix can increase sales and impact profit. • The customer profile of supermarkets will be different, therefore some of WCP estimates of elasticity may be inaccurate, will very much depend on the supermarket. • A judgement about the usefulness of elasticity to marketing planning decisions. • A judgement about the limitations of elasticity calculations. – Measurement of elasticity is difficult and likely to be inaccurate due to large range of factors that will affect outcomes, for instance competitors entering the market. Other things don’t remain equal in markets. • Factors that the judgement could depend on including: – The degree of competitive rivalry in the market – Other elements of marketing plan are important e.g. integrated marketing mix to ensure consistency in message communicated to potential customers and therefore attract sales. Accept all valid responses.

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5 Evaluate the most important factor Aldin should consider before changing the HRM approach at GC if the takeover 12 goes ahead. 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 Developed application of Developed analysis Developed evaluation of relevant key term(s) 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 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 HRM approaches OR knowledge of relevant factor(s). Developed knowledge + + will be demonstrated through knowledge of HRM approaches AND knowledge of relevant factor(s). Knowledge of HRM approaches: • Hard versus soft HRM approaches. • Need for whole company integrated HRM approach. • General links with motivation • Flexible employment contracts versus full-time contracts 5 Knowledge of factors in the decision 12 • Highly motivated employees make for better productivity and low labour turnover • Target setting may help to meet overall objectives • Flexible employment contracts may mean needs of the business are met, but full-time contracts may lead to higher employee satisfaction and loyalty • Changing HRM strategy may involve costs, such as redundancy payments or recruitment. • A takeover will be successful if HRM can integrate strategies • Nature of the workforce: Hard HRM may be suitable for less skilled workforce. Soft HRM may be more suitable more skilled workforce. AO2 Application Limited application, applies knowledge to WCP once. Developed application, + applies knowledge to WCP twice. Note: Application is making use of relevant case information not just repeating it. • WCP seems to follow a soft HRM approach. • WCP has gained a reputation as an ethical employer. • Labour turnover at WCP is low. • GC seems to follow a hard HRM approach, possible culture clash may result. • Flexible employment contracts used by GC contrast with full-time contracts at WCP. • Consideration by Aldin of an integrated consistent approach after takeover of GC. 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. • Soft HRM at WCP has led to motivated workers and low labour turnover and therefore less costs of recruiting and training new employees. • Flexible employment contracts at GC, targets and ‘boring jobs’ suggest hard HRM leading to high turnover . However, flexible contracts suit some workers who have other commitments, and they may be very productive when at work 5 • Flexible contracts, such as zero hours mean workers are present when needed by the business and this may lead to 12 lower wage costs and increased profits • After the takeover of GC, WCP may want to change HRM approach at GC, may lead to higher motivation and productivity If many workers at GC are low skilled then the hard HRM approach may lead to efficiency and targets achieved AO4 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. • A judgement about the most important factor Aldin should consider before making the change. • Hard HRM approach at GC would be hard to change and will take time and careful management of change • There will be costs as well, have these been considered? • Managers at GC may not be willing and/or able to change their approach • It will also depend on the nature of the workers at GC, are they mainly unskilled? • HRM approach needs to fit with the company’s social and ethical objectives • What exactly might success mean in HR terms? More profit? More motivated workers? • Might there be room for more than one approach? Accept all valid responses.