Cambridge A Level Business (for first examination in 2016) 9609 — 2017 Oct/Nov Paper 2 · Variant 1

1 Rugged Back Packs (RBP) RBP is a manufacturing business that specialises in producing travel bags and backpacks. The products are sold by many different retailers. The brand of RBP has become well known for quality and reliability. Each retailer requires a fast response to orders for more inventory from RBP. RBP holds high levels of inventories to enable it to respond to orders from retailers within 48 hours 5 (see Fig. 1). The inventory is kept in a secure warehouse next to the factory. Fig. 1: Inventory control chart 60 50 inventory 40 level 30 (000s) 20 10 0 0 1 2 3 time (weeks) RBP employs around 100 employees in the factory. Most of the employees are skilled operators of the machinery used to make the bags. The factory manager was dismissed last month because productivity levels had fallen and the factory was not achieving RBP’s production targets. This manager had many disagreements with the employees 10 and most of the workforce is demotivated, with high levels of absenteeism and labour turnover. RBP’s factory is now managed by Maya. Maya is a very experienced manager and she was described by her previous employer as having a high level of emotional intelligence. (a) (i) Define the term ‘brand’ (line 2). [2] (ii) Briefly explain the term ‘labour turnover’ (lines 11–12). [3] (b) (i) Refer to Fig. 1. Identify the size of: • maximum inventory level • buffer inventory level • re-order quantity. [3] (ii) Explain one possible use of an inventory control chart to RBP. [3] (c) Analyse two disadvantages to RBP of holding a high level of inventory. [8] (d) Evaluate the importance to RBP of Maya having a high level of emotional intelligence. [11]

Mark scheme: Question Answer Marks 1(a)(i) Define the term ‘brand’ (line 2). 2 Knowledge Marks A correct definition 2 A partial, vague or unfocused definition 1 No creditable content 0 A correct definition will contain: • A brand is a name, term, design or symbol • Distinguishes one seller's product from those of others/makes it unique. Exemplar Marks Rationale A brand-name differentiates a product 2 A correct definition from similar products A brand is a name/symbol/design that differentiates a product from similar 2 A correct definition products. Vague as brands could also A brand is a name/image/logo 1 differentiate products with names/images/ logos Distinguishes one product from Other factors could 1 another. also do this 1(a)(ii) Briefly explain the term ‘labour turnover’ (lines 11–12). 3 Award one mark for each point of explanation: C Percentage/proportion or formula 1 mark B per year/time period (this could be in the formula) 1 mark A Employees/workforce that leave 1 mark Content The proportion/percentage/rate of a firm's workforce/employees that leave during a certain time period. Number employees who left in a given time period × 100 Total number of employees Exemplar Marks Rationale The percentage of a firm’s workforce that Points from A, B 3 leave in a year and C Number employees who left in a year Formula covering × 100 3 Total employees all three points Number employees who left Formula missing × 100 2 Total employees the B point Number of employees that leave per year. 2 A and B points Does not refer to workforce/ percentage leaving 1 employees so a C point only Does not explain Numbers of employees that leave 1 ‘turnover’ so point from A only 1(b)(i) Refer to Fig. 1. Identify the size of: 3 • Maximum inventory level • Buffer inventory level • Re-order quantity Marks Rationale 3 Correct calculation of three figures 2 Correct identification of two figures 1 Correct identification of one figure 0 No creditable content No own figure rule applicable Answers: • Maximum inventory level 60 000 (1 mark) • Buffer inventory level 10 000 (1 mark) • Re-order quantity 50 000 (1 mark) Allow 60, 10, 50 Note: Reward if you are confident that they have identified the correct figures 1(b)(ii) Explain one possible use of an inventory control chart to RBP 3 Level Knowledge and Application Marks 2b Shows understanding of a use of an inventory 3 (APP+APP) control chart in context 2a (APP) Identification of a use of an inventory control 2 chart in context 1 (K) Identification of a use of an inventory control 1 chart 0 No creditable content 0 Correct use of an incorrect answer to 1(b)(i) should be fully rewarded (own figure rule –OFR). Note: identification of a figure ONLY would not gain any marks as marks have been awarded in the previous question – the answer must identify a USE Content Answers may include: • Can be used to make sure RBP do not run out of stock – v important as shops require quick response • Can analyse the lead time required for re-orders • Can make sure RBP do not hold too much stock Context may include: • RBP known for reliability • Retailers require a fast response • RPB holds high levels of inventory to ensure a fast response to retail orders • Respond to orders within 48 hours 1(c) Analyse two disadvantages to RBP of holding a high level of inventory Level Knowledge and Marks Analysis Marks Application (4 marks) (4 marks) Good analysis of two (or more) disadvantages of 4 4 holding a high level Shows knowledge of inventory in of holding a high context 2 level of inventory Good analysis of one in context disadvantage of 3 holding a high level 3 of inventory in context Shows knowledge Limited analysis of of inventory and/or two (or more) knowledge of 1–2 disadvantages of 2 holding a high holding a high level level of inventory of inventory 1 Limited analysis of one disadvantage of 1 holding a high level of inventory 0 No creditable content A non-contextual answer can only be awarded a maximum of 2 + 2 = 4 Limited analysis in context: Marks limited to 4 + 2 = 6 Analysis of only one disadvantage in context: Marks limited to 3 + 3 = 6 Content Answers could include: • Cost of storing the stock (i.e. warehousing, insurance etc.) • Possibility of stock becoming obsolete – new designs, materials etc. • Possibility of demand changing – colours, fashions etc. • Cash tied up inventory – opportunity cost Examples of knowledge of Examples of Examples of holding a high level application/context possible analysis of inventory RBP produces large Will increase the cost items (travel bags) High cost of holding of each bag produced and keep them in a stock and decrease the warehouse next to the profit of the business. factory ARA 1(d) Evaluate the importance to RBP of Maya having a high level of 11 emotional intelligence. Analysis and Knowledge and Marks Evaluation Marks Application (4 marks) (7 marks) A justified evaluation based on argument(s) of the importance of 7 emotional intelligence in context Developed evaluation based on argument(s) of the 6 importance of emotional intelligence in context An evaluative statement based on argument(s) of the importance of 5 emotional intelligence in context Argument (two-sided) about the importance of 4 emotional intelligence in Shows understanding of context emotional intelligence in 3–4 Argument (one-sided) context about the 3 importance of emotional intelligence in context Limited analysis of Shows knowledge of 1–2 emotional 1–2 emotional intelligence intelligence Justification can come from looking at the importance and/or importance of other qualities/leadership style required in a leader/manager or importance of training of workers/providing adequate resources 1(d) Answers could include: Emotional intelligence is the ability to recognise your own and other people's emotions, to discriminate between different feelings and identify them appropriately, and to use emotional information to guide thinking and behaviour. Importance in motivating employees, increasing productivity, reducing absenteeism and turnover. • 100 workers who will need to be motivated and led and this may require emotional intelligence, especially since the workers are skilled and therefore not easily replaced. • RBP has high levels of absenteeism and labour turnover – Maya will need to resolve the underlying issues if she is to make the factory more productive • The previous manager was sacked due to lack of productivity. If this is to be solved Maya will need to be able to motivate the workers • However, the productivity issue may not be due to a lack of emotional intelligence from the previous manager, but there may be a more important reasons, such as poor training, equipment etc... • The factory may need a more authoritarian approach to increase productivity An example of how an answer could develop and how it should be annotated. ANAN (one K APP AN EVAL sided) By Overall Maya having high Maya needs to understanding levels of emotional understand their emotions, intelligence is likely to be the emotions This could lead to Maya can make important, as it will help of the 100 better productivity changes to the her understand the issues workers so and hit the factory, which of the workforce that she that she can production may increase manages. (EVAL – tackle the targets. (ANAN) the workers statement) productivity motivation. Emotional issues. (APP) (AN) However, it depends upon intelligence why the productivity levels is ANAN (two- are low. If the main issue recognising sided) was the disagreement The workers your own between the previous may be absent and other Without better manager and the and leaving people’s conditions the workforce then it is likely The factory RBP because of emotions. workers are to be very important. has high poor working (K) unlikely to (EVAL – developed) levels of conditions in the improve their absenteeism factory. This absenteeism and However, this is unlikely to and labour issue requires turnover and be the only issue and turnover. action from therefore RBP will Maya will need more than (APP) Maya not an not have improved just emotional intelligence understanding productivity and to hit the production of their hit the targets. targets for RBP. (EVAL – emotions. (AN) (ANAN) justified)

2 Car Wash (CW) CW is a national chain of car wash businesses. Each car wash is a franchise of CW and is owned and managed by an entrepreneur who is local to the area where the car wash is based. As well as washing cars, each CW franchise offers customers the opportunity to have the interiors of their cars cleaned for an additional payment. Every entrepreneur who wants to set up a CW franchise must present a plan to CW for 5 the business, including market research information. An entrepreneur called Palesh has recently submitted a proposal for a new franchise in a town that does not currently have a CW car wash. Palesh selected a sample of people on the main street in the town to carry out his market research. He asked them about how often they would use the car wash service and how 10 much they would be willing to pay. Based on his market research, Palesh has forecast the cash flow for the first two months of trading (see Table 1). Palesh will have an opening balance of $10 000 at the start of Month 1. Table 1: Cash flow forecast Month 1 ($) Month 2 ($) 15 Cash inflow 20 000 20 000 Cash outflow 25 000 10 000 CW car washes are labour intensive businesses. Employees work outside and they often get very wet from the water used. Each car is washed by two employees, one for the wheels and one for the rest of the car. A third employee is responsible for cleaning 20 the interior of the car if this is required by the customer. Palesh plans to employ 12 employees to work in shifts at the car wash. The opening hours will be 06:00 until 22:00, seven days a week. Palesh is aware that he will need to keep costs low, so he will pay each employee a low hourly wage. However, he is also aware that this may lead to human resource problems. 25 (a) (i) Define the term ‘franchise’ (line 1). [2] (ii) Briefly explain the term ‘entrepreneur’ (line 2). [3] (b) (i) Refer to Table 1 and any other relevant information. Calculate the forecast closing balance at the end of Month 2. [3] (ii) Explain one benefit for Palesh of producing a cash flow forecast. [3] (c) Analyse one advantage and one disadvantage to Palesh of how he carried out his market research. [8] (d) Recommend how Palesh could motivate his employees. [11]

Mark scheme: 2(a)(i) Define the term ‘franchise’. (line 1) 2 Knowledge Marks A correct definition 2 A partial, vague or unfocused definition 1 No creditable content 0 A correct definition will contain: What the franchisee gains (i.e. use of name/logo/trading system/operations system etc«) What the franchisor gains (i.e. royalties/license fee/percentage of profits/sales etc...) Exemplar Marks Rationale A business that pays a licence fee/royalties to use the logo and 2 Correct definition trading systems of an existing business Partial definition but A business that uses the logo and 1 no sense of a trading systems of another business payment/licensing A business that uses the name of 1 Partial definition another business 2(a)(ii) Briefly explain the term ‘entrepreneur’ (line 2). 3 Award one mark for each point of explanation: Example of a quality, i.e. qualities required by an C entrepreneur; innovation, self-motivation, creativity, 1 mark multi- skilled, leadership, confidence. Makes the decisions/runs/manages/leads a business B 1 mark venture/owns/starts a business A Takes the risk 1 mark Content Someone who takes the financial risk of starting and managing a new venture. Qualities may include innovation, self-motivation, multi-skilled, leadership, confidence, risk taking. . Exemplar Marks Rationale An entrepreneur takes the risk of starting a business and makes the 3 All three elements decisions, An entrepreneur should be confident Someone who makes decisions about the factors of production, takes risks 3 All three elements and comes up with creative ideas. Someone who takes the financial risk of starting and managing a new 2 A and B only venture. Someone who takes the risks in a 1 A only business Running a business 1 B only 2(b)(i) Refer to Table 1 and any other relevant information. Calculate the 3 forecast closing balance at the end of Month 2. Marks Rationale 3 Correct answer (with or without working or $) Correct calculation of net cashflow for both months (can be 2 one calculation or two) Formula or one correct calculation of net cashflow; i.e. cash 1 inflow-cash outflow (can be month 1 or month 2) 0 No creditable content Formula: Opening balance + net cash flow (Cash inflow – cash outflow) Calculations: Opening balance $10 000 Cash inflow $40 000 Cash outflow $35 000 Closing balance $15 000 (3 marks for correct answer) Common incorrect answers Answer Marks Rationale M1 $20 000 – $25 000 = –$5000 (1) M2 $20 000 – $10 000 = $10 000 Missed off opening 2 (1) balance Answer = $5000 No idea where the $5000 (no working) 0 figure came from so no marks Some understanding with opening balance 10 000 + 20 000 – 10 000 1 but cash inflow and = 20 000 outflow for month 2 only No opening balance 20 000 – 10 000 and cash inflow and 1 = 10 000 outflow for month 2 only 10 000 0 No working Correct formula 1 Correct formula 2(b)(ii) Explain one benefit for Palesh of producing a cash flow forecast. 4 Level Knowledge and Application Marks 2b Explanation of one benefit of cash flow 3 (APPAPP) forecasting used in context Identification of one benefit of cash flow 2a (APP) 2 forecasting in context Identification of one benefit of cash flow 1a (K) 1 forecasting 0 No creditable content 0 Correct use of an incorrect answer to 1bi should be fully rewarded (own figure rule – OFR) Content Answers could include: • Palesh can show the cash flow forecast to CW to help get the franchise • One of the major causes of new business failure is poor cash flow. A cash flow forecast will help Palesh to foresee any potential problems such as not having enough cash to pay wages • Allows Palesh to see when he may need extra finance • May help Palesh to get external finance if required Note: a positive cashflow does not mean profit will be made – do not reward this confusion in an answer. 2(c) Analyse one advantage and one disadvantage to Palesh of how he 8 carried out his market research. Knowledge and Level Application Marks Analysis (4 marks) Marks (4 marks) Good analysis of one (or more) advantage(s) AND one (or more) 4 disadvantage(s) of market research Shows techniques in understanding of context 2 market research 3–4 Good analysis of one techniques in (or more) context advantage(s) OR one (or more) 3 disadvantage(s) of market research techniques in context Limited analysis of one (or more) advantage(s) AND one (or more) 2 disadvantage(s) of market research Shows knowledge techniques of market 1 1–2 research Limited analysis of techniques one (or more) advantage(s) OR one (or more) 1 disadvantage(s) of market research techniques Limited analysis in context: Marks limited to 4+2=6 Answers could include: Advantages • Quick – reduces costs to Palesh • This is primary research which can be more up-to-date than secondary • Cheaper than other methods that may require more preparation time • Focused on the local area where Palesh is planning to set up his business 2(c) Disadvantages • Choose random – surely Palesh is only interested in people who have cars • On high street – is this the best place to sample people who might want to use a car wash? • Limited questions – e.g. could have asked what time of day might use the car wash 2(d) Recommend how Palesh could motivate his employees. 11 Knowledge and Analysis and Evaluation Application Marks Marks (7 marks) (4 marks) A justified recommendation for for Palesh based on the given argument(s) of one or 7 more motivation methods in context A developed recommendation for Palesh based on the given 6 argument(s) of one or more motivation methods in context An evaluative statement/ recommendation based on the given argument(s) of 5 one or more motivation methods in context Argument (two-sided) based on one or more motivation 4 Shows knowledge of methods in context motivation methods 3–4 Argument (one-sided) based in context on one or more motivation 3 methods in context Shows knowledge of Limited analysis of one or motivation/motivation 1–2 1–2 more motivation methods methods No creditable content 2(d) Content: Answers could include: • Payment methods are unlikely to be in context as Palesh has already stated he must pay a low wage. Commission/bonus or piece rate could be viable options as both of these keep costs linked to revenue. Alternatively, fringe benefits (such as free car washing) could be an option. • Job rotation – there may be some way of moving employees around the different jobs to stop them becoming demotivated • Job enlargement – there may be some additional responsibilities (such as a supervisor role) that Palesh could utilise • Job enrichment – unlikely to be much scope, but it may be possible to allow employees to decide on certain aspects of their role • Team working • Quality circles • Target setting – This may work as a motivational tool as long as there are enough cars to maintain the targets (could be linked to bonus or profit sharing scheme) • Delegation • Empowerment • Participation – Allowing workers to participate in decisions about the business may be a useful form of motivation, especially in a new business 2(d) An example of how an answer could develop and how it should be annotated. ANAN K APP AN EVAL (one sided) If Palesh uses a However, not all workers are method such as motivated by the same methods allowing so Palesh might need to use CW is labour workers to Less absenteeism more than one non-financial intensive so participate in would mean higher method of motivation. (EVAL – it is important decision making productivity and statement) that Palesh they will feel they would be able finds ways to part of the to wash more cars. As car washing can be boring motivate business and (ANAN) some workers might be Motivation staff. (APP) work harder to motivated by more interesting methods make it a work such as extra are used to success. (AN) responsibilities maybe as inspire staff supervisors or by changing roles to work during a shift so not always harder. (K) being the person who cleans ANAN (two-sided) inside cars (EVAL – developed) Motivation Working conditionsmethods However, if Palesh was to ask mean thatcould be The best some to take on extra This will mean employees workfinancial methods responsibilities he might have to that they are outside and theyand non- would be offer higher pay and this might less likely to will get wet whichfinancial. non-financial not be possible as it would raise take could make them(K) as Palesh costs so Palesh might have to unnecessary feel miserable and wants to consider less costly motivation days off work. more likely to take keep costs methods such as team working (AN) days off or leave low. (APP) where the team can decide how the job which could they will complete the necessary result in a bad tasks. This would fit in with reputation for CW. Palesh’s cost concerns. (EVAL – (ANAN) justified)

More questions on Market research