CAIE A-Level Business A2 7.2.5 Management Communication Role

[Maximum number: 8]

Gordy Building Supplies (GBS)

GBS sells sand, gravel and other building materials in country Q. GBS is a partnership between Gordy and his Aunt Mo. The building materials are extracted from land owned by Mo. Gordy manages all business functions apart from finance, which is Mo’s responsibility. Both are committed to owning and operating an independent business.

GBS has 13 employees who are only trained to extract and prepare materials for distribution to building industry customers. Gordy tells employees exactly how to carry out their tasks and expects them to follow instructions without question. Time spent in meetings is minimised and Gordy believes this improves productivity. Employees have flexible part-time employment contracts. Inventory of extracted materials is low, but GBS is able to react quickly to seasonal fluctuations in demand. GBS is profitable and Gordy is thinking of expanding the business. He believes that country Q’s economy will continue to grow by 8% each year if interest rates remain at 5%.

Communication process innovation

Currently Mo and Gordy use paper-based systems to process customer orders. Gordy wants to improve GBS’s efficiency. His ideas are focused on a coordinated information technology (IT) system that links customer orders and distribution. This will include:
• a smart phone app to be used by customers to place orders with GBS
• introducing barcodes to enable orders to be tracked.

Investment in new grinding machine

Demand for GBS’s products is increasing and output needs to increase. A new machine for grinding rocks into gravel and sand would speed up production and reduce unit costs. It would require a skilled operator. Mo used her experience and data from the machine’s manufacturer to prepare discounted cash flows. (See Table 1.1.) The investment will cost $110 000 and will have no residual value after five years. Mo has calculated the total profit will be $45 000.

Analyse two disadvantages to GBS of its proposed communication process innovation.

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.

Analyse two disadvantages to GBS of its proposed communication process innovation.

Level

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.

1-2 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 marks

No creditable response.

2

Note:

- Only reward problems / disadvantages.

- If more than two problems are referred to, reward the best two.

- L2AN (3 marks) is possible for just one point made.

All annotation ( $\mathbb{K}$ ase $|\mathrm{AN}|^{[2]}$ ) should be in the left margin.

Indicative content

AO1 Knowledge and understanding

- Definition or explanation of process innovation (max K 1 mark).

- Application or introduction of a new technology or methods/systems that increase efficiency.

- Examples include new IT systems, use of blockchain, automated payments or inventory, robotics.

- Possibility that the changes form part of an ERP system.

Possible disadvantages include (max K 2 marks):

- Cost of the proposals and need for finance.

- Possible employee resistance to change.

- Cost of training employees.

- Technology may fail.

2

AO2 Application

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

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

Max one ${ }^{\text {APP }}$ for application for the first problem and max one ${ }^{\text {APP }}$ for application for the second problem.

- Number of employees (13) - will need training.

- Low inventory.

- Proposal includes coordinated IT system linking customer orders and distribution.

- Tracking of orders of sand & gravel.

- Gordy is thinking of expanding the business.

- Finance needed for new grinding machine.

AO3 Analysis

Limited analysis ${ }^{\mathrm{AN}}$ - candidate shows one link in the chain of analysis.

Developed analysis L2AN - candidate shows two or more links in the chain of analysis.

- A new IT system could be expensive to implement resulting in cash flow problems AN .

- Employees may feel they have less control as a result of the process innovation. This may result in conflict and disturb current effective working relationships and employees may leave AN increasing recruitment costs L2AN.

- Employees will need training which will increase costs and reduce profit in the short term L2AN.

- Opportunity cost of investment which could delay the purchase of the new grinding machine ${ }^{\text {AN }}$ therefore reducing the ability of GBS to meet increasing demand L2AN.

- The app could crash causing customers to be unable to place orders ${ }^{\text {AN }}$ and going elsewhere to purchase building materials ${ }^{\mathrm{APP}}$ resulting in a loss of sales and therefore profit.

Accept all valid responses.

CAIE A-Level Business A2 7.2.5 Management Communication Role Topic Practice

Question 1