Business 9609/31 October/November 2023: question paper and mark scheme

Mark scheme

1 Analyse two advantages to CP of changing to a product–based organisational structure. 8 Level AO1 Knowledge and understanding AO2 Application AO3 Analysis 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 points • Application of two relevant points Limited analysis is used to answer the question. to a business context. • Limited analysis that identifies • Knowledge of one relevant point • Application of one relevant point connections between causes, is used to answer the question. to a business context. impacts and/or consequences of two points • 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: • Only reward advantages • If more than two advantages are referred to, reward the best two. Indicative content Responses may include: AO1 Knowledge and understanding Limited knowledge will be demonstrated through knowledge of the concept of a product-based organisational structure or a functionally based organisational structure or knowledge of possible impacts of changing to a product-based organisational structure. Developed knowledge + will be demonstrated through knowledge of the concept of a product-based organisational structure and knowledge of possible impacts of changing to a product-based organisational structure. • Definition or explanation of product-based organisational structure – one where people in the company are divided according to which product line they work on. • Definition or explanation of functionally based organisational structure – one where people in the company are divided according to their job role, such as marketing or finance. Possible advantages include: • Employees in each product area are specialised in that product. • Increased focus on each product and the market it sells in. • Costs and revenues can be allocated more accurately to each product. • Communication between departments will be more direct. • Coordination between functions for each product is easier and quicker. • Focus will be on products and their marketing. • Competition for resources between functions will be less. Efficiency increases. • Quicker reaction time to market changes. • Quicker decision making as focus on particular product, rather than having to wait for input from other departments. 1 AO2 Application Limited application, applies knowledge to CP once. Developed application, + applies knowledge to CP twice. Max one for application for the first advantage of a product-based organisational structure and max one for application for the second advantage of a product-based organisational structure. • CP produces paint for three markets – internal and external paints, aircraft industry. • Production, development and marketing for each of these are different. • Increasing competition and innovative distribution channels in the markets. • Currently organised by function: five departments. • Research centre for R&D into improving qualities of paints such as durability. • Rising costs, customer dissatisfaction because of centralisation and poor communication. 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. • Development of knowledge and application points, in terms of the likely advantages to CP, such as improved focus on customer needs in each of the paint markets, leading to increased sales revenue, and potentially profit due to increased efficiency. • Easier and less costly to implement and focus marketing strategies for each paint product, leading to more effective strategies. • Specialisation and focus on product mean closer to market so quicker to react to changes , potentially leading to first mover advantage and higher market share. • Accurate allocation of costs and revenues means loss makers and profitable paints can be identified clearly and quickly, leading to more efficient portfolio management and lower costs as weak performing products may be discontinued • Research centre projects can be more closely linked to the different market requirements, leading to meeting customer needs , higher sales and increased revenue and profit. • Functions integrated with products so more efficient production and marketing – lower costs. Accept all valid responses.

Mark scheme

2 Analyse two ways technological change might impact on CP’s decision to develop nanopaints. 8 Level AO1 Knowledge and understanding AO2 Application AO3 Analysis 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 points • Application of two relevant points Limited analysis is used to answer the question. to a business context. • Limited analysis that identifies • Knowledge of one relevant point • Application of one relevant point connections between causes, is used to answer the question. to a business context. impacts and/or consequences of two points. • 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: • Impacts can be positive or negative. • If more than two impacts are referred to, reward the best two. Indicative content Responses may include: AO1 Knowledge and understanding Limited knowledge will be demonstrated through knowledge of the concept of technological change or knowledge of possible impacts of technological change. Developed knowledge + will be demonstrated through knowledge of the concept of technological change and knowledge of possible impacts of technological change. Definition or explanation of technological change – in product design, production techniques or marketing, such as data collection, use of IT/AI. Possible impacts include: • New product designs lead to company being known as an innovator. • New processes may lead to greater efficiency in all areas of production and operations, including methods of distribution. • Innovative marketing methods may lead to more effective customer relationship marketing (CRM). • R&D into innovation and introduction of new technology is expensive. • Firms who do not innovate are in danger of being forced out of the market. AO2 Application Limited application, applies knowledge to CP once. Developed application, + applies knowledge to CP twice. Max one for application for the first impact of technological change and max one for application for the second impact of technological change. • CP has a research and development centre. • Recent history of new technology-based products – external paint, specialist paints, plastic/nanopaints. • Production of new paints will be costly, due to innovative materials and processes. • CP a leader in nanopaints and plastic paints. • Competitors currently not producing these new paints but will do in future. • Technology gives the new paints a USP. • CP creates technological change by research – the nanopaint is a technological change. 2 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. • Development of knowledge and application points explaining the potential influences of technological change on CP. • Paint industry has a history of new technological based products so important to keep producing these, to maintain market position. • Keeping up with technological change will lead to innovative products, which will lead to higher sales and be an important factor in market success . However, may lead to more competition if competitors develop innovative products first, decreasing sales and market share. • Research centre has produced new ideas so important to maintain confidence in research, in order to move the business forward and expand the paint range, leading to increased sales, market share and profit. • Universities engage in research so market requires change and new products to avoid a company being left behind, but cost of new production line technology may make it uneconomic to go ahead even if the paint technology is good. • The USP is likely to bring first mover advantage and commercial success. Accept all valid responses.

Mark scheme

3(a) Refer to Table 1.1 and Fig. 1.1. Calculate the minimum project duration. 1 Responses may include: CP = 13 (weeks) (1) 3(b) Refer to Table 1.1 and Fig. 1.1. Calculate the total float for activity D. 3 Responses may include: Total float activity is time an activity can be delayed without delaying overall project duration. LFT – duration – EST (1) 10 – 1 – 4 (2) Total Float = 5 (weeks) (3) Accept all valid responses. 3(c) Evaluate whether critical path analysis (CPA) will ensure CP achieves its objective of minimising interruption to 12 production. Level AO1 Knowledge and AO2 Application AO3 Analysis AO4 Evaluation understanding 2 marks 2 marks 6 marks 2 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 Developed analysis Developed evaluation of relevant key term(s) of relevant point(s) to that identifies • A developed judgement/conclusion and/or factor(s) is used the business context. connections between is made. to answer the question. causes, impacts and/or • Developed evaluative comments consequences. which balance some key arguments. 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 that identifies • A judgement/conclusion is made and/or factor(s) is used the business context. connections between with limited supporting to answer the question. causes, impacts and/or comment/evidence. consequences. • 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. 3(c) Indicative content Responses may include: AO1 Knowledge and understanding Limited knowledge will be demonstrated through knowledge of critical path analysis (CPA) or benefits of CPA Developed knowledge + + will be demonstrated through knowledge of critical path analysis (CPA) and benefits/limitations of CPA • Understanding of CPA – network diagram, critical path, floats, minimum duration. • Benefits of CPA: knowing minimum project time, start times for activities, progress monitoring, assessing significance of delays and if necessary, corrective actions. • Limitations of CPA: analysis only as good as input data, planning costs, does not ensure effective management. AO2 Application Limited application, applies knowledge to CP once. Developed application, + applies knowledge to CP twice. Max one for application for the first impact of technological change and max one for application for the second impact of technological change. • Importance of continuous supply to retailers. • Contractor produced CPA. • Contract based on accuracy and reliability of CPA. 3(c) 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. • Development of knowledge and application points about usefulness of CPA to CP. • CPA is quantitative as it allocates timings to activities, so can help with planning and monitoring to ensure project does not over-run. • Contractor may have produced CPA and contract terms in order to get the contract. This may mean contract takes longer , which will lead to delays and dissatisfied customers. • CPA enables CP to determine non-production time and prepare, by building up inventory, before work starts. This will enable sales to proceed as normal and avoid potential of unmet orders and decreased sales and profit. • Enables monitoring critical activities, such as E (delivery of components) and allows CP to take action if a delay is threatened to ensure project is completed on time , minimising production interruptions. 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. • Either conclusion is valid, as long as it is justified. • CP has contract provision that CPA for the external use paint production line is accurate and reliable so more likely that it is, as the contractor will not want to pay penalty fees. • CP experienced in paint production, rather than production line installation, so not likely to know accuracy of CPA. • An accurate CPA will be very important for enabling continuous supply of external paints, so customers are not disappointed. • CPA only as good as data and the skills of the person who prepared it. Some question about its accuracy so CP wise not to rely solely on its results, especially as the price is low and the contractor produced it. • Other information is also important, such as staff training. The CPA does not allow for this. • Work progress has to match the CPA plan, so CP would be wise to maintain constant check on progress before and after work starts. Accept all valid responses.

Mark scheme

4(a) Using the data in Table 1.2, calculate the forecast dividend cover ratio for 2024. 4 Responses may include: Answer Note Marks DC = 4 (times) Correct answer 4 DC = 5 (times) DC for 2023 3 DC = $4 or 4% Incorrect units DC = 0.24 / 0.05 = 4.8 Incorrect figure for profit used 0.2 / 0.05 Knowledge of correct 2 equation & correct numbers Profit for the year / Knowledge of correct 1 Annual dividend equation 4(b) Evaluate the usefulness of the annual report to CP’s shareholders in deciding whether to sell their shares. 12 Level AO1 Knowledge and AO2 Application AO3 Analysis AO4 Evaluation understanding 2 marks 2 marks 6 marks 2 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 Developed analysis Developed evaluation of relevant key term(s) of relevant point(s) to that identifies • A developed judgement/conclusion and/or factor(s) is used the business context. connections between is made. to answer the question. causes, impacts and/or • Developed evaluative comments consequences. which balance some key arguments. 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 that identifies • A judgement/conclusion is made and/or factor(s) is used the business context. connections between with limited supporting to answer the question. causes, impacts and/or comment/evidence. consequences. • 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. 4(b) Indicative content Responses may include: AO1 Knowledge and understanding Limited knowledge will be demonstrated through knowledge of the role of shareholders or annual reports or why shareholders may sell or keep shares. Developed knowledge + + will be demonstrated through knowledge of the role of shareholders and why shareholders may sell or keep shares. • Explanation of contents and purpose of annual report – legal requirement, sets out company objectives, policies, plans, contains annual accounts and details regarding directors. • Content of income statement. • Content of statement of financial position. • Possible meaning and implications of these two statements. • Understanding of shareholders’ role and possible purposes of holding shares – capital gain or dividend income. AO2 Application Limited application, applies knowledge to CP once. Developed application, + applies knowledge to CP twice. Max one for application for the first usefulness of the annual report to shareholders and max one for application for the second usefulness of the annual report to shareholders. • CP is a paint manufacturing plc. • Nanopaints and finance needed, new production line and its cost. • Static market share and increasing competition in country Q. • Possible international marketing. • Use made of information in Table 1.2 including any calculations undertaken. Calculations might include for 2024 and 2023: • Operating profit margins: 0.47% in 2023 and 0.26% forecast for 2024 • ROCE is forecast to decrease by 0.57% points • Forecast decrease in operating profit of $0.18m • Forecast decrease in profit for the year of $0.8m (80%) • Forecast decrease in dividends payable of $0.15m (75%) • Increase in gearing ratio 4(b) 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. • Development of knowledge and application points in terms of the impact of the annual report on shareholders decision to keep or sell shares. • Optimistic written section of annual report will encourage shareholders to keep shares, hoping for higher returns in the future to make their investment worthwhile. • CP seems a company with a good future, investing in new products, new production line, considering expansion internationally, so this should lead to higher future sales revenue and profits, leading to higher dividends. • Forecasted financial information is not optimistic, which may encourage ‘short termist’ shareholders to sell shares, due to low expected returns. This could drive down the market value of CP. • Analysis of accounting data for two years linked to shareholder decision and if impact on shareholders is developed. 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. • Shareholders hold shares for different reasons: capital gain, income, interest in the company, commitment as owners. Reason will be a factor in decision. • More information needed to finalise a decision including share price (difficult to forecast), and previous years information to see any trends. • Objectives of shareholders vital component in decision to sell or not – short-term income seekers more likely to sell, capital seekers less likely as costs in the next year are likely to generate future revenues, committed owners, maybe founders, less likely to sell unless want to realise financial gain. • Very important factor is timescale – short term sees a deteriorating financial position due to investment that will generate longer term improved figures. • Key factor is how shareholders perceive the accuracy of the forecast information. • Longer term forecasts would be extremely useful in making the decision. • Are shareholders capable of interpreting the report information accurately? Accept all valid responses.

Mark scheme

5 Evaluate which method CP should use to enter the market in country D. 12 Level AO1 Knowledge and AO2 Application AO3 Analysis AO4 Evaluation understanding 2 marks 2 marks 6 marks 2 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 Developed analysis Developed evaluation of relevant key term(s) of relevant point(s) to that identifies • A developed judgement/conclusion and/or factor(s) is used the business context. connections between is made. to answer the question. causes, impacts and/or • Developed evaluative comments consequences. which balance some key arguments. 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 that identifies • A judgement/conclusion is made and/or factor(s) is used the business context. connections between with limited supporting to answer the question. causes, impacts and/or comment/evidence. consequences. • 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. 5 Indicative content Responses may include: AO1 Knowledge and understanding Limited knowledge will be demonstrated through knowledge of international expansion methods, such as joint ventures or direct investment or advantages and disadvantages of methods. Developed knowledge + + will be demonstrated through knowledge of international expansion methods, such as joint ventures or direct investment and advantages and disadvantages of methods. • Understanding of methods of entry. • Exporting directly to retailers – promoting and distributing products to retailers who take responsibility for the marketing. • Joint venture – alliance with another business, two companies agree to act as one for a particular project. Direct exporting advantages: • Quick to set up and discontinue. • Little investment needed. • Low initial cost, retailer bears risk. • Retailer uses local knowledge of markets and promotion methods. • CP retains control over marketing. Direct exporting disadvantages: • May face trade barriers. • Transport costs. • CP relies on retailer to implement desired marketing strategy. • Retailers may prioritise sale of other companies’ products. • CP may have cash flow and credit risks. • CP unlikely to gain market information. Joint venture advantages: • Shared risk. • Shared cost of investment. • Access to local market knowledge, distribution arrangements. • More control over marketing. 5 Joint venture disadvantages: • Higher costs, especially management and communication, and slower, more expensive to set up. • Possible conflicts over contractual arrangements and possibility that partner may become a competitor. • Loss of control as shared venture. • Reliance on another business. AO2 Application Limited application, applies knowledge to CP once. Developed application, + applies knowledge to CP twice. Max one for application for the first impact of technological change and max one for application for the second impact of technological change. • Nature of CP’s paint products – good quality, value for money, strong brand name, priced above similar brands. • Not supplied for own brand products. • Identified market gap is for CP’s existing products. • Joint venture with wholesaler versus direct exporting to retailers. • Different countries may have different cultures in terms of domestic use of paints inside and outside of homes, maybe due to style of houses or weather. 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 • Development of knowledge and application points in terms of the advantages and disadvantages of the two stated methods. • Direct exporting may be less costly and more flexible as it can be set up quickly and the retailer takes the risk. However, there is no guarantee that retailers will give CP paints a high profile, so sales may not increase very fast. • A joint venture allows CP to share the risk and gain expertise of a local company, this could increase sales. However, there may be some loss of control to the joint venture partner and if the company is a competitor, sales may not increase as fast as expected. 5 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. • Other options exist and could be researched: use of an agent, direct investment in a paints factory, etc. Is CP sure that the two put forward are the only realistic options? • These options rely on accurate and reliable choice of paint retailer or wholesaler. • Direct exporting may be suitable for CP as there are cost advantages for home paint production, assuming low trade barriers. • Joint ventures may be suitable if the partner has good local knowledge and contacts. In the case of CP this may be very important in the specialist paints for the aircraft industry. • Difficult to decide on these factors alone. • Time scale and finance are important factors. Direct exporting is much quicker and cheaper to set up than a joint venture. CP have limited finance, so direct exporting may be the only possible option. • Important to clarify objectives before deciding. • More information needed regarding market in country D – e.g. the market research carried out, quantitative data on forecast costs of the options, revenues and finding suitable partners. • Need to know the policy of the government in country D on foreign firms and any relevant laws or regulations covering trade, international marketing or paint products. • A justified conclusion and/or recommendation e.g. recommendation of one option, or that both options are suitable, final choice depends on other factors above. Accept all valid responses.