CAIE A-Level Business A2 9.3.1 Operational Decisions

[Maximum number: 20]

Clean Arena (CA)

Nala lives in country P. She left school in 2014 and started university in city A to study Business. In her first year she joined CA as a part-time cleaner. CA is a large business that cleans offices. When Nala graduated in 2018, she tried to find a management job while still working as a cleaner. As country P’s economy was in recession, there were no suitable vacancies available. Fortunately, the owners of CA offered Nala the post of Operations Manager. She accepted and became a full-time employee.

Timeline of CA

2019
Nala is employed as Operations Manager.

2020
Nala recommends that CA should open a new branch in city Z.
She believes the new branch could open in 10 weeks.
Nala uses a network diagram to plan the opening (see Appendix 1).
Nala is given responsibility for the management of the city Z branch.

2021
Nala implements lean production in the city Z branch (see Appendix 2).

2022
Nala introduces a new customer services artificial intelligence (AI) system (see Appendix 3).

2023
The owners of CA are concerned about the performance of the city Z branch. They ask Nala to produce a comparison between the operations of the city Z branch and the city A branch (see Appendix 4).

2024
The owners of CA close the city Z branch and make Nala redundant.

Developing a corporate plan

CA offer Nala the opportunity to buy the city Z branch at a very low price. However, to gain finance from a bank, she has been asked to create a corporate plan for the future of the city Z branch.

From node	To node	Activity	Duration (weeks)
1	2	A	5
2	4	B	3
1	3	C	2
3	4	D	3
4	6	E	4
1	4	F	4
4	5	G	2
5	6	H	1
6	7	J	1

Appendix 1: Network diagram — activity connections

Node	Earliest start time (weeks)	Latest start time (weeks)
1	0	0
2	5	5
3	2	5
4	8	8
5	10	11
6	12	12
7	13	13

Appendix 1: Times shown in network nodes

Activity	Task	Duration (weeks)
A	Secondary market research of cleaning market in city Z	5
B	Primary market research of city Z target customers	3
C	Advertise for employees in city Z	2
D	Recruit and select employees in city Z	3
E	Advertising of CA in city Z	4
F	Find a suitable location in city Z	4
G	Setup office in city Z location	2
H	Open office in city Z	1
J	Bookings taken for cleaning jobs in city Z	1

Appendix 1: Activity tasks and durations

Appendix 2: Lean production methods implemented by Nala at city Z branch in 2021

• Kaizen is introduced throughout the city Z branch.
• All cleaners are assigned to a quality circle, with each quality circle to include eight cleaners and one manager.
• A target to ethically recycle 90% of customers’ waste.
• Inventory of cleaning materials ordered on a just in time (JIT) basis.

Appendix 3: Local news article in city Z about CA’s AI system in 2022

Cleaning firm CA has made the majority of its customer service operatives redundant. The company has replaced these workers with a new ‘chatbot’ system that uses an online database to respond to customer needs. The system can book appointments, answer customer queries and even take complaints, most of which have been about the chatbot itself. A spokesperson from a local business which is a customer of CA is quoted as saying ‘when you replace people with computers you might save money, but it’s the customers who suffer.’

	City Z branch — 2021	City Z branch — 2023	City A branch — 2021	City A branch — 2023
Annual revenue ($m)	0.45	0.46	1.0	1.1
Profit for the year ($m)	0.05	(0.1)	0.2	0.5
Number of cleaners employed	18	18	24	26
Direct costs ($m)	0.3	0.32	0.5	0.5
Rate of inventory turnover	6	12	6	6

Appendix 4: Comparison between the operations of the city Z branch and the city A branch of CA

Evaluate the extent to which CA's operations strategy between 2019 and 2024 led to the failure of the city Z branch.

Level	AO1 Knowledge and understanding 3 marks	AO2 Application 2 marks	AO3 Analysis 8 marks	AO4 Evaluation 7 marks
3			7–8 marks Developed analysis of the overall strategy that identifies connections between causes, impacts and/or consequences.	6–7 marks Effective evaluation A developed judgement/conclusion is made in the business context that draws together developed evaluative comments which balance some key arguments in the business context.
2	2–3 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.	4–6 marks Developed analysis of individual strategic element(s) that identifies connections between causes, impacts and/or consequences.	3–5 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.	1–3 marks 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.

Example	Award
Operations strategy involves lean production, which is about reducing waste. One way to implement lean production is using just in time, which involves only ordering inventory when it is needed.	1 K for identification and 1 DEV for a point of explanation
AI can improve the efficiency of a business because it uses a computer instead of a person. A computer can work seven days a week for 24 hours a day. Unlike a person who is legally allowed to take comfort breaks and breaks for meals.	1 K for identification and 2 DEVs for two points of explanation

Own MS8: AO1 examples and awards

AO1 Knowledge and understanding

Knowledge □ (max 1 mark) can be awarded for any relevant business knowledge about operations, including:

- The transformation process

- Efficiency, effectiveness, productivity and sustainability

- Capital intensive and labour intensive operations

- Job, batch, flow and mass customisation

- Managing inventory, including JIT

- Capacity utilisation

- Outsourcing

- Location

- Economies and diseconomies of scale

- Quality management, including benchmarking

- The influence of human, marketing and finance resource availability on operations decisions

- The changing role of Information Technology (IT) and Artificial Intelligence (AI)

- The need for flexibility with regard to volume, delivery time and specification

- Process innovation: changing current processes or adopting new ways of producing products or delivering services

- Location

- Internal and external economies and diseconomies of scale

- Quality management

- Benchmarking

- Improving flexibility and innovation

- Enterprise resource planning (ERP)

- Lean production

- Operations planning, including critical path analysis.

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

1 K for identification and 1 DEV for a point of explanation

1 K for identification and 2 DEVs for two points of explanation

1

AO2 Application

Application ${ }^{[m \ll]}$ (max 2 marks) can be awarded for applying operations/operations strategy to CA between 2019 and 2024 CA's operations decisions, including:

- CA is Nala's first job after university, only experience before being made Operations Manager was as a cleaner for CA.

- Planning opening of the new city Z branch, including:

- The use of critical path analysis

- 13 weeks to plan and open the branch (assuming no delays)

- Float available on activities C, D, F, G and H

- Critical path = A, B, E and J

- No built-in time to respond to research results

- Lean production methods introduced by Nala in 2021, including:

- Kaizen (continuous improvement) introduced throughout city Z branch

- All cleaners are placed in a quality circle, including one manager and eight cleaners in each team

- A target to ethically recycle 90% of customers waste

- Just in time re-ordering of cleaning materials

- CA's new AI system introduced in 2022, including:

- Majority of customer services operatives made redundant

- Chatbot system to interact with customers

- Book appointments, answer customer queries and take complaints

- Poor customer/media reaction

- Comparison between the operations of the city Z branch and the city A branch of CA in 2023, including:

- City Z branch has lower revenue than city A

- City Z branch has sightly improved revenue between 2021 and 2023 ( 2% increase)

- City A branch has 10% improved revenue between 2021 and 2023

- City Z branch has improved revenue, same number of cleaners whereas city A branch has increased cleaners

- City Z branch has a loss of $\$ 0.1 \mathrm{~m}$ in 2023, compared to an increased profit for city A branch.

- City Z branch has increased direct costs, despite introduction of lean production methods

- Rate of inventory turnover has increased in city Z branch (suggesting improvement) but may not have added to cost savings.

1

AO3 Analysis

Analysis is likely to be based on how operations may have affected CA's decision making ( $\triangle 1$ and $\begin{array}{r}A2 \text { and }{ }^{\triangle 3} \text { ) between }\end{array}$ 2019 and 2024, including:

- Nala's inexperience - poor decision making - too much responsibility - may have been integral to the failure of city Z branch - particularly important since city A branch has increased profitability.

- Did the city Z branch open too quickly? - Is 13 weeks long enough to plan such a large investment? - poor implementation of decisions.

- Critical path analysis is a useful theoretical tool, but does it have enough practical value when Nala and the business are new to the city? - increased costs - reduced profit.

- Built-in float may suggest inefficiency - Was the rent paid for too long before opening? - increased costs - reduced profitability.

- Employee recruitment in city Z had float - increased costs - reduced profit.

- However, CPA may have led to a more efficient opening - reduced costs - increased profit.

- No float between advertising and bookings - efficient.

- CPA allowed Nala to focus on what areas are most important - increased efficiency.

- Kaizen may have allowed more creative ideas to come from every area of the business - lower costs - however also detracts from the primary task of the cleaners (and other employees) - increased costs.

- Likewise, quality circles may detract from cleaning - may theoretically (academically) increase value of workforce but could lead to wasted time not focused on primary tasks like cleaning - increased costs. Also there may be problems of bringing mainly part-time employees together for meeting - may incur additional costs for wages. Also, attendance and contributions might depend on whether workers are paid for attending or not - employees may feel resentful and become demotivated - deceased productivity.

- Ethical recycling of customer waste may provide a USP to CA in city Z - however only if customers value this in the market.

- Just in time ordering may decrease costs of holding inventory - however it may lead to wasted time without necessary supplies.

- Chatbot system may lead to reduced indirect costs (less customer service employees needed) - however seems to have irritated customers and may lead to losing established customers going to other firms.

Link between figures in Appendix 4 and operations decisions.

1

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 the extent to which operational decisions between 2019 and 2024 led to the failure of CA's city Z branch.

- Discussion over the contribution of the separate and combined decisions on the eventual failure of the city Z branch,

- The extent to which the decisions alone led to the failure of the city Z branch.

- Other likely influences on the failure of the city Z branch, such as the state of the economy in city Z, human resource management of the cleaners and indirect staff, Nala's personality, unrealistic expectations of the board of directors of CA, marketing of CA, especially for the city Z branch, the financing given to help the city Z branch become successful etc.

- The extent to which the failure of the city Z branch could be attributed to the operational decisions alone.

- The extent to which CA itself was deemed successful (city A branch).

Accept all valid responses.

1

Exemplars for awarding evaluation:

L2 □

including: (developed supporting evidence)

Figure for Answer to Question 1 — CAIE A-Level Business A2

No credit	L1 $\stackrel{\mathrm{N} 1}{ }$ including: (limited supporting evidence)	L2 including: (developed supporting evidence)	L3 including: (developed supporting evidence with context)
The operations strategy did lead to the failure of the city Z branch.	The operations strategy did lead to the failure of the city Z branch because it was poorly implemented.	The operations strategy did lead to the failure of the city Z branch because it was poorly implemented. This meant that the money spent on the lean production methods was wasted and it could have been spent on something else.	The operations strategy did lead to the failure of the city Z branch because it was poorly implemented by Nala who was inexperienced. This meant that the money spent on the lean production methods was wasted and it could have been spent on something else.
The reason the city Z branch failed was due to the marketing.	The reason the city Z branch failed was due to the marketing not the operations.	The reason the city Z branch failed was due to the marketing not the operations. This is because they did not do enough market research to back up their strategic decisions.	The reason the city Z branch failed was due to the marketing not the operations. This is because they did not do enough market research to back up their strategic decisions, such as research whether customers want 90% of their waste recycled.

Own MS12: Evaluation exemplars

CAIE A-Level Business A2 9.3.1 Operational Decisions Topic Practice

Question 1