Business 9609/33 October/November 2025: question paper and mark scheme

Mark scheme

1 Analyse two advantages to the government of country G that could result from the nationalisation of LBM. 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. Note • Only reward advantages • If more than two advantages are referred to, reward the best two. 1 Responses may include: AO1 Knowledge and understanding Definition or explanation of nationalisation: ownership of a business is transferred from private to public (Max K1). Possible advantages include: • Government control over the development of a scarce resource. • Funding for research and production can be guaranteed. • Profits paid to the government not to shareholders. • Enables lithium production in country G even if this is marginally profitable or loss making. • Minimises possibility of foreign takeover. • Restricts monopoly power to charge high prices. • Can ensure that the business acts in the public interest e.g. reducing externalities AO2 Application Limited application, applies knowledge to LBM once. Developed application, + applies knowledge to LBM twice. Max one for application for the first advantage and max one for application for the second advantage. • LBM is the only business in country G planning to mine lithium. • Government concern that demand from industry for lithium in country G will not be met in the long -term. • Prevent a hostile takeover from a multinational business. • LBM is currently unprofitable, but revenue is forecast to rise rapidly. • Possibility of future price rises/profits as demand to supply ratio increases. • Pollution from production of lithium • Lithium is an essential raw material used in batteries for electric vehicles, smartphones and other products. 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. • By controlling the only source of lithium in Country G, the government can ensure that local industry demand is met, preventing supply bottlenecks and supporting key economic sectors like electric vehicles thus promoting economic growth . • Nationalisation prevents a hostile takeover by a multinational business, ensuring future forecast rapidly rising revenue remains within the country , which can then be used by the government to fund public services or infrastructure . • The government can absorb the initial losses of the currently unprofitable LBM to secure control over a crucial long - term resource, mitigating uncertainty regarding private sector commitment and therefore encouraging investment in manufacturing in country G . • Government control means control of supply to battery producers, maximising country G production capability and therefore reducing reliance on foreign imports . • Profits to the government likely to be higher source of income than tax receipts from profits to shareholders and will therefore support government spending on its objectives . Accept all valid responses Exemplar answer demonstrating skills: The government is currently very concerned that demand from industry in Country G for lithium will not be met in the long - term. By nationalising LBM, the government can dictate production priorities, ensuring that adequate supply is maintained domestically, thereby preventing supply bottlenecks and supporting key economic sectors that rely on this raw material. This ultimately safeguards long-term industrial and economic stability within Country G. Although LBM is currently unprofitable, losing $2–3 million per year, its revenue is forecast to rise rapidly once mining begins. By nationalising the business, the government ensures that this potentially high future revenue is retained within the country's public finances. This retained profit can then be directed towards public services, infrastructure development, or subsidising local industries, rather than flowing out of Country G to a foreign multinational

Mark scheme

2 Analyse one benefit and one limitation of sales forecasting to LBM as it begins its mining operations. 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. Note • Only reward benefits or limitations • If more than one benefit or limitation is referred to, reward the best. 2 Responses may include: AO1 Knowledge and understanding • Sales forecasting involves making a prediction of future sales volumes or revenues. • Time series analysis is a method of forecasting based on extrapolation from past data. (maximum of 1 mark for definition of TSA / sales forecasting) • Benefits include (max K 1 mark): – Contribution to workforce planning. – Planning purchase of resources. – Greater accuracy in cash flow forecasting. – Aids operational decisions. – Aids decisions about pricing. – Identifies both trend and seasonal variation. • Limitations (max K 1 mark) – Lack of historical data to use quantitative technique – Uncertainty regarding external influences AO2 Application Limited application, applies knowledge to LBM once. Developed application, + applies knowledge to LBM twice. Max one for application to a benefit and max one for application to a limitation. Application is making use of relevant case information not just repeating it. • LBM is just beginning its mining operations. • Output is difficult to vary at very short notice. • Holding inventory of lithium involves high costs. • Variations in demand for electric vehicles and smartphones exist. • Alternatives to lithium are being developed. • New hard rock mining under development. • Global demand for lithium is rising and supply will not meet demand after 2030. 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. Benefits • Accurate sales forecasts are crucial because output from lithium mines is difficult to vary at short notice thus allowing LBM to plan production capacity in advance to ensure sufficient lithium is available to meet forecast rapidly rising demand. • Sales forecasts important in planning resource needs and therefore keeping costs lower which will increase efficiency and therefore profit Limitations • Accuracy and reliability depend on market conditions remaining the same – this is possibly not likely in the lithium market due to variation s in demand for products containing batteries resulting in failure to capitalise on market growth . • Accuracy and reliability are higher in the near future so longer term forecasts are less reliable reducing the usefulness of forecasting to planning. . • SF relies on historical data/trends but the future of lithium demand is uncertain due to variations in demand for electric vehicles and smartphones and the development of alternatives; this lack of reliability means LBM may miscalculate production , leading to high inventory holding costs or. Accept all valid responses Exemplar answer By anticipating future sales levels, LBM can use SF to plan resource needs effectively, ensuring the efficient scheduling of machinery and labour well in advance of peak demand. This forward planning helps minimise operational waste and controls production costs, which is vital given LBM is currently losing money and needs to move towards profitability quickly. A key limitation is that sales forecasting, particularly methods based on extrapolation from past data, relies on the assumption that future conditions will resemble the past. This is unreliable for LBM because the lithium market faces significant external volatility. There are likely to be variations in demand for electric vehicles and smart phones over time, and, crucially, alternatives to lithium are being developed. These factors are difficult to integrate into simple historical trend analysis, meaning LBM’s forecasts might be inaccurate. If the forecasts are too optimistic, LBM could face high inventory holding costs for this raw material, which are specifically noted as ‘high costs’, potentially worsening LBM’s current financial losses

Mark scheme

3(a) Using the data in Table 1.1, calculate the payback period. 2 Payback period is time taken to recover the initial investment. OR Initial investment = $320m. OR Payback in sixth year (1 mark) (no of months = 10/120 * 12 = 1 month) Payback period is 5 years 1 month OR 5.08 years (2 marks) 3(b) Using the data in Table 1.1, calculate the net present value (NPV) over six years discounted at 8%. 2 NPV is the value today of future cash flows net of the original cost of investment. OR Total discounted net cash flows = $307.63m OR Discounted capital cost = $311.11m (1 mark) NPV = 307.63 – 311.11 = ($3.48m) (2 marks) Accept 3.5 3(c) Evaluate LBM’s decision to go ahead with the hot water test mine. 12 Leve AO1 Knowledge AO2 Application AO3 Analysis AO4 Evaluation l 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) Responses may include: AO1 Knowledge and understanding • Understanding of the use of investment appraisal – payback period, NPV including advantages (quantitative, based on data, NPV factors in time value,) and disadvantages (predictions may be inaccurate as circumstances change, false sense of accuracy, providers of data may be biased and provide misleading data). • Qualitative factors in investment decisions include: • Attitude to risk. • Impact on stakeholders e.g. environmental/social considerations, future economic changes. • How well the project fits the business objectives. AO2 Application Limited application, applies knowledge to LBM once. Developed application, + applies knowledge to LBM twice. Application is making use of relevant case information not just repeating it. • Quantitative results (Payback 5 years 1 month; NPV –$3.48m over 6 years). • Project life span is 15 years, but cash flows are only appraised for 6 years. • LBM has strict finance limitations (no adverse variances allowed). • The project has local opposition. • The hot water extraction process allows water to be used for heating local housing. • LBM is currently losing $2–3 million per year. • Estimated 15 year life span. • Uncertain forecasting beyond six years. • Non-inclusion of data relating to possible extraction of other metals. • Objective of LBM is to produce lithium. • Decreasing supply/demand gap (after 2030 demand>supply). • LBM only producer in country G. • Test mine is the first project, next is hard rock mining. • Government concerned to get lithium production in country G, • LBM has the finance. 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. • The negative NPV (-$3.48m) over six years suggests the project does not cover its costs of capital and should be rejected , thus ensuring LBM does not deepen its existing losses . • The project lifespan is 15 years, and the uncounted positive cash flows in Years 7–15, coupled with rapidly rising global demand for lithium, could lead to a highly positive overall NP , significantly increasing future revenue . • If LBM experiences adverse variances, they may run out of finance, leading to project failure and a loss of the large initial investment ($200m + $120m) . • The dual benefit of extraction and heating local housing may satisfy social objectives and reduce local opposition , thereby lowering the risk of delays . • Learning from this project will enhance performance in future projects, therefore increasing the likely success of the hard rock mining project • The price of lithium is likely to continue to rise resulting in higher revenues in years 7 –15 . • Other producers may appear causing lower lithium prices and therefore reduce forecast net cash flows . • If other metals can be recovered the revenue figures may be higher than forecast . 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. • Supported judgement as to whether LBM should proceed. • Quantitative investment appraisal indicates the decision is unwise as NPV is negative but likely positive ARR, and NPV very close to zero mean qualitative factors may be more important. • Factors that decision might depend on: – Reliability of the estimated cash flows for the remaining 9 years; – LBM’s willingness to accept high financial and operational risk (local opposition, tight budget); – the importance of social benefits (heating local housing) versus financial return. – Accuracy of the discount factor and forecast cash flow. In the changing lithium market the indicators are that they are possibly neither, but the most likely possibility is that revenues will be higher than forecast. 3(c) • the risk appears to be low and the finance is available. • If LBM does not go ahead, it is likely to go out of business due to increasing losses. • The decision is highly subjective due to high uncertainty beyond Year 6. Given that LBM is currently unprofitable and operates with tight funding, the negative NPV indicates high risk. However, strategically, LBM must establish mining operations to leverage the rapid revenue forecast. • The project should probably be delayed or redesigned until LBM can secure sufficient finance to absorb potential adverse variances and until a more reliable long-term forecast can demonstrate a clearly positive NPV over the full 15 years Accept all valid responses Exemplar L3 Evaluation The decision hinges on LBM’s risk tolerance and belief in the long-term forecast. While the negative NPV over the appraised period suggests that rejecting the project would be financially prudent for a company currently operating at a loss, strategically, LBM must establish mining operations to survive and capture future revenue. However, the decision is contingent on securing a buffer of finance to tolerate adverse variances. Given the extremely tight financial limitations, LBM should consider conducting a sensitivity analysis on the cash flows for years 7–15 to demonstrate that the strategic gain outweighs the immediate financial risk. If LBM cannot demonstrate a substantial expected NPV over the full 15 years, or if the tight budget cannot be loosened, the project should be delayed until funding is more secure to protect the business from insolvency.

Mark scheme

4(a)(i) Using Figure 1.1: calculate the total float for activity C 3 Total float is the maximum time an activity can be delayed without delaying the whole project time or LFT – duration – EST OR LST – EST (1 mark) Total float = 80 – 40 – 30. (2 marks) = 10 weeks (3 marks) No need for weeks 4(a)(ii) identify the minimum project duration. 1 Sum durations of critical path: 40 + 60 + 10 + 5 = 115 weeks (1 mark) No need for weeks 4(b) Evaluate the importance of Critical Path Analysis (CPA) to the success of the hard rock mine. 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) Responses may include: AO1 Knowledge and understanding Limited knowledge will be demonstrated through knowledge of CPA. Developed knowledge + will be demonstrated through knowledge of CPA and its usefulness. • Knowledge of CPA: network, EST, LFT, floats, nodes, minimum duration, critical path. • Benefits of CPA: calculation of project duration – knowing when activities should start – knowing latest finish times – knowing critical path – knowing floats. • Limitations of CPA: – analysis only as good as the data. – new projects may not have past experience as a guide – planning costs. – does not ensure effective management. • Knowledge of other factors: availability of finance, materials and equipment. • Investment appraisal methods also needed to assess financial criteria for success. • Business objectives matching project aims. AO2 Application Limited application, applies knowledge to LBM once. Developed application, + applies knowledge to LBM twice. Application is making use of relevant case information not just repeating it. • Hard rock mine follows the hot water mine, which will be nearing completion of building and about to start production. • need to buy equipment for drilling and factory. • data for CPA from partners, suppliers and R and D. • Minimum project duration is just over two years. • CPA relates to the complex sequence of activities (A to H) involved in establishing the hard rock mine. • The planned start of the mine is in two years’ time (104 weeks), but the calculated duration is 115 weeks. • CPA uses data obtained from mining industry sources and the LBM Research and Development (R&D) team. • Lithium is found 500 metres underground. • Activity C (Obtain drilling machinery) has 15 weeks of float. 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. • CPA identifies the critical activities (A-H route through nodes 1–2-4–5–7–8, for example) which, if delayed, will delay the whole project duration. This allows LBM, a new mining operator, to focus its limited resources and management supervision on these tasks , thereby preventing cost overruns . • CPA reveals that the current duration (115 weeks) already exceeds the planned start time (2 years/104 weeks). This forces LBM to find ways to shorten the duration to meet the original target , maximising early revenue generation . • The calculation of float (e.g., 15 weeks for activity C) enables Astor to reallocate resources away from non -critical tasks to critical ones , helping to reduce the overall project duration and improving efficiency . • As this is the first mining activity for LBM there is no past experience to rely on therefore the data may be inaccurate 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. • Supported judgement as to the importance of CPA. • CPA is highly important for the success of the hard rock mine because the project is complex and already forecasted to be delayed (115 weeks vs 104 weeks goal). CPA provides the necessary planning and monitoring framework to potentially shorten this delay and secure timely revenue. • Factors that the impact might depend on: – CPA relies entirely on the accuracy of time estimates provided by the R&D team and suppliers. If these estimates are inaccurate (e.g., optimistic), the critical path may be wrong, leading LBM to misallocate resources and still fail to achieve the minimum duration. • CPA must be continuously monitored and updated as the project progresses to account for unexpected operational difficulties (e.g., drilling 500m underground). • Project success also depends on availability of finance, equipment and appropriate employees. Without them the project is less or not likely to succeed. 4(b) Accept all valid responses Exemplar L3 Evaluation The benefit of CPA is limited by its reliance on assumptions. CPA’s success depends entirely on the accuracy of the time estimates for activities like D (Install drilling machinery) and E (Test drill exercise), which were obtained from mining industry sources and the LBM Research and Development (R&D) team. Since LBM is a new operator in Country G, and the scale of this project (drilling 500 m) is complex, these estimates may be overly optimistic or inaccurate. If the critical path calculation is flawed, LBM might misallocate resources, potentially causing unnecessary delays in the 115-week plan or wasting scarce finance.

Mark scheme

5 Evaluate LBMs decision to use two different approaches to 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. 5 Responses may include: AO1 Knowledge and understanding • Understanding of ‘hard HRM: – viewing employees as a inputs for the business, close monitoring, and control, training to improve business performance, little delegation of decision making. – leadership style likely to be autocratic – power for leader comes from rewards, position or coercion. – little space for emotional intelligence. – One-way formal communication (top down) • Understanding of ‘soft’ HRM: employees are individuals, to be developed, e.g. by appraisal and training, consultation and delegated decision making. – leadership style likely to be democratic or laissez-faire. – leader likely to use contingency leadership – power for leader comes from expertise, information or charisma. – transformational leadership possible. – emotional intelligence employed. – Two-way communication, possibly informal. AO2 Application Limited application, applies knowledge to LBM once. Developed application, + applies knowledge to LBM twice. Application is making use of relevant case information not just repeating it. • Soft HRM is used for the 35 graduate employees. • These graduates have delegated powers and decide their own work patterns (autonomy). • Graduates are involved in R&D, mapping technology, and developing techniques. • Hard HRM is used for the 150 new machine operators at the hot water mine. • These new employees are closely supervised by ten technology specialists. 5 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. • changing HRM approaches takes time and cost to plan details. • Using Soft HRM for graduates increases their motivation and creativity, which is crucial for maximizing the efficiency of mapping technology and generating innovative mining techniques , thereby increasing LBM's competitiveness . • Small number of graduate employees should be easy to manage and soft approach will reuce need for middle management therefore reducing costs . • Hard HRM focuses on tight control and efficiency for the 150 machine operators. This approach ensures standardisation and low labour costs, which is important for LBM, as it is currently an unprofitable company . • The stark difference in treatment (delegation vs. close supervision) risks creating resentment and conflict between the two groups, potentially leading to poor morale and resistance among the machine operators, threatening operational stability . • Production requires clearly defined tasks so more control/autocracy can be more efficient . • Very tight time scale for hard rock project means HRM changes must be well planned 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. • Supported judgement as to the likely effectiveness of the approach. • The decision to use dual approaches is largely appropriate because the nature of the jobs is vastly different (creative R&D vs. standardised machine operation). The soft approach is essential for knowledge workers (graduates) to foster innovation, while the hard approach is effective for large groups performing repetitive tasks in a controlled industrial environment like a mine. 5 • Factors that the impact might depend on: – The degree of separation between the two employee groups; – LBM’s ability to minimise perceived unfairness; – the specific skills required by the machine operators (if tasks are complex, hard HRM may lead to high error rates and reduced quality). – Can LBM afford to change? In time for recruiting and starting production? • The decision is strategically sound but requires careful management. LBM must ensure communication and compensation systems do not exacerbate the cultural divide, or the benefits of high R&D output might be negated by industrial relations problems at the mine site. Accept all valid responses Exemplar L3 Evaluation The decision to use two different approaches is strategically sound and appropriate because it matches the HRM approach to the specific needs of each job role (innovation for R&D vs. control for operations). LBM’s dual HRM strategy is necessary for functional efficiency but dangerous for internal culture. The success of this decision is conditional upon management (led by Astor) successfully mitigating the risk of conflict. LBM must invest in transparent communication explaining why the roles are managed differently and ensure that the machine operators feel valued through factors other than autonomy, such as fair compensation or training opportunities, to prevent internal dissatisfaction from undermining the profitability of the new mine