Business 9609/31 October/November 2025: question paper and mark scheme

Mark scheme

1 Analyse two likely impacts on PPP of the changing external influences. 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 between used to answer the business context. causes, impacts and/or consequences of two points. question. • Application of one • Limited analysis that identifies connections between • Knowledge of one relevant point to a causes, impacts and/or consequences of one point. relevant point is business context. used to answer the question. 0 0 marks 0 marks 0 marks No creditable response. No creditable response. No creditable response. Note: • If more than two impacts are referred to, reward the best two. • Accept any external influence that relates to context • L2AN (3 marks) is possible for just one point made. • All annotation ( ) should be in the left margin. 1 Responses may include: AO1 Knowledge and understanding Definition of external influences (max K1) might include: • External influences are those outside the control of business and act as both constraints and enablers for PPP’s activities. • External influences include legal, political, economic and social changes. Knowledge of impact of changes in external influences might include (max K2): • Increased trading barriers making trade more difficult, such as due to import taxes/tariffs • Decreasing demand for luxury goods due to decreasing income • Increasing demand for budget or low-priced goods due to decreasing income • Changes to eating habits and diets, such as healthy eating AO2 Application Application is making use of relevant case information not just repeating it. Limited application, applies knowledge to PPP once. Developed application, + applies knowledge to PPP twice. Max one for application for the first impact in context and max one for application for the second impact in context. • Trade more difficult between Country A and other countries in the region, may mean more expensive to export and import pies and ingredients, due to import taxes. • PPP sells both ‘classic’ pies and premium ‘handmade’ pies, the mix of items sold may change, due to falling real incomes. • ‘Classic’ pies may have a negative YED, whereas premium pies may have a positive YED (see table 1.1) • Maybe an opportunity for the new vegan range to be developed, due to people consuming less meat. • Maybe a threat to the new cheese pie aimed at the export market 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 OR offers a two-sided analysis • An increase in export costs may make pies more expensive for overseas customers, leading to less export orders resulting in reduced revenues and profit / unless PPP finds a way to decrease production costs • Imported ingredients may become more expensive leading to higher production costs and prices • Demand may increase for ‘classic’ pies and decrease for ‘premium’ pies The impact on total revenue will depend on the different added value amounts, but is likely to decrease, maybe decreasing profit • If pies are seen as generally unhealthy, overall demand will fall, due to the ‘healthy eating’ trend, leading to a decrease in sales revenue • Demand for meat pies may decrease, decreasing revenue but there could be an increase in demand for no-meat vegan pies, giving PPP an opportunity to develop this innovative range and increase sales. (two-sided analysis) • The difficulties in exporting to countries in the region may encourage Pedro, as an innovator to explore other markets and target a wider range of customers in other countries or at home resulting in increased brand awareness and sales revenue. . • Accept all valid responses.

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2 Analyse two benefits to PPP of using quality assurance. 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 Limited analysis • Knowledge of two • Application of two • Limited analysis that identifies connections relevant points is relevant points to a between causes, impacts and/or consequences of used to answer the business context. two points. question. • Application of one • Limited analysis that identifies connections • Knowledge of one relevant point to a between causes, impacts and/or consequences of relevant point is business context. one point. used to answer the question. 0 0 marks 0 marks 0 marks No creditable response. No creditable response. No creditable response. Note: • Only reward benefits of use of QA to PPP. • If more than two benefits are referred to, reward the best two. • All annotation ( ) should be in the left margin. 2 Responses may include: AO1 Knowledge and understanding • Definition of quality assurance (QA) (max K1) might include: • QA involves checking for errors throughout the production process/at each stage, rather than at the end. • QA focuses on preventing mistakes, rather than finding them. • QA gives all employees responsibility for the checking process. • QA as part of TQM. Knowledge of benefits might include (max K2): • QA means no need to employ quality control inspectors. • QA means mistakes should be picked up early in the production process, rather than at the end. • QA leads to more responsibility for employees and may lead to motivation. • QA should lead to less wasted output and lower costs. • QA should lead to all employees understanding that quality is part of their job. AO2 Application Max one for application to the first benefit of using QA and max one for application to the second benefit of using QA. • Pedro values his employees and trains them, including in carrying out QA. • Pedro encourages ideas from employees and offers rewards, which can improve QA methods. • QA would start from the point where ingredients arrive at the factory and it is likely that there would also be some checks on suppliers. • The importance of safety in food products. 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. • QA is likely to have cut down on wasted ingredients and pies potentially reducing unit pie production costs, increasing efficiency, and therefore increased profit . • QA means that quality control inspectors are not needed, decreasing wage costs. • Taking responsibility for quality may motivate employees and result in an increase in productivity or work effort reducing unit costs and therefore increase profit. • Motivated employees may provide good product development ideas which will increase sales and therefore profit . • QA will motivate and retain employees and therefore reduce recruitment costs . Accept all valid responses

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3(a) Using the data in Table 1.3, calculate the payback period for PPP’s proposed new machine. 2 Definition of payback: the amount of time it takes for the initial investment cost to be recovered (1 if no valid calculation ) (1.9) + 0.5 + 0.6 + 0.8 = 0 payback is 3 years or 36 months (2) 0.5 + 0.6 + 0.8 = 1.9 (1) Correct units needed for full marks – years or months. 3(b) Using the data in Table 1.3, calculate the accounting rate of return (ARR) for PPP’s proposed new machine. 2 ARR = average annual profit / average investment × 100 (1 if no valid calculation) ARR = 0.2 / 0.95 × 100 = 21.05% or 21.1% or 21% (2) Use of ‘old’ formula 0.2 / 1.9 × 100 = 10.53% (1) Correct units required for full marks – % 3(c) Evaluate whether PPP should invest in the new machine. 12 Level AO1 Knowledge AO2 Application AO3 Analysis AO4 Evaluation and 2 marks 2 marks 6 marks understanding 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 is relevant key term(s) relevant point(s) to that identifies made. and/or factor(s) is the business connections • Developed evaluative comments which used to answer the context. between causes, balance some key arguments. question. impacts and/or consequences. 1 1 mark 1 mark 1 mark 1–2 marks Limited Limited application Limited analysis Limited evaluation knowledge of relevant point(s) that identifies • A judgement/conclusion is made with of relevant key to the business connections limited supporting comment/evidence. term(s) and/or context. between causes, • An attempt is made to balance the factor(s) is used to impacts and/or arguments. answer the consequences. question. 0 0 marks 0 marks 0 marks 0 marks No creditable No creditable No creditable No creditable response. response. response. response. 3(c) Responses may include: AO1 Knowledge and understanding Limited knowledge will be demonstrated through knowledge of one factor in investment decision / knowledge of impacts of process innovation. Developed knowledge + + will be demonstrated through knowledge of two factors in the investment decision / impacts of process innovation. Knowledge of process innovation and its impacts Definition of process innovation: the move to new methods of production, in this case computer -controlled automation. Less labour required. Knowledge of factors in decision • Investment cost. • Availability of finance. • Impact on employees. • ARR and Payback results. • Technical economies of scale possible. • Reduction in average cost of production. • Impact on quality. AO2 Application Limited application, applies knowledge to PPP once. Developed application, + applies knowledge to PPP twice. • Payback of 3 years – within 4 years of estimated life. • Return of $800 000 over 4 year period. • ARR of 21.05% • Cost of machine $1 900 000 • NCL are $6 million and gearing is 45%, total CE is therefore $13.3 million • Extra borrowing of $1.9 m would make gearing 7.9 / 15.2 = 51.97% • Pies have a shelf-life, therefore over-stocking inadvisable 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. • Machine is costly, but the relatively high gearing of PPP increases risk of further borrowing causing cash flow problems for PPP especially if sales fail to increase at the same rate as capacity increase. • Employee training to deal with computer automated system will result in increased cost , but PPP has a reputation for good employee training, which could be boosted by this. • Automation leads to increased efficiency and therefore eventually increased profits . • Introducing automation may cause disruption to operations in the short-term reducing output whilst it is installed possible damage to reputation if orders are not fulfilled resulting in lower sales. • Automation will help PPP fulfil customer orders more quickly resulting in customer satisfaction and therefore an increase in sales • Automation may result in a reduction in the number of employees engaged in production which will reduce operating costs but this will also result in redundancy payments being made • If automation leads to excess stocks, waste may increase , which could lead to increased production costs. • Work may become more boring for employees resulting in a reduction in motivation and therefore an increase in labour turnover increasing costs 3(c) 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 whether to invest in automation/process innovation. • Elements that the evaluation/judgement might depend on: If automation is used, then success greatly depends on increased demand. How flexible might the machine be in changing from one type of pie to another? How well does automation fit with the ‘social objectives’ of PPP’s employment practices? How important might the ‘handmade’ aspect of PPP’s pies be in marketing? • Other factors to consider e.g. NPV as this considers time value of money. Depends on availability of finance linked to relatively high gearing and interest rate. How long will it take to install the automated system? Will specialist IT employees be required and how expensive is that? Opportunity cost of this project. • Weighing up of the factors and their relative influence on PPP’s decision whether to invest in the new machine Accept all valid responses

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4(a) Using the data in Table 1.2, calculate the monthly revenue from the sales of the classic pie after the price increase. 4 Mark Correct new sales revenue 3500 × $3.60 = $12 600 4 $ sign not required New quantity of sales 5000 – 30% = 5000 – 1500 = 3500 3 % change in QD 20% × –1.5 = (–)30% 2 Percentage change in price OR 0.60/3.00 × 100 = (+) 20% 1 PED equation Percentage change in Quantity demanded / Percentage change in price No creditable response 0 4(b) Evaluate the usefulness to PPP of elasticity measures when deciding on the marketing mix for the new cheese 12 pies in export markets. Level AO1 Knowledge AO2 Application AO3 Analysis AO4 Evaluation and 2 marks 2 marks 6 marks understanding 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 relevant point(s) to that identifies is made. term(s) and/or the business connections • Developed evaluative comments factor(s) is used to context. between causes, which balance some key answer the impacts and/or arguments. question. consequences. 1 1 mark 1 mark 1 mark 1–2 marks Limited Limited application Limited analysis Limited evaluation knowledge of relevant point(s) that identifies • A judgement/conclusion is made of relevant key to the business connections with limited supporting term(s) and/or context. between causes, comment/evidence. factor(s) is used to impacts and/or • An attempt is made to balance the answer the consequences. arguments. question. 0 0 marks 0 marks 0 marks 0 marks No creditable No creditable No creditable No creditable response. response. response. response. 4(b) Responses may include: AO1 Knowledge and understanding Limited knowledge will be demonstrated through knowledge of the concept of elasticity of demand or knowledge or marketing strategy. Developed knowledge + will be demonstrated through knowledge of the concept of elasticity of demand and knowledge of marketing strategy. Knowledge of elasticity of demand Understanding of different elasticity concepts: • promotional elasticity measures responsiveness of demand to changes in promotional spending • price elasticity measures responsiveness of demand to a change in price • cross price elasticity measures the responsiveness of demand to a change in price of another product • income elasticity measures the responsiveness of demand to a change in income. • Understanding of inelastic - not responsive and elastic - responsive to change in price / promotion / income. Knowledge of marketing strategy • Marketing strategy includes market research and marketing mix to achieve marketing objectives within a budget. • Marketing mix consists of price, place, promotion and product 4(b) AO2 Application Do not reward APP for quoting elasticities, need to show understanding of the figures. Limited application, applies knowledge to PPP once. Developed application, + applies knowledge to PPP twice. • Estimated PED for classic pies is –1.5, which is price elastic, as confirmed by the calculation in 3a, the 20% increase in price would lead to a 30% decrease in demand. • Estimated PED for premium pies is –0.4, which is price inelastic. The 25% increase in price only led to a 10% decrease in demand • OFR for PED calculations • YED for classic pies is –1.2 (inferior good) and for premium pies +1.5 (normal/luxury good) • Monthly sales revenue following price increases would decrease (by $2400) for classic pies but increase (by $3000) for premium pies. • Market research data may suggest whether the demand for the proposed new cheese pie will be price elastic or price inelastic in other countries in the region. • As real incomes are falling in other countries in the region, cheese pies may be more successful if seen as a ‘budget’ product. 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. • Knowledge of PED is useful to PPP in making decisions about pricing. For example, elastic PED would indicate that an increase in price would decrease revenue and therefore probably decrease profit . • Decreasing price, such as using a launch penetration price will increase quantity of cheese pies demanded and therefore increase revenue/encourage more customers to try the new product overall leading to a successful launch and loyal customers increasing profit . • As real incomes are falling, launching cheese pies as a ‘budget’ item should lead to higher sales due to negative YED. 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. • In a marketing strategy, PPP will also consider other factors e.g. promotional elasticity of demand and local tastes in different countries in the region. • As this is a new pie product being launched, existing elasticity data for other products may not be as useful • To what extent may a pan global strategy be suitable in this case? • A judgement about the usefulness of elasticity to marketing mix decisions. • A judgement about the most important factors influencing marketing strategy decisions. • A judgement about the limitations of elasticity calculations. • Measurement of elasticity is difficult and likely to be inaccurate due to large range of factors that will affect outcomes, particularly competitor decisions. Other things don’t remain equal in markets. • Factors that the judgement could depend on including the degree of competitive rivalry in the market • Other elements of marketing strategy are important e.g. integrated marketing mix to ensure consistency in message communicated to potential customers and therefore attract sales. Accept all valid responses.

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5 Evaluate the importance of emotional intelligence to Pedro’s leadership of PPP 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 analysis Developed evaluation knowledge of application of that identifies • A developed relevant key term(s) relevant point(s) to connections between judgement/conclusion is made. and/or factor(s) is the business context. causes, impacts • Developed evaluative comments used to answer the and/or which balance some key question. consequences. arguments. 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) to that identifies • A judgement/conclusion is made term(s) and/or the business context. connections between with limited supporting factor(s) is used to causes, impacts comment/evidence. answer the question. 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 Responses may include: AO1 Knowledge and understanding Limited knowledge will be demonstrated through knowledge of emotional intelligence. Developed knowledge + + will be demonstrated through knowledge of emotional intelligence and its importance in leadership. Knowledge of emotional intelligence (EI): Goleman’s four competencies: • Self-awareness • Social awareness • Self-management • Social skills/relationship management Statements showing understanding, such as: • Understanding emotions of yourself and others • Empathy with employees • Self control over moods/emotions Knowledge of EI importance in leadership • Effective leaders use their EI to understand others and motivate them • Effective leaders understand their own emotions and the impact they have on others so communicate effectively • The modern view of a good leader is one who has excellent social awareness and skills and maintains good relationships with their workforce. 5 AO2 Application Limited application, applies knowledge to PPP once. Developed application, + applies knowledge to PPP twice. • There is evidence that Pedro is a democratic, transformational leader, who has taken employees with him since taking over PPP. • Pedro has a high level of emotional intelligence, so he understands his employees’ feelings as well as his own. • Pedro encourages intrapreneurship in his employees and welcomes their ideas. • PPP has grown successfully under Pedro’s leadership since 2010 • Pedro has ethical principles and social objectives in his employment practices 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. • Pedro has developed PPP, using his social skills and a mainly democratic leadership style, leading to employee loyalty and therefore low recruitment costs. • Employees are motivated by their ideas being welcomed and delegated responsibilities, so productivity will increase . • Pedro’s emotional intelligence will help him to understand how his employees may react to a change in the organisation, such as the introduction of automation, leading to successful change management. • Pedro’s employment principles, giving opportunities to unemployed young people gain PPP the reputation as an ethical employer with social objectives which may attract customers which will help improve PPP’s performance . 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. • Which of Goleman’s EI competencies may be most important for Pedro’s leadership in the past and going forward? • Revenue and profit growth suggest improving performance year on year. To what extent can this be attributed to Pedro’s emotional intelligence and leadership? • Future success may depend on many factors, both internal and external. How might the external influences disrupt PPP’s future plans? • Democratic leadership and emotional intelligence may not be so effective if the business is faced with crisis situations. • Many of the job roles at PPP may be low skilled production tasks, might a more autocratic approach be needed in this case? • What might be the different measures of success for PPP, given its social objectives? • Too much emphasis may be placed on the characteristics and emotional intelligence of Pedro as a leader, who else is driving the success of PPP? Accept all valid responses.