Practise Edexcel Business questions on production, capacity, productivity and quality, applying operational data to explain resource-management decisions.
Source for use with Extract C Belmont Estate Belmont Estate is a plantation established on the Caribbean island of Grenada in the 17th century. Since 2017, its main activity has been chocolate manufacturing. The ‘tree-to-bar’ range of organic chocolate is produced from cocoa grown on the 1.6 km2 plantation. Natural flavours such as mango, banana and ginger are absorbed into the cocoa from crops growing close by, so that Belmont Estate can produce chocolate with unique flavours. Batch production of the chocolate is used and is labour-intensive, from picking the cocoa to wrapping the chocolate bars. Despite the size of the plantation, the production process is well-organised, making it efficient. Belmont Estate prides itself on its reputation and the quality of chocolate produced, allowing it to sell at a price of $7.50 for a 55 g chocolate bar. The owners of Belmont Estate offer a happy and positive place to work. The business aims to support the local community by providing employment and preserving the environment. These aims are well-received by visitors who enjoy tours of the plantation, as well as the increasing number of importers of Belmont Estate’s chocolate bars, most of whom are in the US. Tours of Belmont Estate are run whenever there is a demand, whether from an individual visitor or a bus full of tourists. The price of a tour is $6.00. It is possible to book a tour through Belmont Estate’s own website or through Viatour, a tour business. However, if a tour is booked through Viatour, it charges 17% of the tour price as a fee for taking the booking.
Extract C Belmont Estate Belmont Estate is a plantation established on the Caribbean island of Grenada in the 17th century. Since 2017, its main activity has been chocolate manufacturing. The ‘tree-to-bar’ range of organic chocolate is produced from cocoa grown on the 1.6 km2 plantation. Natural flavours such as mango, banana and ginger are absorbed into the cocoa from crops growing close by, so that Belmont Estate can produce chocolate with unique flavours. Batch production of the chocolate is used and is labour-intensive, from picking the cocoa to wrapping the chocolate bars. Despite the size of the plantation, the production process is well-organised, making it efficient. Belmont Estate prides itself on its reputation and the quality of chocolate produced, allowing it to sell at a price of $7.50 for a 55 g chocolate bar. The owners of Belmont Estate offer a happy and positive place to work. The business aims to support the local community by providing employment and preserving the environment. These aims are well-received by visitors who enjoy tours of the plantation, as well as the increasing number of importers of Belmont Estate’s chocolate bars, most of whom are in the US. Tours of Belmont Estate are run whenever there is a demand, whether from an individual visitor or a bus full of tourists. The price of a tour is $6.00. It is possible to book a tour through Belmont Estate’s own website or through Viatour, a tour business. However, if a tour is booked through Viatour, it charges 17% of the tour price as a fee for taking the booking.
Define the term 'batch production'. (Extract C, line 8)
Knowledge 2
Up to 2 marks for defining the term 'batch production', e.g.
A number of identical items (1) made simultaneously/together (1)
Extract C Belmont Estate Belmont Estate is a plantation established on the Caribbean island of Grenada in the 17th century. Since 2017, its main activity has been chocolate manufacturing. The ‘tree-to-bar’ range of organic chocolate is produced from cocoa grown on the 1.6 km2 plantation. Natural flavours such as mango, banana and ginger are absorbed into the cocoa from crops growing close by, so that Belmont Estate can produce chocolate with unique flavours. Batch production of the chocolate is used and is labour-intensive, from picking the cocoa to wrapping the chocolate bars. Despite the size of the plantation, the production process is well-organised, making it efficient. Belmont Estate prides itself on its reputation and the quality of chocolate produced, allowing it to sell at a price of $7.50 for a 55 g chocolate bar. The owners of Belmont Estate offer a happy and positive place to work. The business aims to support the local community by providing employment and preserving the environment. These aims are well-received by visitors who enjoy tours of the plantation, as well as the increasing number of importers of Belmont Estate’s chocolate bars, most of whom are in the US. Tours of Belmont Estate are run whenever there is a demand, whether from an individual visitor or a bus full of tourists. The price of a tour is $6.00. It is possible to book a tour through Belmont Estate’s own website or through Viatour, a tour business. However, if a tour is booked through Viatour, it charges 17% of the tour price as a fee for taking the booking.
Analyse two reasons why productivity may have improved at the Belmont Estate.
Knowledge 2, Application 2, Analysis 2
Knowledge
Up to 2 marks for defining productivity, e.g.
OR
For stating up to two reasons, e.g.
Application
Up to 2 marks for answers contextualised to Belmont Estate, e.g.
Analysis
Up to 2 marks for reasons/causes/consequences for Belmont Estate, e.g.
- Motivated employees can lead to a faster rate of production
(1)
- Efficient production means less time is needed between stages of production (1)
(6)
Question
Discuss how increasing the price of Belmont Estate's products may increase its profit.
Indicative content
Assess the likely advantages of using labour-intensive production methods, rather than capital-intensive methods, for a business such as Belmont Estate.
Indicative content guidance
Answers must be credited by using the level descriptors (below) in line with the general marking guidance. The indicative content below exemplifies some of the points that candidates may make but this does not imply that any of these must be included. Other relevant points must also be credited.
Knowledge, Application, Analysis, Evaluation - indicative content
- Labour-intensive production requires a high use of human capital rather than machinery to produce goods and services
- Businesses such as Belmont Estate may benefit from producing bars of
chocolate by hand, as they can be seen to have more value due to the quality
- By using labour to produce the chocolate, bars can be specifically made to a
consumer's requirements allowing a premium price, such as $7.50 per bar,
to be charged
- Different flavours of chocolate, such as mango, banana or ginger, can be produced more easily, as it can be quicker to switch flavours than if using
capital-intensive methods of production
- This means that costs can be reduced, especially when production is of small batches of chocolate
- By using labour-intensive methods, Belmont Estate is able to keep its aims of transforming lives and supporting local communities because it offers employment to more people than using capital-intensive methods
- However, if capital-intensive production is used instead, the work can be
done faster and with greater efficiency
- Machinery can operate more quickly, continuously without a break and with
consistency
- This means, once up and running, capital-intensive production can be much
cheaper and more productive, leading to higher profits
- Therefore, capital-intensive production may be better for long term
production
- As Belmont Estate's main activity has been chocolate production since 2017
and it is increasing export sales, capital-intensive production may be more suitable
- Despite this, there may not be sufficient output to make capital-intensive production an option given the cost of the machinery
- Nonetheless, if the quality and/or reputation of chocolate from Belmont
Estate suffers as a result of switching to capital-intensive methods of production, it may need to reduce the price or risk losing sales
Level
Mark
Descriptor
0
No rewardable material.
Level 1
1-2
Isolated elements of knowledge and understanding - recall based.
Weak or no relevant application to business examples.
Generic assertions may be presented.
Level 2
3-4
Elements of knowledge and understanding, which are applied to the business example.
Chains of reasoning are presented but may be assertions or
incomplete.
A generic or superficial assessment is presented.
Level 3
5-7
Accurate knowledge and understanding, supported by relevant and effective use of the business behaviour/context.
Analytical perspectives are presented, with developed chains of reasoning, showing cause(s) and/or effect(s).
An attempt at an assessment is presented, using quantitative and/or qualitative information, though unlikely to show the significance of
competing arguments.
Level 4
8-10
Accurate and thorough knowledge and understanding, supported throughout by relevant and effective use of the business behaviour/context.
A coherent and logical chain of reasoning, showing cause(s) and/or effect(s).
Assessment is balanced, wide ranging and well contextualised, using quantitative and/or qualitative information, and shows an awareness of competing arguments/factors, leading to a supported judgement.
Question
Evaluate the extent to which the business cycle is likely to affect Coles.
Indicative content
Sources for use with Extract A Brooke Downs Vennard Partnership (BDVP) BDVP is a firm of solicitors located in British Columbia, Canada. Established in 1980, it has grown into one of the most respected legal businesses in the area. This is important because there are over 10,000 qualified solicitors competing for clients in British Columbia. As well as providing clients with assistance when buying property or making a will, the partners specialise in business, contract and commercial law. Clients are allowed either 30 or 60 days to pay on completion of legal work provided by the partnership. This has helped BDVP increase its client base. However, it can make cash flow more difficult to manage. Communication is very important to BDVP and the partners try to replace computers whenever they become out‑of‑date and slow. They also make sure employees are trained in the use of technology. As well as employing five solicitors, BDVP has a team of other employees in legal occupations such as secretaries, administrative assistants and junior associates. Employees currently work from 8.30 am – 5 pm with a 30 minute lunch‑break. All employees are encouraged to take responsibility for their work and are often consulted about changes affecting the office. The latest example of a consultation was a discussion about changes to employee protection legislation and how it would affect the partnership. Extract B British Columbia Employment Standards Act British Columbia employers can expect significant amendments to the Employment Standards Act to be introduced in 2019. Some of the more significant recommendations for amendment include: allow alternative working hours within the 40‑hour week to the standard eight‑hours per day allow employees the right to refuse overtime in circumstances where overtime would conflict with significant family‑related commitments, scheduled educational commitments, or other employment obligations the existing five days per year unpaid family responsibility leave would be replaced with seven days per year of unpaid leave, which could be taken for reasons of the employee’s own illness or for the care, health, or education of a child in the employee’s care.
Assess whether improving employee motivation is likely to be the most effective
way to increase productivity for a business such as BDVP.
Indicative content guidance
Answers must be credited by using the level descriptors (below) in line with the
general marking guidance. The indicative content below exemplifies some of
the points that candidates may make but this does not imply that any of these
must be included. Other relevant points must also be credited.
Knowledge, Application, Analysis, Evaluation - indicative content
- Motivation is a factor that encourages employees to be more interested
and committed to their work
- Productivity is a measure of the efficiency with which labour or capital
completes a task
- Secretaries and administrative assistants may increase their work-rate if
they are offered bonuses or profit share incentives
- By empowering employees, BDVP helps its secretaries and administrative
assistants to take pride in their work and to feel a sense of responsibility
- This could encourage employees to work harder in order to complete their
work to a higher standard, meaning they would be more productive
- Consulting with junior associates about alternative working hours to
8.30am - 5pm is likely to increase the productivity of the employees as
they feel more motivated as their views are being taken into account
- Increasing labour flexibility would not only comply with new regulations
but also help employees to balance their work with personal
commitments. This could increase productivity
- However, some junior associates may not be more productive even if
offered financial methods of motivation or by being consulted about the
hours they are in the office, as they may already be working as hard as
they are able
- Improving motivation alone may not be very effective if the technology
used is out-of-date and slow. New technology could be more effective
- Many ways to improve productivity could increase motivation as well, thus
providing multiple benefits to BDVP
- A combination of ways to improve productivity, such as bonuses,
introducing flexible working practices and replacing old technology may
be the best way to increase productivity
Level
Mark
Descriptor
0
A completely inaccurate response.
Level 1
1-2
Isolated elements of knowledge and understanding - recall based.
Weak or no relevant application to business examples.
Generic assertions may be presented.
Level 2
3-4
Elements of knowledge and understanding, which are applied to the
business example.
Chains of reasoning are presented, but may be assertions or
incomplete.
A generic or superficial assessment is presented.
Level 3
5-7
Accurate and thorough knowledge and understanding, supported
throughout by relevant and effective use of the business
behaviour/context.
Analytical perspectives are presented, with developed chains of
reasoning, showing cause(s) and/or effect(s).
An attempt at an assessment is presented, using quantitative and/or
qualitative information, though unlikely to show the significance of
competing arguments.
Level 4
8-10
Accurate and thorough knowledge and understanding, supported
throughout by relevant and effective use of the business
behaviour/context.
A coherent and logical chain of reasoning, showing cause(s) and/or
effect(s).
Assessment is balanced, wide ranging and well contextualised, using
quantitative and/or qualitative information and shows an awareness of
competing arguments/factors, leading to a supported judgement.
Sources for use with Extract C Hostelworld reports dip in revenue and operating profit Hostelworld is an Irish company that provides an online booking platform for cheap accommodation worldwide. It operates in a market that is described as being ‘highly competitive’ . In 2018, it reported a decrease in revenue and profit. However, this decrease is similar to many of its competitors and it is optimistic about its future due to favourable market conditions and overall growth in the market. Hostelworld said revenue fell by 5% to €82.1m and operating profit fell to €6.7m in 2018, down from €11.9m the previous year. Finance costs (interest payments) remained constant at €0.6m. However, Chief Executive, Gary Morrison said, “We have a well known brand that is trusted by loyal customers. Our objective is to return to growth in 2020” . Hostelworld enables travellers to make bookings on its website or its app. It reported a 22% increase in bookings from the app, which accounted for 40% of all bookings in 2018. This shows the introduction of the app was a worthwhile cost to the business. “To encourage customers to use Hostelworld we have to adapt to suit their busy lifestyles. Having an option of how to book offers customers convenience and flexibility,” continued Mr. Morrison. In 2018, Hostelworld said it was proposing to pay a dividend to shareholders of €0.138 per share and intends to use share capital to help fund its growth strategy. The strategy will take advantage of growth in the market and focus on increasing market share for Hostelworld. This will be through investment in advanced technology, increased awareness of customer needs, refocused marketing activities and a strengthened management team. 5 10 15 20
4 Extract D International tourist arrivals forecast to reach 1.8 billion by 2030 20 000 18 000 16 000 14 000 12 000 10 000 800 600 400 200 0 1950 International tourist arrivals received (million) 1960 1970 1980 1990 2000 2010 Forecast 2020 2030 Year Actual
Analyse two ways Hostelworld's efficiency might be affected by having an option
of how to make a booking.
Knowledge 2, Application 2, Analysis 2
Knowledge
Up to 2 marks for defining efficiency, e.g.
- Making the best possible use of all a business's resources (1)
by minimising average costs (1)
OR
For giving two ways, e.g.
- Efficiency could increase as it would be easier/quicker for
customers to make a booking (1)
- Fewer employees would be needed to complete the booking
process because of the use of technology (1)
Application
Up to 2 marks for answers contextualised to Hostelworld, e.g.
- There was an increase of 22% in the number of customers who
made bookings by its app in 2018 (1)
- Hostelworld allows travellers to make bookings on its website
or using its app (1)
Analysis
Up to 2 marks for reasons/causes/consequences for Hostelworld,
e.g.
- As booking on the app increases, it reduces the average cost per
customer of operating the app (1)
- Needing fewer employees would reduce costs for Hostelworld and
therefore profits may increase (1)
(6)
Question
Number
Indicative content