Cambridge A Level Business (for first examination in 2016) 9609 — 2023 May/June Paper 2 · Variant 1

1 Great Resources (GR) GR is a business partnership that creates educational resources. It sells direct to schools and teachers via its own website. Sanjay, Rukmal and Boris are entrepreneurial teachers who formed the GR partnership. One year ago, they identified a gap in the market to supply interactive, digital resources. GR’s website is subscription only. An online marketing campaign, which used penetration 5 pricing, attracted 250 subscribers in the first six months of operation. The start-up costs were financed with a $5000 bank overdraft, which is GR’s only debt. Reviews for GR’s products in teaching journals are positive but cash flow is poor. Many customers have taken advantage of a recent sales promotion for one month’s free membership and posted positive reviews. Unfortunately, few have then taken out a regular 10 subscription. As revenue has not increased as much as the entrepreneurs had hoped, they must now consider alternative promotion methods. They have researched possible promotion methods and decided to advertise in an educational newspaper. The newspaper has a readership of half a million people. 15 Expert Materials (EM) is a large national company that also advertises in the newspaper. EM is GR’s closest competitor. The EM brand is well-known and trusted in the educational resources market. Table 1.1 shows some marketing data. Table 1.1 Marketing data GR EM Total 20 market Revenue ($000) 15 300 500 Number of customers 300 5000 7000 Annual advertising spend ($000) 7.5 45 60 (a) (i) Identify one barrier to entrepreneurship. [1] (ii) Explain the term partnership. [3] (b) (i) Refer to Table 1.1. Calculate GR’s market share by revenue. [3] (ii) Explain one factor which may influence the supply of GR’s products. [3] (c) Analyse one advantage and one disadvantage to GR of using a bank overdraft. [8] (d) Evaluate whether price or promotion is the most important element of GR’s marketing mix. [12]

Mark scheme: 1(a)(i) Identify one barrier to entrepreneurship. Indicative content Identification of a barrier may include:  Lack of finances  lack of a strategic plan  fear of failure  strong rules and regulations  lack of capacity Accept all valid responses. 1 Question Answer Marks 1(a)(ii) Explain the term partnership. AO1 Knowledge and understanding 1 mark AO2 Application 2 marks 2 marks Developed application of one relevant point to a business context. 1 mark Knowledge of one relevant point is used to answer the question. 1 mark Limited application of one relevant point to a business context. 0 marks No creditable response. 0 marks No creditable response. Indicative content AO1 Knowledge and understanding Knowledge of partnership may include:  Two or more owners of a business AO2 Application Limited application applies knowledge of a partnership one of the factors: Developed application + applies knowledge of a partnership to two of the factors  Unlimited liability  Unincorporated  Deeds of partnership  No shares  No continuity  No separation of legal personality  Shares profits Application can be made to the teachers/GR or any other scenario/context/business/person. Accept all valid responses. 3 Question Answer Marks 1(a)(ii) Exemplar and annotations Mark Rationale A business with 2 or more owners . For example, Sanjay, Rukmal and Boris will have created a deed of partnership to formally set out who invested what and what their returns are . 3 An answer which starts with the knowledge and then applies it to the case study. Where two or more owners directly share control of a business. A partnership does not limit the owners’ liability , and there is no continuity . 3 Again, knowledge first, followed by application to a decision (unlimited liability) and no continuity. It is an unincorporated business , and both partners will be liable for the debt because both partners share control and responsibility for the business . 3 A different way of answering the question. There is developed application to one element of a partnership (the liability) as well as clear knowledge of the concept by the end of the response. Where two or more owners directly share control of a business. A partnership does not limit the owners’ liability , so the owners could lose their personal assets in a bankruptcy. 2 Again, knowledge first, followed by application to a decision (unlimited liability) however the second point is a repetition. Two people share control of a business . For example, two people invest and share the responsibilities for running a business . 2 BOD knowledge. Some application of a choice, but not expanded. Two people owning a business . 1 Not a perfect definition, but enough to award the knowledge mark. No attempt to apply. When two people manage/run a business . 0 No ownership of a business mentioned. Question Answer Marks 1(b)(i) Refer to Table 1.1. Calculate GR’s market share by revenue. Indicative content Formula: Total sales of business Total market sales  100 (1 mark – formula) Total sales = 15000 500000  100 (1 mark – ID/use of correct figures) Total Sales = 3% (1 mark – correct answer, no % needed) Final answer for MS = 3 (%) (3 marks – no % or working needed) OFR applies Marks 3 marks Correct answer (3) Working and % do not matter. Must be three to denote the three marks. 2 marks EITHER  Correct formula AND  Correct identification of figures OR  An incorrect answer with one mistake allowing OFR for final stage. To award two marks, there must be  Two and a OR  One , one and one 1 mark One of the following:  Correct formula  Correct identification of figures in an incorrect formula To award one mark, there must be:  One and two 0 marks No creditable content. To award zero marks, there must be  One 3 Question Answer Marks 1(b)(ii) Explain one factor which may influence the supply of GR’s products. AO1 Knowledge and understanding 1 mark AO2 Application 2 marks 2 marks Developed application of one relevant point to a business context. 1 mark Knowledge of one relevant point is used to answer the question. 1 mark Limited application of one relevant point to a business context. 0 marks No creditable response. 0 marks No creditable response. Indicative content AO1 Knowledge and understanding Knowledge of a factor that may influence the supply of products :  Knowledge of the impact of a lack of one or more of the factors of production (land, labour, capital and/or enterprise)  Price of the item (if the price is high, it will be supplied, if low then maybe not) (not demand)  The appropriateness of the sales platform  The choice of marketing media chosen  Cost of production  Government taxes/subsidies that affect suppliers  Advances in technology which affect the cost of production  Return on investment  Feasibility of market share 3 Question Answer Marks 1(b)(ii) AO2 Application Limited application , applies knowledge of one factor that influences supply to Sanjay, Rukmal and Boris (SRB)/GR once. Developed application + applies knowledge of one factor that influences supply to SRB/GR twice. Application of a factor may include:  OFD is a partnership including SRB: 3 only/enough to create enough resources/breadth of subject knowledge  GR has a low 3% market share in comparison to 60% EM so less competitiveness in advertising  Cost of developing/selling interactive digital materials may rise/reduce the incentive to produce  Lack of conversion to regular subscriptions may reduce the return on investment and cause a lack of motivation to write new/update materials  direct sales to schools on its own website/is the website/ increased cost of maintenance/ reduce profit margins  GR only has $5000 debt/potential to borrow more/invest in new software  Poor cashflow/banks may not see profitability/lack of opportunity to invest  Answer from Q1(b)(i) (OFR applies)  GR offers one month’s free membership but is unable to convert many to regular subscriptions  Revenue has not increased as much as hoped Accept all valid responses. Question Answer Marks 1(b)(ii) Exemplar and annotations Mark Rationale A factor would be the available capital , because free trials are not converting into subscriptions which means revenue is not increasing as much as hoped . 3 (Availability of) capital is a reasonable factor, explained in the specific context of SRB/GR by using the in-text data. GR may not be able to compete when advertising , as they only have 3% MS and GR has 60% and are well known and trusted . 3 Ability to compete is reasonable and there are two specific pieces of context based on this so two . 300 customers is not enough to make the business a success as EM spends 6 x more on advertising than GR makes in revenue so the amount of finance available may influence the ability to compete. 3 Although the appears first, it cannot be awarded until the has been found. However, there is obvious , so you can go back and award the . Government taxes may make the cost of supply too high which is why they only have 300 customers . 2 The mention of taxes, although not in context, is still a factor that influences supply . The context of 300 customers linked to this is reasonable , but only one point of application. The level of expertise of the suppliers because if the output is poor and not well-regarded the business might ultimately fail . 1 Expertise is a factor (enterprise). The rest of the answer is not applying it to the context, so (Not Answering Question). EM is much larger than GR and has 4700 more customers which means that they have larger brand awareness and customers are more likely to trust them and choose them . 0 Although there is some relevant context, there is no knowledge of a factor, so no marks can be awarded. The answer is based on demand, not supply. Question Answer Marks 1(c) Analyse one advantage and one disadvantage to GR of using a bank overdraft. Level AO1 Knowledge and understanding 2 marks AO2 Application 2 marks AO3 Analysis 4 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  Knowledge of two relevant points is used to answer the question.  Knowledge of one relevant point is used to answer the question. 1–2 marks  Application of two relevant points to a business context.  Application of one relevant point to a business context. 1–2 marks Limited analysis  Limited analysis that identifies connections between causes, impacts and/or consequences of two points.  Limited analysis that identifies connections between causes, impacts and/or consequences of one point. 0 0 marks No creditable response. 0 marks No creditable response. 0 marks No creditable response. *Advantage in the left hand side column, disadvantage in the right hand side column 8 Question Answer Marks 1(c) Indicative content AO1 Knowledge and understanding  An overdraft is a credit that the bank agrees that can be borrowed by a business/individual up to an agreed limit and as required. Knowledge of the advantages of using a bank overdraft (max 1 ), may include:  Flexibility  Amount used can vary from day to day  Allows a business to overdraw on its account  Can make payments of a greater value than the balance of an account  The maximum amount agreed in advance allows for financial planning/emergencies  Useful for short term lack of cashflow Knowledge of the disadvantages of using a bank overdraft (max 1 ), may include:  High interest charges  Can be withdrawn if the bank has concerns  Usually limited amounts  For short term cashflow issues only AO2 Application Max one for application in the first benefit and max one for application in the first disadvantage. Application of knowledge of bank overdrafts to GR (max 2 s), including:  OFD is a partnership  Sells to schools on its own website  Entrepreneurial teachers  Interactive digital resources  Subscription only  Online marketing campaign used penetration pricing, attracting 250 subscribers in the first six months of operation.  Start-up costs financed with a $5000 bank overdraft, which is GR’s only debt  Cash flow is poor  Recent sales promotion for one month’s free membership  Few have then taken out a regular subscription  Must now consider alternative promotion methods – advertising in an educational newspaper  EM also advertises in the ed paper, is well known and trusted  Any data from Table 14.1 Question Answer Marks 1(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 or a two-sided analysis. Advantages  Flexible cashflow allows for flexibility in use. This can cover lower than expected cashflow – ensures that all payments can be made if the account is not in credit.  Lowers the cost of borrowing in the long term for investment which is designed to generate a quick return on investment – allows for increased profit margins. Disadvantages  High cost of borrowing can reduce profit margins – leaves less for future investment.  The withdrawal of the overdraft with short notice could mean there is not sufficient capital available for the planned advertising – alternative funding would have to be found which increases risk/time frame. Accept all valid responses. Exemplar and annotations AO1 Knowledge AO2 Application AO3 Analysis Useful for short term planning for periods of negative cashflow . As the recent sales promotion did not convert many free membership trials into regular subscriptions on the induction training. Which may not cover the costs of promotion which means there may not be enough money in the bank account to pay for new (newspaper) adverts . Overdrafts have high interest rates . Which places pressure on the already poor cashflow/partners . Which could make the business unprofitable and put the personal assets (of the partners) at risk . Question Answer Marks 1(d) Evaluate whether price or promotion is the most important element of GR’s marketing mix. Level AO1 Knowledge and understanding 2 marks AO2 Application 2 marks AO3 Analysis 2 marks AO4 Evaluation 6 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 Developed knowledge of relevant key term(s) and/or factor(s) is used to answer the question. 2 marks Developed application of relevant point(s) to the business context. 2 marks Developed analysis that identifies connections between causes, impacts and/or consequences. 3–4 marks Developed evaluation  A developed judgement/conclusion is made.  Developed evaluative comments which balance some key arguments. 1 1 mark Limited knowledge of relevant key term(s) and/or factor(s) is used to answer the question. 1 mark Limited application of relevant point(s) to the business context. 1 mark Limited analysis that identifies connections between causes, impacts and/or consequences. 1–2 marks Limited evaluation  A judgement/conclusion is made with limited supporting comment/evidence.  An attempt is made to balance the arguments. 0 0 marks No creditable response. 0 marks No creditable response. 0 marks No creditable response. 0 marks No creditable response. Evaluative judgement (a definitive answer to the question) in the LHS margins Evaluative comments (however/the other side/a rebuttal) in the RHS margins 12 Question Answer Marks 1(d) Indicative content AO1 Knowledge and understanding Knowledge of the marketing mix (max 1 for knowledge of product OR price; 2 for knowledge of product AND price) including:  Knowledge of price  Can go up  Can go down  Can stay the same  Pricing strategies  (allow but not require knowledge of elasticity)  Knowledge of promotion  Digital promotion  Direct promotion  Sales promotion  Advertising  Above and below the line AO2 Application Limited application applies knowledge of price OR promotion information to GR Developed application + applies knowledge of price AND promotion information to GR.  creates educational resources  sells direct to schools and teachers via its own website  interactive, digital resources  GR is subscription only  online marketing campaign, which used penetration pricing  Reviews for GR’s products in teaching journals are positive but cash flow is poor  recent sales promotion for one month’s free membership and posted positive reviews  decided to advertise in an educational newspaper with a readership of half a million people  Any data in Table 1.1 Question Answer Marks 1(d) 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. Price  The penetration pricing model attracted 250 subscribers in 6 months, which shows that customers are price sensitive – and will be attracted to a cheaper option  Subscription model may not be considered as a suitable pricing method by customers who do not like continuous cash outflows – especially if they do not have budgets – reduces demand  The price may be higher than /not as competitive as EM, the established competition – may be seen as better value – attracts a larger market share  The price charged covers the annual advertising spend, however, investment into a newspaper campaign will increase costs – will either reduce profits or increase the price Promotion  effective promotion grows the brand– increases brand loyalty  Without promotion customers will not know the brand exists – reduces cash inflows  Incorrect promotion wastes valuable resources – opportunity cost for product development AO4 Evaluation Limited evaluation - unsupported 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.  Relative importance of price and promotion – are other issues more important? e.g. potential customer demand, marketing, qualities/skills of entrepreneurs in creating digital resources  Accuracy of promotion/price depends on GR market research and business knowledge/experience. External factors could impact the accuracy of the market research, such as existing contracts, available budgets and competitor materials  The impact of inaccurate customer predictions may be based on unrealistic expectations  A judgement on which factor is the most important of GR’s marketing mix (could be any of the 4 available). Accept all valid responses. Question Answer Marks 1(d) Exemplar and annotations Price can vary in relation to demand. . It is important to get price right as GR is challenging a well-known and trusted market leader. The information shows that price is important in the overall mix as penetration pricing attracted 250 out of 300 customers in the initial stages, however a regular price has only attracted a further 50 customers. This shows that customers are price sensitive and if the price/pricing model is incorrect, it would lead to GR’s cash flow and profitability remaining poor . The original online marketing campaign may have only advertised to a niche market while the educational newspaper reaches the mass market. As EM still uses this medium and is the market leader, a successful promotional piece could introduce their service to a wider customer base and increase the number of subscribers to their digital resource platform. Therefore, pricing is the most important element of GR’s marketing mix as even a great promotional campaign that sets the wrong price is unlikely to persuade potential customers to sign up to a costly subscription service . However, this also depends on whether GR has used the right place to advertise its interactive digital services as an educational newspaper may not be used by the technologically savvy teachers who would be GR’s target market and may consist of technologically illiterate teachers who may not use their service at any price. Therefore, while price is the most important element as price sensitivity seems to be high, GR must ensure it targets the appropriate market segment. *A judgement OR a comment is the bottom of the level/A judgement AND a comment is the top of the level ** A Judgement is a yes or no, a comment is anything weighing up the other side of the argument. AO1 – 2 marks AO2 – 2 marks AO3 – 2 marks AO4 – 6 marks TOTAL – 12 marks

More questions on The nature of operations

2 Delicious Cocoa (DC) DC is a co-operative owned by cocoa farmers in country X. It has 500 workers. In 2022, DC produced 2000 tonnes of raw cocoa beans. Productivity is expected to increase by 5% in 2023. Although DC is profitable, it has no retained earnings. DC focuses on the triple bottom line as its main objective. The members of the co-operative (farmers) are motivated within the current operation. 5 Zara, the Managing Director, has recently completed a workforce plan. She has identified that young people do not want to work on DC’s farms. Their concerns are: • lack of investment in training • most of the work is manual • lack of control over earnings. 10 Ranjit, the Operations Director, has identified an opportunity to create added value by investing in a capital intensive factory. The factory will process raw cocoa beans produced by DC’s farms into cocoa butter. Cocoa butter is a premium product and attracts higher profit margins than raw cocoa beans. The processing factory will require a significant capital investment (see Table 2.1). 15 Table 2.1 Data for the cocoa processing factory $ Initial investment: Land 100 000 Machinery 150 000 20 Training 15 000 Average variable costs per tonne 5 000 Average selling price per tonne 10 000 (a) (i) Identify one element of the triple bottom line. [1] (ii) Explain the term added value. [3] (b) (i) Refer to lines 1–2. Calculate DC’s expected labour productivity in 2023. [3] (ii) Explain one reason why labour productivity is important to DC. [3] (c) Analyse two ways DC can motivate young people to work on its farms. [8] (d) Evaluate whether DC should grow its operations by opening its new cocoa processing factory. [12]

Mark scheme: 2(a)(i) Identify one element of the triple bottom line. Identification of an element may include: Any features of CSR  Economic (financial)  Social  Environmental  People  Planet  Profit Accept all valid responses. 1 Question Answer Marks 2(a)(ii) Explain the term added value. AO1 Knowledge and understanding 1 mark AO2 Application 2 marks 2 marks Developed application of one relevant point to a business context. 1 mark Knowledge of one relevant point is used to answer the question. 1 mark Limited application of one relevant point to a business context. 0 marks No creditable response. 0 marks No creditable response. Indicative content AO1 Knowledge and understanding Knowledge of added value may include:  Added value refers the difference between the cost of purchasing bought in inputs (materials) and the selling price of the finished goods.  Selling price – cost of raw materials  Profit margin AO2 Application Limited application applies knowledge of added value to one of the below. Developed application + applies knowledge of added value to two of the below.  The costs of the production process including, land, labour and/or capital  The value of enterprise  Unique features and benefits of a product/service e.g. branding, delivery times  Excellent service/ convenience which persuades customers to pay a premium  Product or service  Examples of added value Application can be made to DC or any other scenario/context/business/person. 3 Question Answer Marks 2(a)(ii) Accept all valid responses. Exemplar and annotations Mark Rationale Added value is the difference between the purchase and selling price of a good or service . For example, if DC processes their raw cocoa beans they can make a premium product with higher profit margins . 3 An answer which starts with the knowledge and then applies it to DC. Added value is the difference between the purchase and selling price of a good or service . A business could process their raw materials , for example refining oil into petrol . 3 Knowledge of added value in a generic format. Increasing the value of the product sold . So, DC can attract higher profit margins . 2 Clear knowledge. Some application to the benefit, but not how. Added value is the difference between the purchase and selling price of a good or service. . 1 A clear definition. Adding value is making more money when selling products . 0 Too vague. Some idea of an increase, however, could relate to simply selling higher quantities. Question Answer Marks 2(b)(i) Refer to lines 1–2. Calculate DC’s expected labour productivity in 2023. Formula: total output in a given time period Total workers employed (1 mark – formula) (2000 1.05) 500  or 2100 500 (1 mark – formula plus figures) 4.2 (tonnes per farmer) (1 mark – correct answer – no tonnes needed) Final answer for DC = 4.2 (tonnes per farmer) (3 marks – no % or working needed) OFR applies Exemplar and annotations Marks Answer Rationale 3 marks Correct answer 4.2 Working and tonnes do not matter. Must be three to denote the three marks. Correct rounding must be applied. 2 marks Both of the following:  Correct formula  Correct calculation of 2023 output (2100) OR An incorrect answer with one mistake allowing OFR for final stage. OR (has not calculated 2023 figure) OR A correct answer from an inverted formula (453.96 – OFR) x To award two marks, there must be:  Two and a OR  One , one and one 3 Question Answer Marks 2(b)(i) Marks Answer Rationale 1 mark One of the following:  Correct formula  Correct calculation of 2023 output (2100) To award one mark, there must be:  One and two 0 marks No creditable content. To award zero marks, there must be:  One 2(b)(ii) Explain one reason why labour productivity is important to DC. AO1 Knowledge and understanding 1 mark AO2 Application 2 marks 2 marks Developed application of one relevant point to a business context. 1 mark Knowledge of one relevant point is used to answer the question. 1 mark Limited application of one relevant point to a business context. 0 marks No creditable response. 0 marks No creditable response. Indicative content AO1 Knowledge and understanding Knowledge of a reason why labour productivity is important may include:  To keep costs down  To keep revenue/profits up AO2 Application Limited application , applies knowledge of a reason why labour productivity is important to DC once. Developed application + applies knowledge of a reason why labour productivity is important to DC twice. Application of a reason may include:  DC is a co-op owned by farmers  It has 500 workers  Productivity is expected to increase by 5%  DC is profitable  DC has no retained earnings  The triple bottom line is its main objective  Concerns include lack of investment, manual work and lack of control  Investment into a capital-intensive factory  Significant capital investment needed into the processing factory  Any data from Table 2.1 3 Question Answer Marks 2(b)(ii) Accept all valid responses. Exemplar and annotations Mark Rationale Profits may increase , if productivity rises by 5% which will be useful for the $260 000 investment . 3 A reasonable reason for importance of LP, applied using the data from the text (5% increase and investment into processing factory). All profits are shared between the 500 co-op owners so profits are dependent on productivity levels as well as the social and environmental main objective . 3 profits dependent on productivity and reference to the data is . DC can use labour productivity to assess the performance of their workers and help in making future decisions such as workforce planning . 2 Workforce planning decisions relate to the costs of a business (obvious reference to a cost) which means the assessing performance is the . Higher productivity can lead to higher profits . These can be used for future investments and can lead to DC being more successful. 1 Higher profits is a reason, but the rest is not specifically related to DC. Labour productivity is the average output per employee in a given time period. If labour productivity is low, DC is unlikely to be successful which will make the cocoa farmers who own the co- operative unhappy and may even jeopardise future investments . 0 Although there is some relevant context, there is no knowledge of a reason why labour productivity is important, so no marks can be awarded. DC can use labour productivity to assess the performance of their workers and help in making future decisions . 0 There is no reference to costs or revenue for the K. Question Answer Marks 2(c) Analyse two ways DC can motivate young people to work on its farms. Level AO1 Knowledge and understanding 2 marks AO2 Application 2 marks AO3 Analysis 4 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  Knowledge of two relevant points is used to answer the question.  Knowledge of one relevant point is used to answer the question. 1–2 marks  Application of two relevant points to a business context.  Application of one relevant point to a business context. 1–2 marks Limited analysis  Limited analysis that identifies connections between causes, impacts and/or consequences of two points.  Limited analysis that identifies connections between causes, impacts and/or consequences of one point. 0 0 marks No creditable response. 0 marks No creditable response. 0 marks No creditable response. 1st method on the left hand side 2nd method on the right hand side 8 Question Answer Marks 2(c) Indicative content AO1 Knowledge and understanding  Motivation is internal and external factors that stimulate the desire in workers to be continually interested in and committed to doing a job well. Knowledge of factors that can motivate people (max 2 s), may include:  Employee input  Personal enrichment  Setting of goals/targets  Celebrating milestones/achievements  Create a positive and inclusive workplace  Invest in training and promotion opportunities  Increase financial benefits  Knowledge of any relevant motivational theorists including Mayo, Maslow and Herzberg AO2 Application Max one for application to each method of motivation.  Creation of jobs off the actual farms  Increase investment in training ($15 000 extra)  Create skilled jobs to replace manual work in cocoa processing  Explore alternative payment methods to allow for control over earnings  Investment into a capital-intensive factory 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 a two-sided analysis. Analysis may include:  Investment into training by encouraging modern farming methods – reduce the reliance on manual work – may increase productivity  Change the current payment method will provide more control over earnings – so productivity increases  Highlight a promotional path satisfies the needs for promotion – keeps youth at the co-op. Accept all valid responses. Question Answer Marks 2(c) Exemplar and annotations AO1 Knowledge AO2 Application AO3 Analysis Exemplar for one method of motivation Annotations for the first method should be placed in the left-hand margin. Investment into training and promotion opportunities For the young people who do not want to work on DC’s/the cocoa farms/the co-operative . This could encourage modern working methods which would reduce the reliance on manual work and create a new generation of workers . Exemplar of a second method of motivation Annotations for the second method should be placed in the right-hand margin. They could also use theorists such as Maslow Who would focus on ensuring the safety needs are met by improving the control over earnings . This could lead to more people seeing farming as a good career choice and ensuring that the amount of output increases to meet future needs . Question Answer Marks 2(d) Evaluate whether DC should grow its operations by opening its new cocoa processing factory. Level AO1 Knowledge and understanding 2 marks AO2 Application 2 marks AO3 Analysis 2 marks AO4 Evaluation 6 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 Developed knowledge of relevant key term(s) and/or factor(s) is used to answer the question. 2 marks Developed application of relevant point(s) to the business context. 2 marks Developed analysis that identifies connections between causes, impacts and/or consequences. 3–4 marks Developed evaluation  A developed judgement/conclusion is made.  Developed evaluative comments which balance some key arguments. 1 1 mark Limited knowledge of relevant key term(s) and/or factor(s) is used to answer the question. 1 mark Limited application of relevant point(s) to the business context. 1 mark Limited analysis that identifies connections between causes, impacts and/or consequences. 1–2 marks Limited evaluation  A judgement/conclusion is made with limited supporting comment/evidence.  An attempt is made to balance the arguments. 0 0 marks No creditable response. 0 marks No creditable response. 0 marks No creditable response. 0 marks No creditable response. 12 Question Answer Marks 2(d) Indicative content AO1 Knowledge and understanding Knowledge of capital and labour-intensive operations (max 2 s), including:  the benefits and limitations of capital-intensive operations  the benefits and limitations of labour-intensive operations  Efficiency, effectiveness, productivity and sustainability  Profitability and level of sales needed to breakeven  Business objectives, profit maximisation, sales growth  Operations e.g. transformation of inputs to outputs AO2 Application Limited application applies knowledge of growth of operations to DC once. Developed application + applies knowledge of growth of operations to DC once twice.  Reputation for high quality cocoa  500 farming families benefit from the co-op  Communities benefit from investment into the future of the young people  Productivity to increase by 5%  Appetite for risk from 500 farming families due to $265 000 initial investment  Ability to gain financial investment as DC has no retained earnings to contribute  Ability of farmers to operate cocoa processing machinery  Profit margins will increase to 100% 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.  Need to provide jobs for trained/skilled employees – keep employees in the co-op  Provide reasons for workers to stay – secure the future of the co-op  Financial risk of investment – reduces long term certainty of income  Reduction of short-term profits – which may reduce workers’ standard of living  Negative impact on cashflow – requires risky capital investment  Return on capital investment is quick – medium/long term increased profits  Increased future profits – more finance to meet organisational objectives  Increased purchasing economies of scales – improve profit margins Question Answer Marks 2(d) AO4 Evaluation Limited evaluation - unsupported 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.  The decision to invest in the new processing factory depends on the priorities and finances of DC. A significant investment may reduce the short-term profits of the farmers who depend on the income to support their families and living standards.  Will demand for premium cocoa fall in the future? Will DC be able to process enough cocoa to be viable in the long term?  Will processing the raw cocoa harm DC’s abilities to focus on the triple bottom line?  Are increased earnings/profits the most important factor for cocoa farmers, or is sustainability of operations and meeting current needs more important?  Will DC be able to grow and provide enough raw materials if the young people migrate to cities in search of better employment?  A recommendation on whether DC should grow its operations by opening a new cocoa processing factory. Accept all valid responses. Question Answer Marks 2(d) Exemplar and annotations The increased profitability of the processed, high quality cocoa beans, may lead to more investment into the community through the objective of the triple bottom line . This could be used to train the young people and potentially encourage entrepreneurship to create more jobs in the community . However, the increased investment would have a detrimental short-term impact on the profits required by the 500 families to sustain their daily lives , and may limit the investment into the wider community. Overall, DC should invest into the cocoa processing factory to secure the long-term success of operations . Young people do not want to work on farms and may move out of the area, making it more difficult for the co-operative to maintain its current output levels, which would cause the co-operative to fail. . However, whether this investment will be popular with existing owners depends on the impact on short term profits . As the farmers are already motivated by their current operations and are having steady increases in productivity and income, they may not want to risk what they already have on a long-term project which may not benefit them in the short term. AO1 – 2 marks AO2 – 2 marks AO3 – 2 marks AO4 – 6 marks TOTAL – 12 marks Judgement is a yes or no. Comment is anything weighing up the other side of the argument.

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