Business Studies · Oct / Nov 2021 · Paper 21 · Question 3
0450
As printed in the paper
Show the answer and mark scheme
3(a)[8]
Explain four ways SSM could increase the motivation of its production workers. Award 1 mark for each way to increase motivation of production workers (maximum of 4 marks). Award one additional mark for each explanation of the way which must be applied to this context.
Introduce piece rate – as currently paid by the hour and now will be paid by the number of products producedIncrease wage rates – for all 60 operations workersBonuses – if increase the output of soap powderProfit share – if SSM increase profit and pay a higher dividendJob rotation – move from mixing raw materials to packaging soap powder to make their job more interestingJob enrichment – as the job is said to be boring then additional tasks can be addedOpportunities for promotion – as production workers can gain promotion to supervisor of the production lineTraining – production workers could have additional training in the use of machinery on the production lineTeamworking / using quality circles / workers councils / involve them in decision-makingJob enlargementFringe benefitsRecognition of good work / Employee of the monthImproving working conditions For example: Introduce piece rate (1)which will encourage workers to produce more soap powder as they will be paid more if they produce more products (app). Application might include: soap powder;
flow production;
60 production employees;
5 workers and 1 supervisor per line;
paid an hourly wage rate;
complain the job is boring;
production workers are unhappy;
shortages of some skilled workers;
reference to Appendix 1;
production line;
SSM makes use of specialisation;
machinery is controlled by a production worker.
3(b)[12]
Consider how SSM could benefit from the following three economies of scale. Which economy of scale is likely to have the greatest effect on SSM? Justify your answer.
PurchasingFinancialManagerial Level Description Sound application of knowledge and understanding of relevant business concepts using appropriate terminology. Detailed discussion of two or more economies of scale. Well-justified conclusion. Candidates discussing all three economies of scale in detail, in context and with a well-justified conclusion including why the alternative economies of scale were rejected should be rewarded with the top marks in the band. 9–12 Sound application of knowledge and understanding of relevant business concepts using appropriate terminology. Detailed discussion of at least one economy of scale. Judgement with some justification / some evaluation of choices made. Candidates discussing two or more economies of scale in detail and applying them to the case should be rewarded with the top marks in the band. 5–8 Limited application of knowledge and understanding of relevant business concepts. Limited ability to discuss economies of scale with little/no explanation. Simple judgement with limited justification / limited evaluation of choices made. Candidates outlining three economies of scale in context should be rewarded with the top marks in the band. 1–4 No creditable response. Relevant points might include: PurchasingRaw materials can be purchased in bulk – discounts received for raw materials needed at stage 1 in the production process – lower unit costs FinancialLess risk as it is a larger business and a public limited company – lower interest rates charged on loans and overdrafts – lower interest costs ManagerialCan attract specialist/skilled managers – as SSM can offer more opportunities for promotion and higher pay – more effective in managing the soap powder business – increases productivity/efficiency in the business ConclusionAs the soap powder manufacturer produces on a large scale then being able to reduce the variable cost of raw materials will have the most effect on lowering unit costs in the long term. Financial will have less effect as it would still be expensive to repay the loan. Managerial will also have less effect because as the business grows it may experience diseconomies of scale which are mainly due to difficulties in managing a larger business.Financial economies of scale will benefit SSM as it is expanding and financing $15 million for expansion will reduce the costs of interest payments – reducing expenses / fixed costs.Increased efficiency from employing specialist managers such as a Human Resources Manager, which may lead to a significant decrease in unit costs as increased motivation leads to fewer employees leaving each year.
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