Practise external influences and business strategy through economic, political, technological, international and environmental change, strategic analysis and implementation.
Lithium Battery Metals (LBM)
Lithium is an essential raw material used in batteries for electric vehicles, smart phones and other products. LBM has developed techniques to detect lithium using mapping technology. LBM sells its survey results to other mining companies. LBM’s annual revenue is less than $1 million and it is losing $2–3 million per year. LBM is planning to start its own lithium mining operations in country G, where it is based.
LBM has researched and developed two effective ways of mining lithium. The first is hot water mining and the second is hard rock mining. LBM became a public limited company one year ago. LBM has substantial finance obtained from grants, shareholders and crowdfunding available for investment. LBM’s revenue is forecast to rise rapidly once mining begins.
Concerns of government
LBM is the only business in country G planning to mine lithium. The government is very concerned that:
• demand from industry for lithium in country G will not be met in the long-term
• LBM is currently unprofitable
• LBM may be a target for a hostile takeover from a multinational business.
The government is therefore considering nationalising LBM.
Analyse two advantages to the government of country G that could result from the nationalisation of LBM.
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, APP applies knowledge to LBM once.
Developed application, APP -APP applies knowledge to LBM twice.
Max one APP for application for the first advantage and max or APP 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 AN - candidate shows one link in the chain of analysis.
Developed analysis L2AN - 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 AN and supporting key economic sectors like electric vehicles thus promoting economic
growth L2|AN .
- Nationalisation prevents a hostile takeover by a multinational business, ensuring future forecast rapidly rising revenue
remains within the country AN , which can then be used by the government to fund public services or infrastructure
L2 /AN.
- 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 AN and therefore encouraging investment in
manufacturing in country GL2AN .
- Government control means control of supply to battery producers, maximising country G production capabilit, AN and
therefore reducing reliance on foreign import L2AN
- 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 objectiv ϵ AN .
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
Advise KF whether using Ansoff's matrix is sufficient to develop a successful growth strategy. [20]
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.
AO2 Application
Application [m](1 mark) can be awarded for applying knowledge of Ansoff's matrix/business strategy, to KF.
Application □=□ (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.
AO3 Analysis
Analysis of the usefulness of Ansoff's matrix to help KF develop a growth strategy ( A and and A2 ) 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.
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 ( N1 and N2 and N3 ) 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.
Evaluate the impact on CD of the appreciation of country K's exchange rate.
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, APP applies knowledge to CD once.
Developed application, APP +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.
AO4 Evaluation
Limited evaluation Eval - limited supported judgement and/or a weak attempt at evaluative comment.
Developed evaluation L2 Evat - supported judgement and/or reasonable evaluative comment.
Developed evaluation in context L3∣ Eval ∣ - 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.
Advise Nala on the most important elements to be included in a corporate plan for the future of the city Z branch.
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 [DEV for any explanation of relevant business knowledge, up to a max of 2 marks.
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 A2 and A3 ) 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.
AO4 Evaluation
Evaluation (N1 and N2 and N3 ) 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.
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.