Business 9609/32 October/November 2024: question paper and mark scheme

Mark scheme

1 Analyse two impacts on HCC of the increase in competition in country E. 8 Level AO1 Knowledge and AO2 Application AO3 Analysis understanding 2 marks 4 marks 2 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 • Application of two Limited analysis relevant points is relevant points to a • Limited analysis that identifies connections used to answer the business context. between causes, impacts and/or consequences of question. • Application of one two points. • Knowledge of one relevant point to a • Limited analysis that identifies connections relevant point is business context. between causes, impacts and/or consequences of used to answer the one point. question. 0 0 marks 0 marks 0 marks No creditable response. No creditable response. No creditable response. 1 Note: • If more than two impacts are referred to, reward the best two. All annotation ( ) should be in the left margin AO1 Knowledge and understanding • Customers will have greater choice. • Competition may reduce sales. • Competition may impact pricing decisions. • HCC may need to reduce costs. • Encourage HCC to innovate to differentiate its product. • HCC may need to increase promotion. • Reduction in profit. • Reduction in market share. • Could threaten HCC’s survival. AO2 Application Limited application, applies knowledge to HCC once. Developed application, + applies knowledge to HCC twice. Max one for application for the first impact and max one for application for the second impact. • CA benefits from greater economies of scale – potentially lower prices than HCC. • HCC customers have low incomes. • Profit has decreased in 2023/24. • Sales are increasing. • HCC is a social enterprise – this could impact how HCC responds to competition. • HCC’s expenses have increased in 2023. 1 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. • Greater choice for customers may lead to reduced sales volume for HCC and therefore reduce revenue and profits . • As CA has economies of scale , its prices can be lower which will attract customers from HCC as customers are on low incomes, thus reducing market share . • Market will become more saturated slowing possible growth of HCC sales . • HCC may need to change policies such as looking to new markets or increasing promotion to maintain sales in the future . • HCC may need to reduce costs to compete and therefore be forced to reduce benefits given to employees resulting in higher labour turnover . Accept all valid responses.

Mark scheme

2 Analyse two factors influencing HCC’s method of entry into international markets. 8 Level AO1 Knowledge and AO2 Application AO3 Analysis understanding 2 marks 4 marks 2 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 • Application of two Limited analysis relevant points is relevant points to a • Limited analysis that identifies connections used to answer the business context. between causes, impacts and/or consequences of question. • Application of one two points. • Knowledge of one relevant point to a • Limited analysis that identifies connections relevant point is business context. between causes, impacts and/or consequences of used to answer the one point. question. 0 0 marks 0 marks 0 marks No creditable response. No creditable response. No creditable response. 2 Note: • This question is about the factors that influence methods of entry to international markets NOT about the marketing strategy that should/should not be used in country K • If more than two factors are referred to, reward the best two. AO1 Knowledge and understanding • Methods of entry include direct export, use of agents, franchising and joint ventures. Factors influencing decision • Cultural differences between country K and E • Cost of alternative methods. • Availability of finance. • Desire to maintain control over marketing. • Knowledge of the market. • Market size. • Competition in the market. • Infrastructure available. AO2 Application Limited application, applies knowledge to HCC once. Developed application, + applies knowledge to HCC twice. Max one for application for the first problem and max one for application for the second problem. • Current marketing depends on demonstrations of products to potential customers using regional sales agents. (using agents with knowledge of the local market might be appropriate) • Objective is to enter the market ahead of competition in January 2025. (direct export might be quickest way of entering the market) • Social mission of HCC. (direct investment as jobs will be created) • High gearing ratio. Has increased from 60% to 70%. (lower cost option of entry such as franchising or joint venture) • Low profit margin. (lower cost option favoured rather than direct investment) • Declining liquidity. (might suggest joint venture would be appropriate) 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. • High gearing ratio and low profitability may mean that HCC needs to consider cost of method of entering the market due to lack of finance . This may favour a joint venture to share costs . • Country K may be culturally different to country E, making it more difficult for HCC to replicate its marketing mix It may be beneficial to use an agent with greater knowledge of the market to gain entry . • Licensing production could reduce costs of selling products making them more competitive . However, this could result in a loss of control over quality and brand image of HCC . • Producing in country K could avoid economic barriers to trade therefore increasing the probability of success Accept all valid responses.

Mark scheme

3(a) Refer to Table1.1. Calculate annual labour productivity for 2023. 1 Labour productivity = 60 000 / 8 = 7500 (units) (1) Do not accept $7500 To award zero marks, there must be One 3(b) Refer to Table 1.1. Calculate the rate of absenteeism for 2023. 3 Note Answer Marks Correct answer 1.7021% OR 1.7% 3 No working required, % not required Correct equation AND total number 32 / 1880 × 100 2 of workdays OR 4 / 235 × 100 Correct equation and days absence per employee 32 / 235 × 100 = 13.62% OR 13.6% OR 14% (Allow OR 13.61%) OFR based on incorrect number of total days Total number of workdays 8 × 235 = 1880 1 OR Days of absence per employee 32 / 8 = 4 OR Correct equation Rate of absenteeism = number of days of employee absence / total number of workdays × 100 OR Rate of absenteeism = average number of days per employee absent / work days per employee × 100 To award zero marks, there must be No creditable content 0 One 3(c) Evaluate HCC’s approach to human resource management (HRM). 12 Level AO1 Knowledge AO2 Application AO3 Analysis AO4 Evaluation and 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 Developed Developed Developed evaluation knowledge of application of analysis • A developed judgement/conclusion relevant key term(s) relevant point(s) to that identifies is made. and/or factor(s) is the business connections • Developed evaluative comments used to answer the context. between causes, which balance some key question. impacts and/or arguments. consequences. 1 1 mark 1 mark 1 mark 1–2 marks Limited knowledge Limited application Limited analysis Limited evaluation of relevant key of relevant point(s) that identifies • A judgement/conclusion is made term(s) and/or to the business connections with limited supporting factor(s) is used to context. between causes, comment/evidence. answer the question. impacts and/or • An attempt is made to balance the consequences. arguments. 0 0 marks 0 marks 0 marks 0 marks No creditable No creditable No creditable No creditable response. response. response. response. 3(c) All annotation ( ) should be in the left margin. AO1 Knowledge and understanding Limited knowledge will be demonstrated through knowledge of HRM or knowledge of the impact of HCC’s approach to HRM. Developed knowledge + will be demonstrated through knowledge of HRM and knowledge of the impact of HCC’s approach to HRM. • Knowledge of hard and/or soft approaches to HRM Hard – focus on cutting costs Soft – focus on developing workers Benefits of HCC approach: • Increased motivation of workers. • Reduced labour turnover. • More satisfied workers. Disadvantages of approach: • Higher labour costs. • Slows decision making. AO2 Application Limited application, applies knowledge to HCC once. Developed application, + applies knowledge to HCC twice. • HCC takes a soft approach to management of HR Use of quality circles Negotiation of targets Investment in training (5 days per employee per year) and facilities (new canteen and rest room) Good pay Discusses plans with employees Reviews employee satisfaction regularly 3(c) Benefits identified from the case: • High levels of worker satisfaction • Attract workers from competitors • Increase in productivity from 7100 to 7500 Cook Bags • Low rate of absenteeism; 1.7% compared to country E average of 5% Disadvantages from the case: • Increased competition faced • Falling profitability 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. • HCC’s soft approach managing human resources will result in a satisfied workforce will reduce labour turnover and therefore costs of recruitment resulting in HCC being more competitive in the market • Productivity has increased which could result in lower unit costs and more competitive pricing • Low rate of absenteeism due to satisfied workforce will increase efficiency • Good pay and better working conditions result in higher costs and decrease competitiveness of HCC so could lose sales to CA • May be difficult for HCC to respond to market changes because of time spent consulting employees therefore losing competitive advantage 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 HCC’s approach to HRM. • Evaluation of the relative importance of different advantages/disadvantages of HCC’s approach to HRM. • Elements that the evaluation/judgement might depend on – financial cost to HCC of its soft approach to HRM, impact on motivation and productivity of employees, impact on quality of HCC’s products and link to customer satisfaction, ethical considerations given that HCC operates as a social enterprise, significance of profit v other objectives. • HCC faces increased competition and therefore needs to control costs to remain competitive as customers have low incomes so price will be a significant factor in customer purchasing decisions. 3(c) Accept all valid responses. Exemplar evaluation and levels L1 Limited evaluation A satisfied workforce will be more productive and in the long term this will outweigh the additional costs of the soft HR approach. OR HCC’s HRM approach has benefits for employee satisfaction, but in a competitive market, the high costs of this strategy may limit its ability to keep prices low for customers. Comment: Judgement made but with limited supporting comment even though there is context. L2 Developed evaluation Overall, a soft HRM strategy is good as the staff will be more loyal to the business which means even though it is more expensive, due to cost and time of involving staff, they can reap the benefits through higher productivity and a lower absenteeism which means it is effective. Comment: EVAL is sufficiently developed, but could apply to any business as there is no context, so limit to L2. L3 Developed evaluation in context. In the short term a soft HRM approach will be more costly to the business, for example spending $500 000 on new staff facilities may prevent them from investing in new products. In the longer term, maintaining a satisfied workforce should keep absenteeism below the industry average of 5% which allows production to continue, and therefore meeting the targets set for production. Overall, as a social enterprise HCC is not primarily concerned with profit and the treatment of workers may be more important to Abeba than profit. Comment: Balanced EVAL with points firmly in the context of the case material leading to an overall supported judgement. In awarding EVAL marks examiners should take a holistic approach to the answer considering its balance and judgement.

Mark scheme

4(a) Refer to Table 1.2. Calculate for 2023–24, the operating profit margin. 4 Note Answer Marks Correct answer 0.5 / 10.8 × 100 = 4.63% OR 4.6% OR 4.629% 4 Working and % not required. Correct rounding must be applied Calculation of operating profit AND $0.5 m AND Operating profit margin = operating 3 statement of equation for operating profit / revenue × 100 profit margin OR e.g. 4.62% OR 4.7% Incorrect rounding OR 0.6 / 10 × 100 = 6% Operating profit margin for 2022–23 OR 4.4 / 10.8 × 100 = 40.74% (GPM) Statement of equation for operating 0.2 / 10.8 × 100 = 1.85% (NPM) profit margin AND OFR for answer including an error in calculating operating profit Calculation of operating profit 10.8 – 6.4 – 3.9 = $0.5 m 2 OR 10.8 – 10.3 = $0.5 m Equation for calculating operating Operating profit = Revenue – (cost of sales + expenses) 1 profit OR Operating profit margin = operating profit / revenue × 100 Equation for operating profit margin OR 4.4 m (GP) OR 0.2 m (NP) Error in calculating operating profit To award zero marks, there must be No creditable content 0 One 4(b) Evaluate methods HCC could use to increase profitability. 12 Level AO1 Knowledge AO2 Application AO3 Analysis AO4 Evaluation and 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 Developed Developed Developed evaluation knowledge of application of analysis • A developed judgement/conclusion relevant key term(s) relevant point(s) to that identifies is made. and/or factor(s) is the business connections • Developed evaluative comments used to answer the context. between causes, which balance some key question. impacts and/or arguments. consequences. 1 1 mark 1 mark 1 mark 1–2 marks Limited knowledge Limited application Limited analysis Limited evaluation of relevant key of relevant point(s) that identifies • A judgement/conclusion is made term(s) and/or to the business connections with limited supporting factor(s) is used to context. between causes, comment/evidence. answer the question. impacts and/or • An attempt is made to balance the consequences. arguments. 0 0 marks 0 marks 0 marks 0 marks No creditable No creditable No creditable No creditable response. response. response. response. 4(b) AO1 Knowledge and understanding Limited knowledge will be demonstrated through knowledge of one method to increase profitability OR knowledge of profitability. Developed knowledge + will be demonstrated through knowledge of two or more methods to increase profitability OR knowledge of profitability and one method to increase profitability. • Profitability measures the relationship between profit and sales, or profit and capital employed. • Need to increase revenue with a less than proportionate increase in costs. • Reducing costs without a corresponding loss of sales or reduction in price. Possible methods: • Increasing price/Adding value • Reducing cost of sales (direct costs) e.g. cheaper materials • Reducing expenses e.g. reducing indirect employees • Reduce promotion costs • Reduce long-term borrowing • Increasing sales through promotion AO2 Application Limited application, applies knowledge to HCC once. Developed application, + applies knowledge to HCC twice • ROCE has decreased by 0.4% • OPM in 2023/24 is 4.6% (reduced from 6% in 2022/23). • Revenue has increased $0.8 m but COS as increased by $0.85 m. • Premium recycled materials used for CookBag. • HR policy increasing direct labour costs – ‘pay is good’ • HCC is a social enterprise. • Increased competition. 4(b) 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. • The increase in COS has caused profitability to decrease , this could be linked to the human resources approach indicating that HCC should take a harder HR approach to control costs • Increasing price to customers to increase profit margin as HCC may have good branding and therefore sales would be largely unaffected • Switching from premium recycled materials to reduce material costs to reduce COS and therefore increase gross profit margin . • Reducing wages to reduce COS and therefore increase profit however this could result in higher labour turnover and lower productivity and therefore cause profits to decrease . • Set higher productivity targets to increase output per employee and therefore reduce unit costs which would result in higher profit • Expand product range to increase revenue by targeting new market segments • Target a higher income market so that HCC can increase prices and therefore increase the profit margin . 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 how to increase profitability • Evaluation of the relative advantages/disadvantages of different methods of increasing profitability. • Elements that the evaluation/judgement might depend on – impact on workers, alignment with social objectives of HCC, ease and speed of implementation, impact on branding of HCC impact on customers, price elasticity of demand. • As a social enterprise HCC should consider impact of any change on customers. Higher prices may be unacceptable as key objective is to help customers cut cooking costs. • Although a reduction in material costs by using non-recycled materials will be beneficial this might be at the expense of HCC’s concerns for reducing CO2 emissions. Accept all valid responses. 4(b) Exemplar evaluation and levels L1 Limited evaluation Overall, the best way of increasing profitability is by reducing costs, such as lowering wages but this could impact employee satisfaction. Comment: Judgement made but with limited supporting comment. L2 Developed evaluation The best method to increase profits would be to lower the cost of sales so that gross profit increases. HCC could find a cheaper supplier. However, HCC would need to ensure that a change in supplier does not impact quality as this could result in less sales or having to reduce price and therefore not achieving an increase in profitability. Comment: EVAL is sufficiently developed, but could apply to any business as there is no context, so limit to L2. L3 Developed evaluation in context. In the short term reducing costs through a reduction in material costs by using non-recycled materials might be the quickest way to improve profitability. However, this may be at the expense of HCC’s long term aims for reducing CO2 emissions which as a social enterprise is important. Overall, HCC must decide whether increasing profit is important as a social enterprise or whether their current profit levels allow them to achieve their aims and objectives successfully without making any changes. OR Overall, I believe the best way to improve profitability is to reduce their cost of sales. These have increased by 16% in the last two years and therefore is something they should look at to minimise cost and increase profit. As competition is increasing with the entry of CA it is critical they become as efficient as possible however lowering their staffing costs might have a significant impact on employee morale and productivity. Of course, they do need to make sure that using cheaper supplies doesn't affect their social enterprise credentials and quality as this could impact their brand position. Comment: Well balanced answers using the case context to development argument.

Mark scheme

5 Evaluate the usefulness to HCC of critical path analysis (CPA) as a management tool for operations planning. 12 Level AO1 Knowledge AO2 Application AO3 Analysis AO4 Evaluation and 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 Developed Developed Developed evaluation knowledge of application of analysis • A developed judgement/conclusion relevant key term(s) relevant point(s) to that identifies is made. and/or factor(s) is the business connections • Developed evaluative comments used to answer the context. between causes, which balance some key question. impacts and/or arguments. consequences. 1 1 mark 1 mark 1 mark 1–2 marks Limited knowledge Limited application Limited analysis Limited evaluation of relevant key of relevant point(s) that identifies • A judgement/conclusion is made term(s) and/or to the business connections with limited supporting factor(s) is used to context. between causes, comment/evidence. answer the question. impacts and/or • An attempt is made to balance the consequences. arguments. 0 0 marks 0 marks 0 marks 0 marks No creditable No creditable No creditable No creditable response. response. response. response. 5 AO1 Knowledge and understanding Limited knowledge will be demonstrated through knowledge of CPA or knowledge of CPA as a management tool for operations planning. Developed knowledge + will be demonstrated through knowledge of CPA and knowledge of CPA as a management tool for operations planning. • Understanding of CPA – network diagram, critical path, floats, minimum duration. • Benefits of CPA: knowing minimum project time, start times for activities, progress monitoring, managing resources, reducing costs, 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 HCC once. Developed application, + applies knowledge to HCC twice. • Operations Manager produced the CPA. • Six-week minimum time. • Reduces disruption to production during improvements to employee facilities. • Use of CPA for other projects e.g. development and launch of the Wonder Stove, expansion to international market. Wonder Stove launched on schedule Target to export by January 2025 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. • CPA will help manage resources efficiently to ensure that resources are available when needed which will therefore reduce costs of HCC’s operational changes and therefore support achievement of HCC’s social objectives . • Identifying critical tasks of investing in the new employee facilities will ensure that those tasks are completed on time and therefore reduce disruption to production minimised which reduce the cost to HCC of the improvements . • Important to use CPA so that customers can be kept informed of any potential impact on orders . Important to avoid customer dissatisfaction as this could result in loss of sales . • Entering international market requires careful planning to get product to market on time and ensure products are available for customers to purchase thus increasing sales . 5 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 usefulness of CPA for operations planning. • Evaluation of the relative importance of different advantages/disadvantages of CPA as a tool for operations planning. • Elements that the evaluation/judgement might depend on – accuracy of the data used in CPA, need for constant monitoring of external events • CPA only as good as data – is operations manager capable of completing accurate CPA for the factory development? • Other information is also important e.g. CPA needs to be interpreted • Work progress has to match the CPA plan. • HCC would be wise to maintain constant check on progress before and after work starts. Accept all valid responses. Exemplar evaluation and levels L1 Limited evaluation Overall, CPA could help HCC plan projects more efficiently, but its usefulness depends on having accurate data and skilled staff to interpret it. Comment: Judgement made but with limited supporting comment. L2 Developed evaluation Overall CPA is useful, especially for large costly projects, to make sure the production remains on time and does not increase unnecessary costs with delays. Any delays or unplanned activities can increase costs and reduce profit. However, it depends on the accuracy of the CPA. If there are errors in the plan then ultimately it would still cost the business money, despite having made one. Its usefulness depends on the quality of the data used. Comment: EVAL is sufficiently developed, but could apply to any business as there is no context, so limit to L2. 5 L3 Developed evaluation in context. Critical Path Analysis (CPA) is useful to HCC as it helps ensure that deadlines for the improvements to staff facilities are met. By highlighting the essential sequence of activities, HCC can allocate resources and reduce delays to ensure future orders of their cook bags are still fulfilled. In the long term, without CPA, HCC may fall behind their schedule and disappoint customers leading to a fall in brand image. However, it will rely on the skill of the operations manager to effectively plan the sequence of works. Comment: Well balanced conclusion in context of the case L3.