Practise analysing political, economic, technological, competitive, international and environmental changes and evaluating their likely effects on decisions and performance.
Refer to lines 69-70. Analyse how the two changes in the economic environment will impact CQ.
Refer to lines 69-70. Analyse how the two changes in the economic environment will impact CQ.
Note:
- If more than two impacts are referred to, reward the best two.
All annotation ( K APP AN L2) should be in the left margin.
1
Indicative content
Responses may include:
AO1 Knowledge and understanding
Definition of relevant terms from lines 69-70 (max K1 mark):
- Depreciation of exchange rate - a fall in the value of one currency in terms of another.
- Inflation - an increase in the general price level.
- Taxation includes income and corporation tax and indirect taxes such as VAT. Changing levels of taxation is an element of fiscal policy.
Knowledge of impact of changes in the economic environment on CQ:
- Decreased demand for goods (increase in taxation).
- Higher costs (inflation and/or depreciation of exchange rate).
- Increased export earnings (depreciation of the exchange rate).
AO2 Application
Max one APP for application for the first element and max one APP for application for the second element.
- Linking ER depreciation to imports of bamboo from the US or exports of shoes to the US.
- CQ objective is to increase sales to US.
- Linking taxation to demand for shoes and/or CQ's premium prices.
- Linking inflation to wage demands of workers at factory in country P.
- Linking taxation to CQ's proposed investment in sustainability.
AO3 Analysis
Limited analysis AN - candidate shows one link in the chain of analysis.
Developed analysis L2AN - candidate shows two or more links in the chain of analysis.
- Depreciation will make imports of bamboo from the US more expensive therefore increasing CQ costs AN and increasing price or reducing gross profit margin. L2 AN
- Depreciation will reduce price of CQ shoes to US importers and therefore result in an increase in sales volume (and value) AN helping to meet CQ objective of growth. L2 AN
1
- Inflation may result in an increase in wage demands from workers at the factory in country P increasing costs of CQ AN and therefore reducing profit margins. L2 AN
- An increase in income tax will reduce consumers' disposable income leading to a decrease in demand for goods and therefore a decrease in sales revenue AN resulting in a decrease in profits. L2 AN
- Unique nature of CQ's product may mean that changes in price and income may have only a limited impact on sales and profit. AN
- Increase in corporation tax will reduce retained profit and could therefore result in delay in CQ's plans such as the investment in sustainability AN limiting future profit of the company. L2 AN
Accept all valid responses.
Evaluate whether DL should consider corporate social responsibility in its decision-making.
Use Table B to mark candidate responses to this question.
AO1 out of 2 marks.
AO2 out of 2 marks.
AO3 out of 2 marks.
AO4 out of 6 marks.
Indicative content
Responses may include:
A01 Knowledge and understanding
- Definition of CSR: considering the interests of society by taking responsibility for the impact of decisions and activities on stakeholders not only shareholders.
- Benefits and limitations of CSR approach:
Improved public image
Impact on costs of production
Impact on pricing - higher prices possible
Use as a promotional tool - unique selling point (USP) for business
Impact on employee recruitment and labour turnover
Reduces risk of legal action.
AO2 Application
- DL donates a share of profits to environmental charities.
- Use of palm oil in producing ice cream.
- High sugar content of ice cream and health issues in country Y .
- Pressure group activity.
- Likely government response to health problems and pressure groups.
- PED estimated to be elastic.
- DL uses school sponsorship as a form of promotion.
- New production line project might lead to redundancies.
5
AO3 Analysis
- CSR can enhance brand image and therefore gain control over pricing to consumers enabling an increase in profit in the long term.
- Greater brand loyalty from consumers can increase sales and profit.
- It differentiates DL from competitors therefore protecting sales from activities of global brands in country Y.
- Reducing sugar content now, could give DL a first mover advantage in the market ahead of any government regulation or avoid negative impact of tax if introduced.
- Removing palm oil from ingredients could give a USP to DL and boost sales.
- If alternatives to palm oil are used then this will increase cost of production and reduce the profit margin of DL. Intense competition may prevent an increase in price (note that PED estimated to be elastic).
- Using different ingredients might affect the taste of the ice cream and consumers could switch to competitors' products.
AO4 Evaluation
Overall supported judgement based on a balance of arguments, including:
- How important is CSR to consumers? Will they care more about taste and price rather than the impact of the palm oil industry on deforestation?
- Businesses do not operate in a vacuum and must take account of impact of decisions on society to avoid negative publicity and harm to image.
- Increased costs in the short term may reduce profit but in the long term increased brand loyalty will enable a higher price to be charged.
- DL might benefit from responding to pressure group activity in the short term rather than being forced to make changes in response to government action.
Accept all valid responses.
AO1
AO2
AO3
AO4
Analyse two ways technological change might impact on CP's decision to develop nanopaints.
Analyse two ways technological change might impact on CP's decision to develop nanopaints.
2
Note:
- Impacts can be positive or negative.
- If more than two impacts are referred to, reward the best two.
Indicative content
Responses may include:
AO1 Knowledge and understanding
Limited knowledge K will be demonstrated through knowledge of the concept of technological change or knowledge of possible impacts of technological change.
Developed knowledge K+K will be demonstrated through knowledge of the concept of technological change and knowledge of possible impacts of technological change.
Definition or explanation of technological change - in product design, production techniques or marketing, such as data collection, use of IT/AI.
Possible impacts include:
- New product designs lead to company being known as an innovator.
- New processes may lead to greater efficiency in all areas of production and operations, including methods of distribution.
- Innovative marketing methods may lead to more effective customer relationship marketing (CRM).
- R&D into innovation and introduction of new technology is expensive.
- Firms who do not innovate are in danger of being forced out of the market.
AO2 Application
Limited application, △APP applies knowledge to CP once.
Developed application, APP +APP applies knowledge to CP twice.
Max one APP for application for the first impact of technological change and max one APP for application for the second impact of technological change.
- CP has a research and development centre.
- Recent history of new technology-based products - external paint, specialist paints, plastic/nanopaints.
- Production of new paints will be costly, due to innovative materials and processes.
- CP a leader in nanopaints and plastic paints.
- Competitors currently not producing these new paints but will do in future.
- Technology gives the new paints a USP.
- CP creates technological change by research - the nanopaint is a technological change.
2
AO3 Analysis
Limited analysis AN - candidate shows one link in the chain of analysis.
Developed analysis L2AN - candidate shows two or more links in the chain of analysis OR offers a two-sided analysis.
- Development of knowledge and application points explaining the potential influences of technological change on CP.
- Paint industry has a history of new technological based products so important to keep producing these, to maintain market position. AN
- Keeping up with technological change will lead to innovative products, which will lead to higher sales and be an important factor in market success AN. However, may lead to more competition if competitors develop innovative products first, decreasing sales and market share. L2 AN
- Research centre has produced new ideas so important to maintain confidence in research, in order to move the business forward and expand the paint range, leading to increased sales, AN market share and profit. L2 AN
- Universities engage in research so market requires change and new products to avoid a company being left behind, AN but cost of new production line technology may make it uneconomic to go ahead even if the paint technology is good. L2AN
- The USP is likely to bring first mover advantage and commercial success. AN
Accept all valid responses.