Business Studies · Oct / Nov 2022 · Paper 22 · Question 3
0450
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3(a)[8]
Explain two diseconomies of scale CC might experience as it expands. Award 1 mark for each diseconomy of scale (max 2). Award a maximum of 3 additional marks for each explanation of the diseconomy of scale – one of which must be applied to this context. Diseconomies might include:
Poor communication – more layers of hierarchy for messages to be transmitted after the takeover of NM – more likely to be distortedLack of commitment from employees – larger businesses may make employees feel unimportant as there are so many employees in the organisation / lower or poor morale – increased absenteeism or higher labour turnover – increased average costsWeak coordination – decisions may be taken by some managers in country X that do not fit well with other department decisions elsewhere in the business – leading to a lack of efficiencyLack of control – because a larger business may not have a close working relationship with all employees – so some employees may not be motivated to work hard producing chocolates – has higher unit costs from employing and training more supervisors For example: There may be poor morale amongst the employees (1)because a larger business may make employees feel unimportant as there are so many employees in the organisation (1). Many of the 4500 employees may lack commitment after the takeover (app) leading to lower efficiency and higher unit costs (1). Application could include: chocolate bars;
shareholders of CC;
low wage costs in country Z;
CC plan to take over NM in country Z;
500 NM employees;
4000 CC employees;
public limited company;
imports most of its raw materials;
cocoa beans;
no trade restrictions in its export markets;
takeover will cost $35 million.
3(b)[12]
Consider the information about the two managers outlined in Appendix 2. Who should be chosen as the Operations Manager for the NM factory? Justify your answer. Level Description Sound application of knowledge and understanding of relevant business concepts using appropriate terminology. Detailed discussion of both employees. Well-justified recommendation. Candidates discussing both employees, in context and with a well-justified recommendation including why the alternative employee was not chosen 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 employee. Judgement with some justification / some evaluation of choice made. Candidates discussing both employees in detail and applying these 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 the employees with little/no explanation. Simple judgement with limited justification / limited evaluation of choice made. Candidates outlining both employees in context should be rewarded with the top marks in the band. 1–4 No creditable response. Relevant points might include: Benefits Drawbacks Samuel
Many years of experience working for CC – worked for 20 years – 10 of which were as the Operations Manager – very familiar with CC production methodsEasier for the production methods used by CC to be transferred to NM as necessary, as he has a wide range of experience and training at CC – may be more efficient as profit margin higher for CC than NMFamiliar with all CC brands and the processes to make themEstablished links with CC’s existing suppliers of cocoa beans – useful for future orders and consistent quality of chocolates madeLowest qualified of the two applicantsNot familiar with the market in country ZNot familiar with the brands produced by NM and these are different to those of CCOnly had on-the-job training and this may be less effective than the external training for RiteshMay not be happy to move to country Z as lives in country X Benefits Drawbacks RiteshThe best qualified of the 2 managers already works in country Z so may be worth keeping as he will understand the new market and the company being taken overExperience of retail outlets in country Z and this may be useful to CC when distributing its own brands in country ZExperience of working for a competitor in country Z may be able to offer an insight into the competitor which may help CC be more competitive in country ZAlready has links with suppliers for the chocolate ingredients in country Z which may be useful for CC when first establishing itself thereIs already familiar with the employees at NM which could be useful for motivating them when they are being taken overNot worked for NM very long and therefore not very experienced in the way NM operatesNot familiar with CC brands or the way of working at CC – production process may be different at CCMay not be happy to work for CC and will not have worked with managers at CC – may be less efficientMay be resistant to changes CC may introduce after the takeover RecommendationSamuel should become the Operations Manager at NM because he is experienced in the way CC wants the factory to be run and the working practices it uses. He is very experienced and has worked for CC for 20 years. Ritesh is not familiar with the working practices at CC, and this might lead to errors and therefore lower efficiency.Ritesh should be kept as Operations Manager because he has far more knowledge and experience of NM and its brands. He understands the market for chocolates in country Z and also has established links with suppliers of ingredients. This would be missing if Samuel tried to run the operations department in NM, resulting in lower efficiency.
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