Business 9609/43 October/November 2024: question paper and mark scheme

Mark scheme

1 Evaluate the impact of FB’s finance and accounting strategy on its performance between 2016 and 2022. 20 Level AO1 Knowledge AO2 Application AO3 Analysis AO4 Evaluation and 2 marks 8 marks 7 marks understanding 3 marks Description Description Description Description 3 7–8 marks 6–7 marks Developed analysis of Effective evaluation the overall strategy that A developed judgement/conclusion identifies connections is made in the business context between causes, impacts that draws together developed and/or consequences. evaluative comments which balance some key arguments in the business context. 2 2–3 marks 2 marks 4–6 marks 3–5 marks Developed Developed Developed analysis of Developed evaluation knowledge of application of individual strategic • A developed relevant key relevant point(s) element(s) that identifies judgement/conclusion is term(s) and/or to the business connections between made. factor(s) is used context. causes, impacts and/or • Developed evaluative to answer the consequences. comments which balance question. some key arguments. 1 Level AO1 Knowledge AO2 Application AO3 Analysis AO4 Evaluation and 2 marks 8 marks 7 marks understanding 3 marks Description Description Description Description 1 1 mark 1 mark 1–3 marks 1–2 marks Limited Limited Limited analysis that Limited evaluation knowledge of application of identifies connections • A judgement/conclusion is relevant key relevant point(s) between causes, impacts made with limited supporting term(s) and/or to the business and/or consequences. comment/evidence. factor(s) is used context. • An attempt is made to balance to answer the the arguments. question. 0 0 marks 0 marks 0 marks 0 marks No creditable No creditable No creditable response. No creditable response. response. response. Indicative content Responses may include: AO1 Knowledge and understanding No other AO2, AO3 or AO4 marks can be awarded without AO1 Knowledge , and (max 3 marks) can be awarded for any relevant business knowledge about Accounting and Finance Strategy: 1 • Accounting and Finance strategy • Company accounts • Ratios • Impact of ratios on growth decisions • Impact of ratios on debt/equity decisions • Impact of ratios on other business strategies • Definition or understanding of concepts of appendix 3 • Understanding of long-term borrowing – example, debts, liability • Understanding of what dividends are – reward for investment to shareholders Any other understanding of finance and accounting concepts. AO2 Application Indicated by as 1 mark (max 2 s), Application must support an assessment objective to be in context • Exclusive high priced products • High costs – losses in 2010’s only now starting to improve • Inventory holding is high • One shareholder – Stefan – who receives dividends every year – $5m • Commitment to use reserves/equity over borrowing • Current ratio seems to be driven by inventory levels • Confidence in reserves to buffer the changes in demand/global economy and the exchange rate with Swiss Franc • Any information from appendix 3 to support point made • No long-term borrowing • High dividends Any point from the case that supports the candidates point 1 AO3 Analysis Analysis of the impact of the HR strategy on a business ( and and ) including: Limited analysis – candidate shows one link in the chain of analysis. (max 3) Developed analysis of individual strategic element – candidate shows two or more links in the chain of analysis. Developed analysis of overall strategy – candidate shows a counter answer to the chain of analysis (2–sided answer) or a multi – strand • Only one shareholder who is also the CEO. This makes it much easier to control level of dividends paid/retained earnings for the business • Demand and reputation is strong for 2019 bounce back to high $59m sales leading to available cash to spend on expansion • No long-term borrowing means less debts and less interest costs increasing profits however this would also mean no available money to fund expansion which may lead to less products and revenue. • FB has a weak cash position and continues to use it for the expansion, reducing reliance on lenders but could lead to over trading or bankruptcy • Current ratio was strong and is now below 1 in the approach to 160th anniversary but is this driven by inventory as acid test is low by comparison. • Low current ratio means inability for FB to pay off short term liabilities may lead to FB being illiquid and close down. • Cash holdings are buffering external shocks on the company and the exchange rate but for how long? AO4 Evaluation L1 limited supporting evidence – answering the question with a brief explanation L2 developed supporting evidence – Reason is developed further L3 developed supporting evidence with context – Level 1 and 2 is answered in context. Evaluation will largely depend on the points raised in the analysis. 1 • Accounting and Finance strategy has been successful given survival over the last 7 years/162 years • Having one shareholder who is also the CEO has made this finance strategy easier to manage as no shareholder/stakeholder conflict but is threatening the future of the business. • The strategy shows a positive impact as there were no reliance on long-term loans leading to lower gearing ratio expenses • This depends upon external factors such as fiscal policies such as increasing tax and its effect on the accounting and finance position of FB • Business has been able to maintain its strategy of no long-term borrowing which in part comes from its reputation and selling prices that keep sales high, but how long will that last? • Purchase and development of workshop, using reserves, shows confidence in the business and its products but should they be looking for investment to grow or is it important to remain independent for its reputation? • How long can this remain viable in a global economy and constant influences. • The strategy can also have a negative impact if the lack of long-term borrowing depletes the cash and limits production • The nature of the product and reputation of the business is allowing the current strategy to work. If anything should change in these two areas the business may not survive unless you bring in external finance and change the way in which the business is run. This is a possibility once Stefan retires and priorities change with a non-shareholding CEO Accept all valid responses.

Mark scheme

2 Advise the Board of Directors on whether scenario planning is the most useful approach to develop a new 20 business strategy for FB. Level AO1 Knowledge AO2 Application AO3 Analysis AO4 Evaluation and 2 marks 8 marks 7 marks understanding 3 marks Description Description Description Description 3 7–8 marks 6–7 marks Developed analysis of Effective evaluation the overall strategy that A developed judgement/conclusion identifies connections is made in the business context between causes, impacts that draws together developed and/or consequences. evaluative comments which balance some key arguments in the business context. 2 2–3 marks 2 marks 4–6 marks 3–5 marks Developed Developed Developed analysis of Developed evaluation knowledge of application of individual strategic • A developed relevant key relevant point(s) element(s) that identifies judgement/conclusion is term(s) and/or to the business connections between made. factor(s) is used context. causes, impacts and/or • Developed evaluative to answer the consequences. comments which balance question. some key arguments. 2 Level AO1 Knowledge AO2 Application AO3 Analysis AO4 Evaluation and 2 marks 8 marks 7 marks understanding 3 marks Description Description Description Description 1 1 mark 1 mark 1–3 marks 1–2 marks Limited Limited Limited analysis that Limited evaluation knowledge of application of identifies connections • A judgement/conclusion is relevant key relevant point(s) between causes, impacts made with limited supporting term(s) and/or to the business and/or consequences. comment/evidence. factor(s) is used context. • An attempt is made to balance to answer the the arguments. question. 0 0 marks 0 marks 0 marks 0 marks No creditable No creditable No creditable response. No creditable response. response. response. Indicative content Responses may include: AO1 Knowledge and understanding No other AO2, AO3 or AO4 marks can be awarded without AO1 Knowledge , and (max 3 marks) can be awarded for any relevant business knowledge about Business strategy and the approaches. 2 • The purpose of business strategy. • The meaning and purpose of strategic management. • What scenario planning is • Alternative approaches to develop business strategy, including: blue ocean strategy Ansoff’s matrix SWOT analysis PEST analysis Porter’s five forces Core competence framework force field analysis Decision trees • PESTLE and Boston matrix too. AO2 Application Indicated by as 1 mark (max 2 s), Application must support an assessment objective to be in context • Uncertain future that needs some planning and consideration – to ensure consistency and direction of the business • Global markets raise a number of issues that could be analysed • Foreign exchange markets and the ability to use reserves to dampen the shock • Luxury product that has a global market which is difficult to predict • Product development of sports watch • Changes in the competitive market • 160+ years of data/experience/reputation • Any element of the case study • Any element of the appendices AO3 Analysis Analysis of the impact of the HR strategy on a business ( and and ) including: Limited analysis – candidate shows one link in the chain of analysis. (max 3) Developed analysis of individual strategic element – candidate shows two or more links in the chain of analysis. Developed analysis of overall strategy – candidate shows a counter answer to the chain of analysis (2–sided answer) or a multi – strand 2 • Things like the volatility of the exchange rate would be good to analyse with scenario planning as increases/decreases can be analysed to give different outcomes and impact on the business • Any volatility – demand, prices of raw materials, changes in competitive environment, could be analysed so appropriate strategies can be implemented if needed. • The leadership issues may not be covered by scenario planning and once the new leader is in place they may need to use other models to do their strategic planning. • Some issues, like the changes in sports watch technology, are only going in one direction therefore multiple scenarios are unlikely to be needed. • The business is not fundamentally changing its products or its markets and it understands these very well to have lasted 160 years so scenario planning may not be useful in this instance. Candidates may offer up alternative approaches: • Blue Ocean Strategy may not be as useful as they already dominate in their market but it may be useful once the new leadership is established. • Ansoff’s Matrix would help if they needed to expand their strategy, but FB seems to be focused on market penetration, even moving forward. • SWOT analysis may help identify strengths that can be used to help overcome the weaknesses the different scenarios present, while also identifying any opportunities and threats so they can plan to overcome those. • PEST analysis could help understand the changing environment after the global pandemic which has changed many elements of this. • Five forces would help understand the rivalry they face in the market, case study implies a changing competitive environment which may need to be addressed to stay ahead. • Core competency framework would allow them to reaffirm what they do well and ensure that they are applied to any changes that are coming including the retirement of Stefan. • Force field analysis could help Stefan to understand the constraining and driving forces in developing the new strategy. This may help him to identify actions that need to be taken to reduce constraining forces. • Decision trees could be used to help make a quantitative led decision between the different options but would need to have much more financial information to be worthwhile. 2 AO4 Evaluation L1 limited supporting evidence – answering the question with a brief explanation L2 developed supporting evidence – Reason is developed further L3 developed supporting evidence with context – Level 1 and 2 is answered in context. Evaluation will largely depend on the points raised in the analysis of the approaches needed to develop the new strategy other than Scenario planning. If candidates never mention scenario planning in their response they will not be able to earn any evaluation marks. • Candidates may state that scenario planning is/isn’t sufficient/useful or isn’t useful and provide some limited explanation why to receive Level 1 evaluation. • The business is very insular and has survived 160 years so the time taken to develop a number of different scenario plans may be wasted given how FB operates. • Scenario planning will help as the issues are about how the business moves forward with a new leader so some continuity could be offered through the use of these plans. • These plans could be ignored by any new leadership that may take the business in a new direction identified by the use of the other strategic methods • Are these plans useful if the decision is made to close the business with Stefan’s retirement? • Isn’t the scenario plan the first step? Once the scenario is played out will FB not then use another method/s to support and develop a strategy to overcome the issues identified? • How much longer can FB rely on using its reserves to absorb the shocks without having a more concreate strategy to support the development of the business. • Advice to FB should make clear whether scenario planning is sufficient or whether it should be supported by other models, and if so which? 2 Candidates may offer up alternative approaches: • Blue Ocean Strategy may not be as useful as they already dominate in their market but it may be useful once the new leadership is established. • Ansoff’s Matrix would help if they needed to expand their strategy, but FB seems to be focused on market penetration, even moving forward. • SWOT analysis may help identify strengths that can be used to help overcome the weaknesses the different scenarios present, while also identifying any opportunities and threats so they can plan to overcome those. • PEST analysis could help understand the changing environment after the global pandemic which has changed many elements of this. • Five forces would help understand the rivalry they face in the market, case study implies a changing competitive environment which may need to be addressed to stay ahead. • Core competency framework would allow them to reaffirm what they do well and ensure that they are applied to any changes that are coming including the retirement of Stefan. • Force field analysis could help Stefan to understand the constraining and driving forces in developing the new strategy. This may help him to identify actions that need to be taken to reduce constraining forces. • Decision trees could be used to help make a quantitative led decision between the different options but would need to have much more financial information to be worthwhile. Accept all valid responses.