Business 9609/31 October/November 2022: question paper and mark scheme

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1 Analyse two possible disadvantages to AP of a merger with SC. 10 Level Knowledge Application Analysis 3 marks 2 marks 5 marks 2 3 marks 2 marks 4–5 marks Knowledge of two Two points Good use of theory benefits and of a applied to AP and/or reasoned merger argument to explain benefits 1 1–2 marks 1 mark 1–3 marks Knowledge of one or One point applied Some use of theory two benefits or to AP and/or reasoned knowledge of argument to explain merger and/or one benefits benefit 0 No creditable content Note: • Do not credit reproduction of phrases/data in the case study without use and/or comment. • Disadvantages to AP not stakeholders • Advantages should not be rewarded • L2 AN can be accessed even if the impact of only one change is analysed. Knowledge: • Understanding of merger and types of merger. Merger is when two businesses join together under one ownership. • Understanding of process of merger – agreement by directors/shareholders, share transfer. • Issues associated with merging include: – difficulties of rationalising workforce, including redundancy due to role duplication. – possible conflicts of objectives, – miscommunication with workforce, – integration of cultures producing inefficiencies. – Requirement for speed of implementation. – Difference in products and marketing difficult to integrate. Application • AP is a plc, SC a cooperative, with different cultures. • Conditions of the takeover – 2 divisions or one enterprise. • AP hard HRM, SC a decentralised cooperative. • Possible new structure (two divisions or combined). • Different markets; AP play equipment, SC components. • Both AC and SC make components • SC workers are skilled and flexible; AP workers are unskilled • Both AP and SC manufacture components. 1 Analysis • Resentment from employees leading to negative effect on efficiency in the new organisation. • Redundancies due to role duplication, such as in component manufacture will lead to job insecurity and demotivation • Costs of integration are higher than expected and remove or work against expected economies of scale. • Difficulty in integrating cultures and work practices means production and sales targets may not be achieved. • Customers not buying from the new brand/organisation due to lack of recognition, leading to lower sales than expected. • Difficulties of the change meaning synergy benefits not achieved. ARA

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2(a)(i) Refer to the network diagram in Fig. 1, and to Table 1 in the Insert: 2 Complete the network diagram at node 2. EST = 2 (1) LFT = 5 (1) Note: ‘days’ not required 2(a)(ii) Calculate the free float of activity E 3 Free float is the maximum time an activity can be delayed without delaying the next activity. (1 mark if no relevant calculation) = EST next activity – duration – EST (1) = 8 – 3 – 2 (2) = 3 days (3) Note: ‘days’ not required OFR 2(a)(iii) Calculate the total float of activity G 3 Total float is the maximum time an activity can be delayed without delaying the whole project (1 mark if no relevant calculation) = LFT – duration – EST (1) = 10 – 1 – 0 (2) = 9 days (3) Note: ‘days’ not required 2(b) Evaluate whether the Operations Manager is right to be confident that 12 the new machines will be ready for production within the 14-day deadline. Level Knowledge Application Analysis Evaluation 2 marks 2 marks 3–4 marks 3–4 marks 2 2 marks 2 marks 3–4 marks 3–4 marks Two relevant Two points Good use of Good points made applied to theory and/or judgment AP reasoned shown argument to answer question 1 1 mark 1 mark 1–2 marks 1–2 marks One relevant One point Some use of Some point made applied to theory and/or judgment AP reasoned shown argument to answer question 0 No creditable content Note: Own figure rule from 2a applies. Knowledge Definition of network analysis: this is part of project management to ensure that resources are used efficiently. Also known as critical path analysis it identifies all tasks in a project, puts them in the correct sequence and allows for the identification of the critical path. Understanding of role of CPA in planning • Planning of when resources are needed: CPA sets out order and times of activities. • CPA sets out earliest start and latest finish times and gives critical path. • Sets target to work towards • Construction of network diagram forces managers to plan project carefully • Identifies critical activities for management to focus on • Knowledge of free and total float • Definitions of rationalisation, sub-contracting, outsourcing. • CPA enables decisions on how to minimise chance of delays. Application • New machines to replace two production lines. • First time the manager has used CPA. • Use of data from the network diagram. • Suppliers provided information and are responsible for activities B–J. • AP’s objectives are lower costs and increased capacity. • Use of data from 2a – 14 days forecast minimum duration. • AP workers are unskilled (the training activity may take longer than expected) 2(b) Analysis • CPA quantitative technique that gives accuracy to forecasting timescale, therefore making it more likely that the machines will be ready on time. • CPA enables resources to be given to activities at optimum time, avoiding idle resources and possibility of loss or damage. • Knowing the critical path enables focus on completion of key activities. • Consideration of possible variations in the network e.g. the allocated activity times might be over/under estimated, could training and testing be run together to save time? Evaluation • Justified conclusion regarding confidence of operations manager as it is first time with CPA. • If AP has contributed to the information and planning the confidence is enhanced. • Accuracy of duration relies on supplier carrying out B–J on time, to what extent does AP have confidence? • Has the operations manager discussed the importance of these accuracy levels with the supplier? • The network diagram may not be accurate, especially as it a first-time effort. • CPA, even if well done, does not guarantee times being met, or duration being shortened. • Lack of contingency time means any delay at all will result in missing the 14-day deadline unless additional relevant resources are available. • External factors e.g. late delivery of resources might mean duration is longer.

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3 Evaluate the likely impact on AP of the introduction of the new 16 employment legislation. (lines 59–63). Level Knowledge Application Analysis Evaluation 2 marks 2 marks 6 marks 6 marks 2 2 marks 2 marks 4–6 marks 4–6 marks Two relevant Two points Good use of Good points made applied to theory and/or judgment AP reasoned shown argument to answer question 1 1 mark 1 mark 1–3 marks 1–3 marks One relevant One point Some use of Some point made applied to theory and/or judgment AP reasoned shown argument to answer question 0 No creditable content Note: Focus is on impact on AP not stakeholders (From case study - ‘New employment legislation will require all businesses with 200 or more employees to: • Allow trade unions and collective bargaining • demonstrate co-operation between management and workforce • implement a policy for equality and diversity’) Knowledge • General points about labour legislation • Trade union and collective bargaining. • Hard and soft HRM • Temporary contracts • Authoritarian management style • Factors affecting motivation. Application • Existing organisational structure is hierarchical with functional departments. • Strict guidelines for managers, centralised decision making (hard HRM). • AP’s low costs, loss of ineffective employees, reputation for high quality products. • The impending introduction of three areas of legislation – allowing TUs, asking business to demonstrate cooperation between management and workforce and implement a policy for diversity and equality. 3 • Use of the six points the HR manager has noted: – Employees refusal to work overtime – Legal challenges to holiday and sick pay terms and conditions – 28 unfair dismissal appeals – Complaints about authoritarian managers who never listen to employees – 40% increase in temporary employment contracts – Many female employees leaving due to low pay and lack of promotion opportunities • Planned merger with SC with its more decentralised structure. Analysis • Linking likely effect of the new legislation to any of the points noted by the HR manager and the consequential impact on AP. • Change will require time and training and this may increase costs. • May need managers to operate a softer HRM approach which may require training, taking time. • Existing difficulties indicate time for change to move into in line with the new laws. • Managers and directors have to plan for change while continuing work which will add to workload and may cause demotivation and affect efficiency. • Management/employee relations will change and this may increase motivation which may increase productivity. • If merger with SC goes ahead the new organisation is likely to be more in line with new legislation. Evaluation • Judgement regarding possible extent of changes needed for compliance. • Some managers unable to change to a softer HRM approach. • Employees and managers will have to change attitudes. • No guarantee that beneficial effects will happen. • Change management will be vital for successful implementation. • If SC merger goes ahead the expertise and experience from SC will more easily enable meeting new legislation requirements. • If the SC merger goes ahead, will SC staff leave/redundancies be made from either firm, which could impact meeting new legislation requirements, at least in the short term.

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4(a)(i) Refer to lines 39–44. Calculate for the new government contract: 3 (i) total contribution Total contribution = Total Revenue – Total Direct Cost (1 mark if no relevant calculation) TR = 7000 (1) Total Direct Cost = 50 X 100 = 5000 (1) Total contribution = ($)2000 (3) OR Unit contribution = 70 – 50 = 20 (2) Total contribution = 100 X 20 = ($)2000 (3) 4(a)(ii) (ii) total profit or loss 3 Profit = TR – TC (1 mark if no relevant calculation) TR = 100 X 70 = 7000 (1) TC = 100 X 80 = 8000 (1) Loss = $1000 or profit = – $1000 or $(1000) (3) OR Profit = total contribution – average indirect costs X quantity (1 mark if no relevant calculation) Contribution = 20 X 100 = 2000 (1) Indirect cost = 30 X 100 = 3000 (1) Loss = $1000 or profit = – $1000 or $(1000) (3) OR 20 – 30 = –10 × 100 = -1000 or (1000) OFR 4(b) You may refer to your answer to 4(a) and other information. 12 Recommend how the Marketing Manager should respond to the proposed government contract. Justify your recommendation. Level Knowledge Application Analysis Evaluation 2 marks 2 marks 3–4 marks 3–4 marks 2 2 marks 2 marks 3–4 marks 3–4 marks Two relevant Two points Good use of Good points made applied to theory and/or judgment AP reasoned shown argument to answer question 1 1 mark 1 mark 1–2 marks 1–2 marks One relevant One point Some use of Some point made applied to theory and/or judgment AP reasoned shown argument to answer question 0 No creditable content Note: OFR from response to 4(a) applies Knowledge • Quantitative factors – Contribution focuses on the difference between price and average variable cost – Profit = TR – TC – If contribution is positive, then worth considering accepting the order • Qualitative factors – Possibility of future orders – Impact on employees – Impact on reputation – Impact on other customers – CSR Application • Normal price is $110 per climbing frame, potential order price is $70, $40 less than normal. • Direct cost per climbing frame is $50, indirect is $30, total $80. • AP has objective of growth. • Use of data from 2a: loss of $1000 and positive contribution of $2000. • Possible capacity constraint especially as the order is required to be delivered quickly. 4(b) Analysis • Loss to be made on order at offered price, assuming same allocation of indirect costs. This will lead to lower profits than if frames sold at full price. • Possibility that this order will lead to more orders from government or other customers at the normal price. • Turning down this order indicates AP not interested in gaining more business so less orders may follow. • This extra order will contribute to growth and achieving this objective. • Possibility of negotiating the order price, especially as it is very low compared to normal price. $80 per frame would cover direct and indirect costs. • Possible capacity constraint may mean this order means others cannot be taken. • If order accepted other potential customers may also demand low prices reducing profit. Evaluation • Justified recommendation to accept order or not, to negotiate a better price, to find out if more orders are likely to follow. • Need to check accuracy of the cost information before making decision. • Timescale of the order needs to be considered in relation to capacity. • If AP decides to enter consumer markets, do they need this government contract? Or if AP decide on new product development, they really do need this contract to allow for further orders of new products. • Short term cost of accepting the contract v the long term potential profit of further government contracts • Most important factor? Growth or profit on the order?

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5 Recommend which international market AP should expand into, 16 country P or country T. Justify your recommendation. Level Knowledge Application Analysis Evaluation 2 marks 2 marks 6 marks 6 marks 2 2 marks 2 marks 4–6 marks 4–6 marks Two relevant Two points Good use of Good points made applied to theory and/or judgment AP reasoned shown argument to answer question 1 1 mark 1 mark 1–3 marks 1–3 marks One relevant One point Some use of Some point made applied to theory and/or judgment AP reasoned shown argument to answer question 0 No creditable content Knowledge • Understanding of international market. • Importance of international market for AP. • Understanding of joint venture with agents, direct investment. • Understanding of tariffs, exchange rate, economic growth, subsidy, grants, role of trade unions, indirect taxes. • Possible aims and content of market research. 5 Application • AP’s objective of growth and profit. • AP is leading supplier in country Z. • Use of relevant data from Table 2. NB not just quoting data but comparisons such as: – 20% of Country P’s population of 20m are under 15, compared to 15% of Country T’s population of 30m. So, Country P has 4m people under 15, which is lower than the 4.5m in Country T. – Marketing cost is $0.5m higher in Country P. – Economic growth is 2% higher in Country T. Analysis • Comparison of strengths/weaknesses of differing entry methods: joint venture with agents v direct investment in factory • Comparison of advantages and disadvantages of the economic factors in Table 2 for AP if exporting. – Appreciation of country Z’s currency against country P will make it more difficult to export over time as less price competitive – Government grant available in country T will reduce the cost of expansion • Comparison of marketing costs and possible market size based on population figures – country T has a larger population under the age of 15 and so there is more potential for sales. • Comparison of strength of competition in countries P and T. Evaluation • Justified recommendation on choice of country. • Most important factor in the decision • Justified recommendation to seek more detailed market information as no sales data given. • Need more information on forecast effectiveness of marketing campaigns. • Important factor of attitude of governments in P and T not detailed. • More information needed on costs/availability of factory or suitable agents. • Either option fit with AP’s objective of growth and AP is leading supplier in country Z so time is right for international expansion. • Justified conclusion of neither at this time 6, 7 Questions 6 and 7 use this marking grid: Level Knowledge Application Analysis Evaluation 3 marks 3 marks 4 marks 10 marks 3 7–10 marks Good judgment shown throughout with well supported conclusion/ recommendation, focused on AP 2 3 marks 3 marks 3–4 marks 4–6 marks Good Good Good use of Some judgment understanding application reasoned shown in the shown to AP argument or main body of the use of answer and an theory to attempt to explain support points made conclusion/ to explain recommendation, points made focused on AP OR effective and well supported conclusion/ recommendation focused on AP 1 1–2 marks 1–2 marks 1–3 marks 1–3 marks Some Some Limited use Limited attempt to understanding application of reasoned show judgment shown to AP argument or either within the use of answer theory to OR support a weakly points made supported conclusion/ recommendation with some focus on AP 0 No creditable content

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6 Evaluate whether decision tree analysis or force field analysis will be 20 more useful to AP’s directors when making a strategic choice. Note: • If there is no reference to, or knowledge of, DTA or FFA then limit to K 2 APP 2 AN 0 EVAL 0 for other factors related to the choice between options 1 and 2. • Award L2 EVAL if there is some judgment shown in the main body of the answer and an attempt to support conclusion/recommendation, focused on AP. Knowledge • Understanding of Force Field Analysis – considers driving and restraining factors in a decision • Understanding of decision tree analysis: inclusion of probability to calculate the monetary outcomes from investments and make choice based on quantitative data • Understanding of other SC techniques such as Ansoff’s matrix and investment appraisal techniques – Investment appraisal: payback and ARR. How quickly investment is recovered and the average profitability of the investment. – Ansoff’s matrix – considers risk of growth strategies with reference to product and market • Role of strategic choice in strategic management, including strategic analysis and implementation. Application • Understanding of content of option 1 and option 2, for instance Option 1 is a change to B2C marketing and selling. • Reference to decision tree analysis and force field analysis. (Table 3). – Option 2 has higher EMV – Option 2 has higher profit of $5.4m if demand is high – Option 1 has higher profit of $2.2m if demand is low • Risk level low to medium for either option. • Option 1 13:9 Option 2 11:10 • AP’s corporate objective is continued low risk controlled growth. Analysis • Advantages of FFA: simple and easy to understand, inexpensive – forces acting on a change. • Disadvantages: not all relevant forces may be identified, subjective scoring, only reliable as an indicator, few quantitative elements, simplistic scoring. • Advantages of decision tree analysis: quantitative, takes market and risk into account, based on research, enables what-if analysis. • Disadvantages of decision tree analysis: relies on accurate forecasting, may be relied on for accuracy, research methods may be flawed, data may be out of date, unforeseen changes can alter forecast. • FFA favours option 1 and DTA favours Option 2 6 • FFA enables focus on strengthening drivers for and minimising forces against. • DT enables clear decision based on objective data. • Comparison of decision tree analysis results with FFA. (Table 3). • Use of other techniques e.g. Ansoff Matrix to cover different aspects and give further information to inform choice • Role of other elements of strategic management: initial analysis, implementation. • Application of FFA and DT analysis to other strategic decisions (HR law response, international marketing, merger). Evaluation • Judgement on usefulness of FFA compared to decision trees for AP. • Judgement on usefulness of FFA based on use of data from Tables 3 and 4. • Subjective nature of FFA in determining values and choice of driving / restraining forces. • Directors must understand the choice techniques to use them effectively. • Decision making based on these techniques relies on accuracy of the information used. • Importance of role of Ansoff Matrix and investment appraisal in supporting /not supporting judgement based on the FFA and decision tree analysis.

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7 Evaluate the importance to AP of effective strategic management in an 20 increasingly competitive world. Knowledge • Understanding of business strategy. • Understanding of strategic management – analysis, choice and implementation. • Understanding of business planning for functional areas – e.g. workforce, marketing, financial, operational. • Understanding of role of corporate plan. • Meaning of competitive advantage – the ability of a business to attract customers over similar businesses • Understanding and use of core competencies. Application • Position of AP in its market: leading supplier in country Z. • Possible (strategic) decisions facing AP – international expansion, options 1 and 2, merger, reaction to new legislation, new machines. • Reference to usefulness of data in Table 3 and Table 4 in helping choice decisions. • AP’s objective is low risk with controlled growth • Increasing competition and new international competitors into the growing market for play equipment Analysis • AP is successful but not fully focussed on strategic planning, many projects and proposals may prevent finer focus on objectives. • AP faces decisions in a number of areas, cannot pursue all of them. • Strategic management – Enables focus but requires understanding and desire/ability to make changes. – Requires clear objectives, planning and research using the strategic techniques. – Involves research and information gathering, using techniques in a coordinated integrated manner. – Corporate planning requires flexibility and continuous updating to ensure that it remains relevant. • Developing and maintaining a strategic approach costs resources – time and requires expertise, commitment and communication to get employees motivated and efficient. • A strategic approach requires flexibility and contingency planning, in case of unexpected events, such as costs of failure of a chosen option or reputational damage caused by a play equipment accident. • Evidence in case study is that AP’s strategy is weak and yet AP has been successful, as evidenced by continuing growth. • Possible that having a strategy reduces flexibility as AP could be locked into one course of action 7 Evaluation • Justified conclusion regarding importance of an effective strategy based on evidence and argument. • Conclusion on relative sizes of benefits and costs. • Strategic decision making is only as good as the information, analysis and choice techniques it is based on. It does not guarantee success. • Effectiveness depends on understanding and execution of techniques by managers plus effective communication to employees. • Having a strategy brings more factors within APs control and enables faster response to changing external factors. • No strategy means AP will be at the mercy of factors beyond its control: economic changes and competitors’ strategies. • Strategic management will always be guided by managers’ attitude to risk, and they appear to be cautious / risk averse.