Business 9609/11 October/November 2023: question paper and mark scheme

Mark scheme

1(a) Define the term labour turnover. 2 Indicative content Responses may include: AO1 Knowledge and understanding Clear understanding • percentage of a business’ workforce that leaves a business. (2) • measure of the rate at which employees are leaving an organisation. (2) Number of employees leaving in one year • (× 100) (2) Average number of people employed • Number / amount of workers leaving a business in a specific time period (2) Partial understanding • Number / amount of workers leaving a business (1) Accept all valid responses. 1(b) Explain one role of a workforce plan. 3 Indicative content Responses may include: AO1 Knowledge and understanding Roles of a workforce plan include: • identify skills / experience of current workforce. • predict the number of employees needed. • fill gaps in current workforce • adapt the workforce. • prevent production difficulties. • identify training needs. • identify costs of changes to workforce AO2 Application HR can recruit new employees or train existing ones to meet future production needs / business objectives. • fill gaps in the current workforce by recruitment or training. assess the current workforce and changes needed to adapt to changing business environment. • organise redundancy of employees no longer needed due to change to capital intensive production or reduced demand. • create budget for changing / training employees to present to finance department. Accept all valid responses.

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2(a) Define the term capital intensive. 2 Indicative content Responses may include: AO1 Knowledge and understanding Clear understanding • involves a high quantity / proportion of machinery / equipment / technology compared with labour input / other resources. Partial understanding • uses machinery / equipment / technology (1) • involves a high quantity of machinery / equipment / technology (1) Accept all valid responses. 2(b) Explain one benefit to a business of labour intensive operations. 3 Indicative content Responses may include: AO1 Knowledge and understanding Benefits of labour intensive operations include: • good quality / customer service. • can be inexpensive. • assists job production / one off items. • skilled / flexible employees. • motivated workforce. • good for small businesses. 2(b) AO2 Application • used in personal services e.g. hairdressing, where good customer interaction and service is needed. • can be better at meeting customer needs and wants. • in some countries human labour is relatively inexpensive, so costs can be minimised. • no costly investment in machinery or maintenance / repair costs. • better suited to job production where specialised / individually designed / one–off products are made. • labour intensive production can be very flexible, using similar skills for many personalised / hand–crafted products. • small business may not need high levels of production so labour intensive production is better than having large fixed costs. Accept all valid responses.

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3(a) Define the term margin of safety. 2 Indicative content Responses may include: AO1 Knowledge and understanding Clear understanding • the amount / quantity by which a firm’s current level of output / sales / revenue exceeds the break–even level of output / sales / revenue. • current level of output / sales / revenue − break–even output / sales / revenue. • difference between current output / sales / revenue and break-even output / sales / revenue current level of output / sales / revenue – break-even output / sales / revenue • margin of safety = × 100 current level of output / sales / revenue • correct diagram with margin of safety labelled (2) Partial understanding • break-even output / sales / revenue (1) • current level of output / sales / revenue (1) • above break-even point (1) • partially correct diagram with margin of safety shown (1) Accept all valid responses. 3(b) Explain one way a business can decrease its break–even level of output. 3 Indicative content Responses may include: AO1 Knowledge and understanding • Ways to decrease break–even level of output include: • increase the price per unit. • reduce fixed costs of business. • reduce variable costs per unit. • increase contribution per unit. AO2 Application • increases revenue per unit, especially if demand is price inelastic – shown as revenue line being steeper. • can add value and / or increase promotion to increase price. • cheaper fixed costs e.g. premises / utilities – reduces total costs – shown by fixed costs line being lower. • variable costs reduced e.g. cheaper inputs / components / materials / backward vertical integration – reduces total costs – shown as variable costs line being less steep. • the break–even point is achieved with less units produced. • relevant calculation(s). • relevant diagram(s). Accept all valid responses.

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4 Analyse one way that a business may be affected by a dynamic business environment. 5 Indicative content Responses may include: AO1 Knowledge and understanding Effects of a dynamic business environment include: • increased / decreased demand. • increased / decreased costs. • increased / decreased revenue. • increased / decreased profit. • increased / decreased competition. • increased / decreased market share. • increased uncertainty / instability. AO2 Application • changing customer needs for products. • technology advances / production possibilities. • government policy e.g. treatment of employees, type of product, ethical behaviour. • competitor actions e.g. pricing / promotion / product development. • external environment – inflation, interest rates. • difficult to forecast future inventory needs. • must change and adapt. 4 AO3 Analysis • changing customer needs might affect demand leading to innovation, product development, extension strategies and altering production. • regular market research needed to adapt to changing demand therefore increasing costs and possibly profit. • technological changes e.g. availability and speed of the internet can make it easier to find suppliers and sell across the world. • new policies can change business behaviour which may alter objectives and production methods. • economic conditions affect spending power and choice of products chosen e.g. needs vs luxuries / cheap vs expensive. • increase or decrease in competition may alter pricing strategy and therefore profit. • managers will need to change some of their decisions about inputs, the transformation process or the outputs they produce. • they might switch production to another country; become more capital intensive; sell products to other countries. • changes may have cost implications for the business and affect revenue and profits. Accept all valid responses.

Mark scheme

5(a) Analyse two advantages to a business of mass marketing. 8 Indicative content Responses may include: AO1 Knowledge and understanding Advantages of mass marketing include: • reduces risk. • large customer base. • little price discrimination. • no need for product differentiation. • little market research. • no targeted advertising. • brand easily recognised. • can use flow production methods. • economies of scale. AO2 Application • one product or a limited range is supplied to the whole market e.g. rice. • little or no differentiation e.g. bottled water. • example e.g. Coca–Cola with large customer base. 5(a) AO3 Analysis • reduces the risk of failure if product is guaranteed to remain necessary / popular – more chance of business success. • large number of customers wanting a standardised product at low price so no need to consider different pricing methods. • mass market means high total sales and high revenue even with a lower price. • gain cost leadership over smaller businesses and can set lower prices. • usually leads to high profits even if profit margins are low. • little product development reduces spending on R and D. • requires little market research if market is stable – saves money and time. • advertising is not targeted so can use expensive but wide–coverage methods – gives marketing economies of scale. • strong brand creates barrier to entry for smaller businesses and keeps market share high / allows high prices. • flow production usually capital intensive which can be cheaper in long run than labour intensive operations. • high volumes of production lead to lower unit costs due economies of scale – this leads to a lower price for consumers. Accept all valid responses. 5(b) Evaluate whether primary sector businesses should use product differentiation to increase sales. 12 Indicative content Responses may include: AO1 Knowledge and understanding • product differentiation is making a product distinctive so that it stands out from competitors’ products in consumers’ perception. • product differentiation could be achieved by branding, product design, ease of use, USP. Do not reward selling different products e.g. wheat and tomatoes. AO2 Application • primary sector business is one which extracts natural resources / raw materials. • primary sector products are used and processed by other firms e.g. strawberries / milk to yoghurt manufacturer. • primary sector business examples could be fishing, mining, farming, oil extraction, logging businesses. • primary sector products could be coffee, wheat, coal, wood. 5(b) AO3 Analysis • primary sector products are often commodities and are a standardised product sold in mass markets. • they can get high sales without product differentiation. • large businesses can dominate the market and gain economies of scale. • they can set low prices and gain high sales without product differentiation. • product differentiation can attract consumers to small businesses e.g. locally produced thereby increasing sales. • ethical sourcing may be important to consumers e.g. organic or fair trade, sustainable (plant a tree) or produced by social enterprises and these customers will buy from ethical businesses rather than cheaper ones, increasing sales. • mining companies can differentiate themselves and therefore the products that they sell by their attitude to human rights. • differentiation of a primary sector product is more likely to be carried out by a manufacturer or retailer e.g. tinned tuna or line caught, own brand vs well–known brand, rather than the primary sector business. • could secure customer loyalty from secondary businesses e.g. reliable supply, better reputation, quality produce. • improvements in technology allow all year round growing of seasonal crops to increase availability – can be a USP. • need market research, possibly primary to find out how best to differentiate – costly. AO4 Evaluation Developed evaluation in Developed / Supported judgement in context 6 marks context: Developed evaluation in Developed / Reasonable evaluative comments in 5 marks context: context Developed evaluation not Developed / Supported judgement without context 4 marks in context: Developed evaluation not Developed / Reasonable evaluative comments without 3 marks in context: context Limited evaluation not in Limited supported judgement 2 marks context: Limited evaluation not in An attempt to balance the arguments / Weak attempt at 1 mark context: evaluative comments 5(b) A judgment / conclusion is made as to whether primary sector businesses should use product differentiation to increase sales. These judgements / conclusions may be made at any point in the essay, not only in a concluding section. • might seem difficult to differentiate a primary / commodity product as it is the same wherever it has been sourced. With no obvious differentiation is it possible for a primary sector business to create an artificial differentiation? • primary sector businesses may compete internationally and the business with the lowest price will make the most sales. If there is a trade–off between costs, price, quality and ethics what should a primary sector business focus on? To what extent are the customers attracted by cheap products? • will the business which can produce at the lowest unit costs and keep its prices lower than competitors achieve price differentiation and greater sales? Will price differentiation favour large businesses, therefore making product differentiation more important to smaller businesses? • to what extent do customers actively seek ethical / locally sourced / organic products? Will a business with a strong corporate social responsibility objective differentiate itself and make higher sales even when charging a higher price? Can this USP be used equally well by large and small businesses? Will it be more necessary to a smaller producer which cannot compete with low prices? Will it depend on whether a niche market exists and is worth targeting? • is branding of primary products more easily achieved by manufacturers or retailers? Is it worthwhile for primary sector businesses to spend money on establishing a brand and marketing it? Will this depend on the product and size of the business? Is a large business more likely to have a large product portfolio and therefore use its branding on any primary sector businesses it owns? • to what extent is marketing the main source of the differentiation? How easily can marketing be adjusted to suit the product and the target market? • how can quality of the product best be used as a differentiating factor and how may it be achieved e.g. by operating in different countries or using different extraction / growing methods? Will quality always matter to customers? Will increased quality always guarantee that sales will increase for those businesses which achieve it better than competitors? Will improved quality always mean that the price can be increased and sales revenue may increase? 5(b) • in all cases the type of product differentiation will appeal to certain target customers. Whether it is price, quality, location, brand, ethicality, it will appeal to customers looking for that type of differentiation. • whether differentiation increases sales depends on whether sales are measured in volume or value. Low price appeal in a mass market is more likely to increase sales volume. Differentiation via any type of quality will allow a higher price and sales revenue may increase even though sales volume may be relatively low. • the success of any differentiation strategy is due to the primary business identifying what attracts the customer to buy their product rather than an identical one sourced by a different primary sector business. Accept all valid responses.

Mark scheme

6(a) Analyse two ways a business could use employee participation in the management of business activity. 8 Indicative content Responses may include: AO1 Knowledge and understanding • gain ideas about job / business / opinions. • assist decision–making. • increase motivation. • reduce employee dissatisfaction. • incorporate into organisation structure. Some candidates have reversed K and APP – this is acceptable. AO2 Application • examples of use of type(s) of employee participation in business contexts – meetings, quality circles, work councils, worker directors, autonomous work groups, laissez faire / democratic management. • might not name specific methods of participation but describe how they work. 6(a) Some candidates have reversed K and APP – this is acceptable. AO3 Analysis • taking part in meetings where the contribution of employees, their proposals and result of being allowed to take part in voting can influence the objectives and activities of the business. • to operate well, employee participation may need a laissez faire style of management. This gives employees the ability to manage their own working practices and is a motivating factor. • motivated employees are more likely to benefit the business in many ways. Employee participation is seen to some extent in all the motivation theories, satisfying higher needs of self–esteem and self–actualisation. • however, the management of business activities is often considered to be the role of senior managers and leaders within a business. It may be difficult for them to relinquish some of their responsibilities to suitably experienced and qualified employees. • works councils – managers and employees meet to discuss issues such as working conditions, pay and training. Employee representatives are elected by the workforce and may be appointed to the Board of Directors. Employee concerns are raised and solutions are likely to be acceptable to employees. • worker directors – can influence decision–making. Will seek actions to benefit employees and prolong decision– making. In reality little notice may be taken of the worker director. • employee shareholders – employees can buy shares in the company, often at discounted rates. Because employee shareholders have a financial interest in the business’ performance, their motivation levels and performance may improve. If the business performs well, its share prices should increase, giving financial benefits to the employee. • quality circles – groups of workers who meet regularly to identify methods of improving all aspects of the quality of their work. They normally involve employees drawn from all levels within the organisation and focus on supplying imaginative ideas. Their decisions can improve the production of the business as well as motivating them. • autonomous work groups – teams of employees who are given a high level of control over their working lives (a form of empowerment). Some groups elect their own leaders and can appoint new staff, as well as having considerable authority over what tasks to complete and in what sequence. Those employees doing the job are often in a better position to make appropriate decisions than senior managers. Positives and / or negatives are acceptable for analysis. Accept all valid responses. 6(b) Evaluate whether McClelland’s three needs theory is the best way to meet employee needs in a software business. 12 Indicative content Responses may include: AO1 Knowledge and understanding • McClelland – three needs theory – achievement motivation, authority / power motivation, affiliation motivation. AO2 Application • examples given of suitable application – software, video games, research, technology, quaternary sector. • examples given of the different types of employees within a software business e.g. app developer, programmer, website developer, game developer, coding, data scientist. • example of a software business e.g. Apple, Microsoft. 6(b) AO3 Analysis • Achievement motivation – employees aim for excellence. Likely to avoid low–risk situations with unchallenging targets. Likely to avoid high–risk situations as they fear not achieving. • Achievement motivation – employees need realistic but challenging goals. Should be given tasks which are demanding but achievable. Need regular positive feedback on achievement and progress to meet their need for accomplishment. • Authority / power motivation – employees need personal power – to direct or control other employees. • Authority / power motivation – employees need institutional power – to organise other employees, to have control and status, to influence the business’ objectives. • Authority / power motivation – employees can be given supervision / control of other workers by promotion to higher position e.g. manager. A strong need for authority may lead to an autocratic leadership style. A junior employee could be given a supervisory role, while more senior employee may manage a large team of employees. • Affiliation motivation – employees need good relationships and social interaction with other employees. They need to feel accepted and are motivated to work with other people. • Affiliation motivation – employees should be employed as a member of a team. • McClelland believed that these three needs exist, to differing extents, in all employees, regardless of their role or status within the business. • the combination of these three needs determines: each employee’s behaviour in terms of what motivates them; how they manage and motivate other employees. • McClelland’s theory of needs has implications for leaders and managers. They must treat each employee as an individual as each employee may require different roles and tasks to meet their individual needs. • reward comments regarding the overlap between McClelland’s theory and others. Motivation theorists show a range of employee needs, some of which overlap. • Taylor – money for basic needs. Mayo – social needs. Maslow’s hierarchy of needs – physiological, security, social, self–esteem, self–actualisation. Herzberg – two factor theory of hygiene factors and motivators, meeting the needs above. These theories can also be used to influence the motivation of employees once McClelland’s theory has been applied. Accept all valid responses. 6(b) AO4 Evaluation Developed evaluation in Developed / Supported judgement in context 6 marks context: Developed evaluation in Developed / Reasonable evaluative comments in 5 marks context: context Developed evaluation not Developed / Supported judgement without context 4 marks in context: Developed evaluation not Developed / Reasonable evaluative comments without 3 marks in context: context Limited supported Limited supported judgement 2 marks judgement Limited supported An attempt to balance the arguments / Weak attempt at 1 mark judgement evaluative comments 6(b) A judgment / conclusion is made as to whether McClelland’s three needs theory is the best way to meet employee needs in a software business. These judgements / conclusions may be made at any point in the essay, not only in a concluding section. • evaluative comments may compare the usefulness of McClelland’s theory with that of other theorists. • how easy is it to identify the relative strength of the three needs in McClelland’s theory in all employees? Will this involve specialist designed questionnaires which can be expensive and time consuming to carry out by the HRM function? • it depends on the individual needs of the employees which are influenced by their experience, current status and ambitions. • can the business act on what it finds by using appropriate methods, maybe those shown in other theories? • it depends on the types of leaders / managers in the business as to how well they recognise and are willing / able to meet these needs. • it depends on the type of business being considered and the types of employees within it. • a judgment will be made relating to the employees in a software business e.g. there may be many types of employees e.g. web developer, computer programmer, database administrator, software designer. Employees in the functions of marketing, finance, production and human resources may have very different needs to those in the technical and creative roles. Accept all valid responses.