Business 9609/33 October/November 2019: question paper and mark scheme

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1 Analyse the threats to CSP of the changes in the energy market and government 10 policy Level Knowledge Application Analysis 3 marks 2 marks 5 marks 2 3 marks 2 marks 4–5 marks Good knowledge Points well applied to Good use of shown of the case theory/reasoned threats/impact of argument to explain the them. likely impact of threats 1 1–2 marks 1 mark 1–3 marks Knowledge shown of Some application to the Some use of threats/impact of case theory/reasoned them. argument to explain the likely impact of threats 0 No creditable content Note: Credit impacts on CS as a business, not, e.g. customers unless link is made with CS. Answers could include Knowledge: • Threats – external factors that impact business negatively • Definitions of terms from text, for example government subsidies, government grants, energy efficiency Application • Use of information from text as to what this means for CS, green energy provider, solar panels, ‘green’ mission statement • Increasing energy efficiency of electrical products • Withdrawal of government grants from European governments • Subsidies to individual and business customers have been reduced or removed Analysis • Reasoned chain of argument, e.g. governments will no longer be giving grants/subsidies, which will increase productions costs. Will CS need to increase prices of solar panels to customers? • Electrical devices more efficient now, needing less energy, maybe less incentive for customers to install solar panels? • May have to drop prices otherwise solar panels out of reach for most householders/small businesses • Also credit references to technical developments, can CS afford to keep up?

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2(a)(i) Refer to Appendix 1. Calculate: 2 the operating profit margin for 2018 Units required for full marks OPM = Operating profit / sales revenue × 100 (1 mark if no relevant calculation) 2018: $20 m / $70 m × 100 [1] = 28.57% [2] Accept 28.6% and 29% 28.57 or 28.6 or 29 [1] Forecast OPM: 10 / 72 × 100 = 13.9% [1] 2(a)(ii) the dividend yield for 2018. 4 Units required for full marks Dividend Yield = Dividend per share / price per share × 100 [1] Dividend per share = total dividend / shares [1] 2018: Dividend per share 5 m / 10 m = ($)0.50 per share [2] 0.50 / $6.50 × 100 [3] = 7.69% [4] 7.69 [3] OFR 2(b) Refer to your results in 2(a) and any other information. Recommend to CSP’s 12 shareholders whether they should sell their shares in the company. Level Knowledge Application Analysis Evaluation 2 marks 2 marks 4 marks 4 marks 2 2 marks 2 marks 3–4 marks 3–4 marks Good Points well Good use of Good knowledge applied to the theory/reasoned judgement shown of case argument to explain the shown in factors reasons for answer and keeping/selling shares conclusion. 1 1 mark 1 mark 1–2 marks 1–2 marks Knowledge Some Some use of Some shown of application to theory/reasoned judgement factors the case argument to explain the shown in reasons for answer and keeping/selling shares conclusion. 0 No creditable content Note: L1 of AN and EVAL if only use results or other information. OFR applies for results. Answers may include Knowledge • Role of shareholders and reasons for buying shares • Importance of dividends as returns and link with profit • General reasons for holding/selling shares • Knowledge of investor ratios Application • Comparison of figures from Appendix 2/Use of results • OPM – 2018 $20 m / $70 m × 100 = 28.57% – Forecast $10 m / $72 m = 13.89% – OPM has decreased by 14.68% points or 14.68 / 28.57 × 100 = –51.38% change • Dividend yield – 2018 $0.50 / $6.50 × 100 = 7.69% – Forecast $0.30 / $5 × 100 = 6% – Dividend yield has decreased by 1.69% points or 1.69 / 7.69 = –21.98% change • Dividend paid is forecast to fall by $2 m • Share price forecast to fall 2(b) • Reference to reasons for forecast falling share price, such as less grants and subsidies leading to lower forecast profit • Tammy’s strategies for growth • Need for continuing future investment, may depress shareholder returns? Analysis • Impact on shareholders as stakeholders • Reasoned arguments for holding or selling, including long term view • Possible ethical objective of investors in CS Evaluation • Balance of evidence – for or against? • Are shareholders short term or long term investors? • Accuracy of forecast data? • Long term future bright for greener energy?

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3 Evaluate the Marketing Director’s view that ‘the greener energy mission statement 16 is the most important factor in the success of our solar panel marketing’ (lines 10–11) Level Knowledge Application Analysis Evaluation 2 marks 2 marks 4 marks 4 marks 2 2 marks 2 marks 4–6 marks 4–6 marks Good Points well Good use of Good judgement knowledge applied to the theory/reasoned shown in answer shown case argument to explain and conclusion the likely importance 1 1 mark 1 mark 1–3 marks 1–3 marks Knowledge Some Some use of Some judgement shown application to theory/reasoned shown in answer the case argument to explain and conclusion likely importance 0 No creditable content Note: L1 for AN and EVAL if only consider marketing mix 4Ps. Answers may include Knowledge • Mission statement: a formal summary of the aims and values of a company, organization, or individual • Environmental objectives as part of corporate and marketing objectives • Marketing planning: including budget, objectives, integrated marketing mix Application • CSP are involved in a ‘green’ industry • Higher prices and less discounts compared to competitors due to longer guarantee period, but possible to still be ‘green’ and pay less • References to consumer’s reasons for choosing to install solar panels, but also reasons for buying solar phone chargers and lamps Analysis • Development of why green objectives may be important or not – will it attract more customers? Do consumers really care? Are consumers willing to pay higher prices for green energy when subsidies disappear? • Will the benefit of CSP longer guarantee outweigh competitor’s offers of lower prices? • Possible impacts on company image and reputation 3 Evaluation • Future use if green energy becomes the ‘norm’ • Judgement as to how important ‘green’ may be – is price more important? • Risks over long term as more competition in ‘green’ technology and need to stay ‘ahead of the game’

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4(a)(i) Refer to the table in Appendix 2 and lines 53–57. Calculate: 4 the change in capacity utilisation which will result if the special order is accepted Capacity utilisation = current capacity / maximum capacity × 100 [1 if no relevant working] Current CPU = 32 000 / 44 000 × 100 = 72.7% [1] With special order = 42000 / 44 000 × 100 = 95.45% [1] Therefore change is 22.8% points [4] or change is 22.8 / 72.7 = 31.4% [4] Allow range of answers 22–23% 22.8 [3] 31.4 [3] 4(a)(ii) the change to CSP’s profits if the special order is accepted. 4 Change to profits will be total contribution. Total contribution = contribution per unit × extra output for special order OR Contribution per unit = selling price – variable cost per unit [1 if no relevant calculation] Variable unit cost = 4 + 1 + 1.50 = 6.50 [1] Contribution per unit = $7 – 6.50 = $0.50 [2] Total contribution = $0.50 × 10 000 = $5000 [4] If fixed costs included then –$0.50 × 10 000 = –$5000 negative contribution [3] Profit for the year with special order $85 000 [2] Profit for the year without special order $80 000 [1] Some attempt [1–2 marks] 4(b) Refer to your results from 4(a) and any other information, recommend whether 12 CSP should accept the special order from X tours. Level Knowledge Application Analysis Evaluation 2 marks 2 marks 4 marks 4 marks 2 2 marks 2 marks 3–4 marks 3–4 marks Good Points well Good use of Good knowledge applied to the theory/reasoned argument judgement shown of case to explain the advantages shown in factors and disadvantages of answer and special order. conclusion. 1 1 mark 1 mark 1–2 marks 1–2 marks Knowledge Some Some use of Some shown of application to theory/reasoned argument judgement factors the case to explain the advantages shown in and disadvantages of answer and special order conclusion. 0 No creditable content Note: L1 of AN and EVAL if only use results or other information. OFR applies for results. (In this case if fixed costs have been included then contribution will be negative). Answers may include Knowledge • Meaning of capacity utilisation and why it is important • Meaning of total contribution and importance in profit calculations • Relevant points about special orders Application • Reference to results • Application of changes to capacity and profits • Reference to other points from the text, including nature of special order Analysis • Reasons for and against acceptance of special order For – addition to profit, better use of resources, could lead to more orders in future. Against – capacity utilisation over 95%, no spare capacity for other orders that may be at full price, will it dilute present sales of lamps from other retailers? • If another order comes in this will put the company over capacity Evaluation • Accept or decline order? • Short/long term? • Is it a ‘one off’ order? • Management objectives?

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5 Evaluate the possible benefits to CSP of the close involvement of employees and 16 the ECE trade union in the workplace. Level Knowledge Application Analysis Evaluation 2 marks 2 marks 4 marks 4 marks 2 2 marks 2 marks 4–6 marks 4–6 marks Good Points well Good use of Good judgement knowledge applied to the theory/reasoned shown in answer shown case argument to explain the and conclusion likely impact of TU involvement 1 1 mark 1 mark 1–3 marks 1–3 marks Knowledge Some Some use of Some judgement shown application to theory/reasoned shown in answer the case argument to explain the and conclusion likely impact TU involvement 0 No creditable content Note: Benefits must be to CSP. If impact on employees then this should be linked to what it may mean for the business. Knowledge • Role of HRM • Employee participation • Role of TU in HRM • Importance of collective bargaining • Knowledge of principle of linking pay with profits (profit sharing) and high quality work (target setting?) Application • CSP production staff are likely to be relatively unskilled • They are currently involved in decision making through the TU and can also put forward suggestions. • How might pay, in this case be linked to profit and high quality work, e.g. through some form of QA or TQM, linked with solar panel production and/or necessity for high quality reference to case • What may be TU objectives in this case? • Job losses? Possibility of less pay as paid on piece rate at present 5 Analysis • Impacts on CSP as a company, such as de-motivated insecure staff • Benefits of collective bargaining in this case • Impact on labour costs – may decrease, but may need to recruit more workers who are more skilled, so more costs Evaluation • Long/short term impacts • References to economic factors, e.g. falling unemployment • Management of change issues • Relationship with TU issues

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6 Discuss the usefulness of strategic choice techniques for the directors of CSP 20 when making a choice between options A and B. Note: Limit to L1 if no knowledge of specific techniques Knowledge • Meaning of strategic choice • Ansoff, force field analysis, decision trees as SC techniques • Investment appraisal techniques: payback, ARR & NPV as SC techniques • Link with other aspects of strategic management – SWOT and PEST, Porters 5 forces, Boston Matrix, Core competencies, vision and mission statements, as strategic analysis techniques when preparing for choice (Note: not rewardable as SC techniques) Application • Option A is potentially market development but accept market penetration • Option B product development/diversification • Use of the techniques/factors for two options • Comparison of options using the techniques. For instance comparison of likely risks/returns – Probability of success for B is lower – EMV for B is higher – Understanding of driving forces Analysis • How techniques may be used and the advantages and disadvantages • Decision trees – estimation of probability difficult. Use of probability aims to take account of uncertainty resulting in better decision making • Ansoff’s Matrix – focus on risk of different strategic options • Force field analysis – subjective. Encourages consideration of a range of factors Managers may manipulate to favour one option • Investment appraisal. – NPV allows time value of money to be taken into account so business can see if project covers costs and makes a return – Payback important to businesses that face cash flow problems – ARR. Key metric for judging business success is profitability Evaluation • Limitations of techniques, e.g. role of estimation • Very dynamic nature of this market. Link to probabilities could be made and their likely accuracy • Other information that could be useful? Qualitative information needed • Impact of management objectives and attitudes • Long and short term impacts

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7 Evaluate the importance of contingency planning for CSP. 20 Knowledge • What is contingency planning? • How CP as part of strategic implementation fits with strategic choice and analysis Application • Contingency planning for CSP as above – allow broad interpretations, including problems caused by related products such as lamps and phone chargers • How might these risks be assessed? • Comment on recent changes such as government policy and market changes • Comment on risks such as fire due to faulty installation – more of a risk as company grows? • The fast developing market and associated risks Analysis • How contingency planning may be used and advantages and disadvantages • Predictable versus unpredictable risks • Associated financial implications • Development and impact of APP points Evaluation • Will there need to be a significant change? Have risks been assessed over the years? • What are the main factors that could lead to successful CP? • Other factors such as external factors that need to be considered