CAIE A-Level Business A2 6 Business and Its Environment Questions

Please refer to the marking grid at the start of the mark scheme

Indicative content

Responses may include:

AO1 Knowledge and understanding

Knowledge (max 1 mark) can be awarded for any relevant business knowledge about business strategy and Ansoff's Matrix as well as the alternative strategies including:

- The meaning and purpose of business strategy

- The meaning and purpose of strategic management: analysis, choice and implementation

- Approaches to develop business strategy, including:

- blue ocean strategy

- scenario planning

- PEST analysis

- Porter's five forces

- core competence framework

- SWOT

- force field analysis

- decision trees.

Award DEV for any explanation of relevant business knowledge, up to a max of 2 marks.

2

AO2 Application

Application ${ }^{[m]( } 1$ mark) can be awarded for applying knowledge of Ansoff's matrix/business strategy, to KF.

Application ${ }^{\square=\square}$ (2 marks) can be awarded for applying knowledge of HR strategy, to KF between 2018 and 2023:

- Delivery market is shrinking back to pre-pandemic levels, limiting growth opportunities.

- Changes in legislation change the model of using zero-hours/gig-economy workers.

- Any element of the case study/appendices including:

- Small staff - one office manager, 15 kitchen support workers

- Use of full-time contracts and flexi-time contracts

- Objectives of growth and profit maximisation

- New delivery service - 45 riders hired, increasing to 75

- Use zero-hours contracts

- Use of tracking software for staff performance

- Tracks speed, efficiency of deliveries

- Unreasonable time targets

- Bad timing within the app

- Bonuses and performance judged unfairly

- Compliance with new legislation banning zero-hours contracts

- Staff moved to self employed and will operate as part of the gig economy

- Use of performance data to judge staff for restructure.

2

AO3 Analysis
Analysis of the usefulness of Ansoff's matrix to help KF develop a growth strategy ( A and and ${ }^{\mathrm{A} 2}$ ) including:
- The current market for deliveries is shrinking - will Ansoff lead them to discuss options that are not viable when other
options may need exploration?
- What is Liam and Samir's attitude to risk? - This may fuel which direction they choose to go in.
- Where will financing come from? - The business has rationalised recently so do they have the money to expand?
Candidates may offer alternative approaches:
- May want to use the blue ocean strategy to identify a market where they can dominate - as they did when they
originally set up the KF/delivery business.
- Scenario planning could help map what may happen with the current business model - to help identify where they
should move to.
- SWOT analysis may help identify strengths that can be transferred to a new project - whilst highlighting the problems
they may face in a different model to how they currently operate.
- PEST analysis could help understand the changing environment after the global pandemic - which has changed many
elements of this.
- Five forces would help understand the rivalry they face in a very crowded food/restaurant/takeaway market.
- Core competency framework would allow them to identify what they do well and could transfer to any growth option
chosen - especially if this is not an expansion of the current food delivery model.
- Force field analysis could help Liam to understand the constraining and driving forces in developing the new strategy -
This may help him to identify actions that need to be taken to reduce constraining forces.
- Decision trees could be used to help make a quantitative led decision between the different options for expansion - but
would need to have much more financial information to be worthwhile.

PUBLISHED

2

AO4 Evaluation

Evaluation will largely depend on the points raised in the analysis of the approaches needed to develop the new strategy other than Ansoff's Matrix.

Evaluation ( ${ }^{\mathrm{N} 1}$ and ${ }^{\mathrm{N} 2}$ and ${ }^{\mathrm{N} 3}$ ) including:

- Candidates must state that Ansoff's Matrix is/isn't sufficient or acknowledge that something else is better for first N1 mark.

- Each option requires much more data and research to understand the risk, financial constraints and success probabilities to help make the final decision.

- Should KF be using a combination of other methods - decision trees to help make the decision, core competency framework to identify strengths to transfer to new business etc.?

- How important is growth to the new strategy moving forward, do they need to consolidate after the pandemic and focus in on what they do best given new HR implications?

- Is the whole structure of their business model changing given changes to ZHC legislation - is this model even still viable?

- Advice to KF should make clear whether Ansoff's matrix is sufficient or whether it should be supported by other models, and if so which?

Accept all valid responses.

Evaluate the impact on CD of the appreciation of country K's exchange rate.

5

Indicative content

Responses may include:

AO1 Knowledge and understanding

- Exchange rate measures the value of one currency in terms of another.

- Appreciation means the value of a currency has increased in terms of another i.e. it buys more of another currency than previously.

- Makes imports cheaper but exports more expensive.

AO2 Application

Limited application, ${ }^{\text {APP }}$ applies knowledge to CD once.

Developed application, ${ }^{\text {APP }}+{ }^{\text {APP }}$ applies knowledge to CD twice.

- Chemicals are currently produced in country K.

- Chemicals could be imported more cheaply.

- Increase in price of CD exports to country C.

- CD's plans for expansion.

- Cost push inflation in country K - including energy costs and raw materials.

- Environmental responsibility of CD.

AO3 Analysis

Limited analysis AN - candidate shows one link in the chain of analysis.

Developed analysis AN L2 AN - candidate shows two or more links in the chain of analysis.

- Appreciation could enable CD to import chemicals at a lower cost and thus reduce cost pressures to increase the selling price AN. This could prevent a reduction in sales in country K L2 AN .

- CD's products will be a higher price in export markets such as country C therefore reducing sales AN.

- Appreciation of country K's currency will reduce the cost of CD's plans to expand operations abroad AN.

- Appreciation could increase the price competition from MNC products produced outside of country K AN , reducing the sales of CD L2AN.

PUBLISHED

5

AO4 Evaluation

Limited evaluation ${ }^{\text {Eval }}$ - limited supported judgement and/or a weak attempt at evaluative comment.

Developed evaluation ${ }^{\text {L2 }}{ }^{\text {Evat }}$ - supported judgement and/or reasonable evaluative comment.

Developed evaluation in context ${ }^{\mathbf{L 3} \mid \text { Eval } \mid}$ - supported judgement in context and/or reasonable evaluative comment in context.

- Depends how much country K's currency appreciates and for how long.

- Depends on PED.

- As sustainability is important, CD may prefer to continue purchasing chemicals domestically rather than importing so appreciation won't bring any direct benefit.

- Depends whether energy costs will be reduced by the appreciation - this could happen if oil and gas are imported to country K to generate electricity.

Accept all valid responses.

Z branch.

AO1 Knowledge and understanding

Knowledge □ (max 1 mark) can be awarded for any relevant business knowledge about a corporate plan / corporate planning, including, including:

- Knowledge of the contents of a corporate plan, including:

- mission/vision

- objectives

- strategic planning

- external influences on a business: social, legal, economic, environmental, ethical, political, technological

- functional data: marketing, operations management, human resources management, financial management

- contingency planning, risk management

- Knowledge of the process of corporate planning, including:

- a corporate plan is similar to a strategic plan

- used for businesses with multiple business units or subsidiaries/parts

- defines business direction

- and business strategy to get there

- usually refers to the broader business as a whole, not individual parts/functions

- steps involved in corporate planning, such as assess your current strategy/position, identify objectives, develop your strategic plan and determine performance metrics, implement and share plan, revise and amend.

Award ${ }^{[\mathrm{DEV}}$ for any explanation of relevant business knowledge, up to a max of 2 marks.

2

AO2 Application

Application ${ }^{[m]}$ (max 2 marks) can be awarded for applying knowledge of a corporate plan or corporate planning, to CA and/or the city Z branch, including:

- Nala has experience as a cleaner, Operations Manager with CA and planning and management of a branch of CA.

- Nala has contacts that she built up (employees, customers, local information) in her role with CA.

- Data from the timeline.

- Data from the appendices.

- A corporate plan is required by the bank to finance her new start-up.

AO3 Analysis

Analysis is likely to be based on the elements of a corporate plan or corporate planning ( A and ${ }^{\mathrm{A} 2}$ and ${ }^{\mathrm{A} 3}$ ) for CA and/or the city Z branch.

Arguments of what should (or should not) be included in Nala's corporate plan for a new cleaning business, including:

- Mission/vision - to give the business direction - important for a new business and to convince the bank to provide finance for the new business - however this might not be useful as the separate business has not been set up yet.

- Objectives - likely to be Nala's own objectives, unless she is planning to bring in shareholders - a new business is likely to focus on survival and/or providing Nala with enough income to survive.

- Strategic planning - likely to be one of the most important elements of Nala's corporate plan as this will give the bank an idea of how she plans to achieve her objectives and repay any finance loaned - Nala may have more experience of her strategy than many start-up businesses as she has managed the city Z branch for the past four years (she has expertise).

- External influences on a business - may be less important to inform the bank/Nala as these will be common to all businesses in city Z and/or market. However, Nala may need to provide evidence to the bank (and other stakeholders) that she has recognised these influences.

- Functional data:

- Marketing - to prove that Nala understands the cleaning market in city Z and to show that she has a plan to reach her target market in sufficient numbers to meet her objectives.

- Operations management - Nala's area of expertise (as a previous Operations Manager of CA) and important to show that she is able to deliver a service sector product.

- Human resources management - as a business offering a service in city Z, the management of people will be important to allowing Nala to meet her objectives and implement the business strategy.

- Financial management - important as Nala's main purpose in preparing a corporate plan is to raise finance to fund her business.

2

AO4 Evaluation

Evaluation $\left({ }^{\mathrm{N} 1}\right.$ and ${ }^{\mathrm{N} 2}$ and ${ }^{\mathrm{N} 3}$ ) including:

Evaluation will largely depend on the points raised in the analysis.

- A judgement over what Nala should include in a corporate plan for her new cleaning business.

- What the judgement may depend upon;
further data about the market in city Z for cleaning services, external influences, such as the economy, legal issues, fashions/trends, demographic changes, ethical influences, environmental influences, political influences, technological influences, the prior history of Nala with CA and other stakeholders whom she may need to interact with in her new business.

- Weighing up of the relevant pieces of data needed for Nala's corporate plan and its use in financing the new business.

- Weighing up of the relevant arguments for the use of other data instead of (or in tandem with) the corporate plan.

Accept all valid responses.

2

Exemplars for awarding evaluation

L □

including: (limited supporting evidence)

L2 □ including: (developed supporting evidence)

(developed supporting evidence with context)

No credit

The most

important

element to be

included in a

corporate plan for

the future of the

city Z branch is

the objective.

\end{tabular}

The most important element to be
included in a
corporate plan for the future of the city
Z branch is the objective to survive the first few months.

The most important element to be
included in a corporate plan for the future of the city Z branch is the objective to survive the first few
months. Without this, Nala is unlikely to be able to make the branch successful.

The most important element to be
included in a corporate plan for the future of the city Z branch is the objective to survive the first few
months. Without this, Nala is unlikely to be able to make the branch successful because she is too inexperienced.

It is important to
include all of the sections such as
marketing, production, HRM and finance.

It is most important to include all of the sections such as
marketing, production, HRM and finance.

It is most important to include sections on marketing, production, HRM and finance, because they all
influence one another and the business as a whole.

It is most important to include sections on marketing, production, HRM and finance, because they all
influence one another and the business as a whole so it is the best way to get finance from the bank.

\multirow{5{*}{Level & $\begin{array}{c}\text { AO1 Knowledge and } \text { understanding } \mathbf{2} \text { marks }\end{array}$ & $\begin{array}{c}\text { AO2 Application } \mathbf{2} \text { marks }\end{array}$ & $\begin{array}{c}\text { AO3 Analysis } \mathbf{2} \text { marks }\end{array}$ & $\begin{array}{c}\text { AO4 Evaluation } \mathbf{6} \text { marks }\end{array}$

3 & & & & $\begin{array}{l}\mathbf{5 - 6} \text { marks } \text { Developed evaluation in } \text { context } \text { • } \text { A developed } \text { judgement/conclusion } \text { is made in the } \text { business context. } \text { Developed evaluative } \text { comments which } \text { balance some key } \text { arguments in the } \text { business context. }\end{array}$

2 & $\begin{array}{l}\mathbf{2} \text { marks } \text { Developed knowledge } \text { of relevant key term(s) } \text { and/or factor(s) is used } \text { to answer the question. }\end{array}$ & $\begin{array}{l}\mathbf{2} \text { marks } \text { Developed application } \text { of relevant point(s) to the } \text { business context. }\end{array}$ & $\begin{array}{l}\mathbf{2} \text { marks } \text { Developed analysis } \text { that identifies } \text { connections between } \text { causes, impacts and/or } \text { consequences. }\end{array}$ & $\begin{array}{l}\mathbf{3 - 4} \text { marks } \text { Developed evaluation } \boldsymbol{-} \text { A developed } \text { judgement/conclusion } \text { is made. } \text { Developed evaluative } \text { comments which } \text { balance some key } \text { arguments. }\end{array}$

Level

AO1 Knowledge and understanding 2 marks

3

5-6 marks

Developed evaluation in context

- A developed judgement/conclusion is made in the business context.

- Developed evaluative comments which balance some key arguments in the business context.

3-4 marks

Developed evaluation

- A developed judgement/conclusion is made.

- Developed evaluative comments which balance some key arguments.
\end{tabular}}}

5

Indicative content

AO1 Knowledge and understanding

Limited knowledge ${ }^{\mathrm{K}}$ will be demonstrated through knowledge of CSR or knowledge of how CSR could impact GBS's decision to expand into new land.

Developed knowledge K+K will be demonstrated through knowledge of CSR and knowledge of how CSR could impact GBS's decision to expand into new land.

- Knowledge/explanation of CSR, including social or environmental audits.

- Business should take into account impact of decision on society and the environment.

- Stakeholder view vs shareholder view.

- Role of pressure groups.

- Cost of implementing CSR policies.

Benefits to GBS of CSR approach:

- Image

- Retention of employees

- Increased sales

- Adds value

- Possible objectives of GBS

- Use of financial investment appraisal methods in making the decision.

5

AO2 Application

Limited application, ${ }^{\mathrm{APP}}$ applies knowledge to GBS once.

Developed application, ${ }^{\text {APP }}+{ }^{\text {APP }}$ applies knowledge to GBS twice.

- Paying an incentive to local government official is unethical.

- Economy requires increased supply of building materials.

- Need for permission from local government.

- Gordy has objective of expansion.

- Using renewable energy to extract materials.

- Job creation from expansion.

- Protests from villagers about pollution and noise.

- Mo is concerned about the cost of CSR to GBS.

AO3 Analysis

Limited analysis AN - candidate shows one link in the chain of analysis.

Developed analysis ${ }^{\text {L2AN }}$ - candidate shows two or more links in the chain of analysis.

- Failing to take account of CSR when making decisions could result in negative publicity and a loss of reputation AN this could result in losing contracts to supply building materials resulting in a loss of revenue and profit L2 AN.

- Implementing socially responsible actions such as using renewable energy could increase costs and therefore reduce the profitability of the expansion ${ }^{\mathrm{AN}}$.

- Businesses are part of society and therefore have a moral responsibility to consider the impact of their decisions on society AN.

- Making profit is the primary goal of private sector business and therefore it is acceptable to make any decision as long as it is within the law ${ }^{\mathrm{AN}}$ to increase profit on behalf of the owners L2AN.

- Due to the housing shortage society will benefit significantly by GBS producing more building materials ${ }^{\text {AN }}$ therefore GBS does not need to take account of other CSR issues L2AN.

PUBLISHED

5

AO4 Evaluation

Limited evaluation ${ }^{[\text {vwi }]}$ - limited supported judgement and/or a weak attempt at evaluative comment.

Developed evaluation ${ }^{\text {L2 }}{ }^{\text {Fum }}$ - supported judgement and/or reasonable evaluative comment.

Developed evaluation in context ${ }^{\text {L3 }}$ - supported judgement in context and/or reasonable evaluative comment in context.

- Weighing up the financial vs non-financial considerations.

- If expansion is a primary objective this may be more important than profit as long as costs are covered.

- How committed are Gordy and Mo to CSR or to maximising profit? At the moment we are not sure.

- Does practising CSR actually lead to an increase in costs? Short term costs vs long term savings.

- How important is CSR to GBS's customers? Construction businesses are more likely to be interested in minimising their costs rather than purchasing supplies from a business practicing good social responsibility.

- Conclusion as to extent of influence of CSR.

Accept all valid responses.