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Business Studies · Oct / Nov 2023 · Paper 21 · Question 3

0450

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  • 3(a)[8]

    Explain two reasons why training is important to PH. 1 mark for each reason (max 2). Award a maximum of 3 additional marks for each explanation of the reason why training is important to PH – one of which must be applied to this context. Relevant answers might include:

    To introduce a new process or equipment – so that employees know how to use the new equipment without damaging it/operate it safely – or not being sure how to operate it and become less productive
    To improve the efficiency/productivity of employees – as they will be skilled in operating equipment – and output will increase
    To train unskilled workers to perform a wider range of tasks – so they may be moved to other areas of the factory – which makes production more flexible when increased output of a particular product is required
    To decrease the chances of faulty products being produced/fewer mistakes – to ensure high quality products are manufactured – so the reputation of PH does not fall
    To decrease the chance of accidents
    To provide opportunities to internally recruit
    To improve the motivation of employees
    To provide induction training to introduce new employees to the business
    Less supervision of workers may be required For example: To decrease the chances of faulty products being produced (1)

    because PH has a reputation for producing high quality products (app) and PH does not want to get a bad reputation (1)

    as sales would decrease (1). Application could include: protective hats;

    construction sites;

    construction workers on building sites;

    mining workers;

    plan to expand by opening factories in other countries;

    remain the market leader;

    has a long history of producing high quality products;

    100 production employees;

    been in business for 50 years;

    becoming a multinational company;

    workers are currently demotivated;

    flow production line.

  • 3(b)[12]

    Consider how the following three groups might use the financial data shown in Appendix 3. Which group will find this data most useful? Justify your answer.

    PH’s employees
    PH’s shareholders
    Competitor considering taking over PH Level Description Sound application of knowledge and understanding of relevant business concepts using appropriate terminology. Detailed discussion of how two or more stakeholder groups might use the financial information in Appendix 3. Well-justified conclusion. Candidates discussing in detail how all three stakeholder groups might use the financial information in Appendix 3, in context and with a well- justified conclusion including why the other stakeholder groups may find the financial information less useful 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 how at least one stakeholder group might use the financial information in Appendix 3. Judgement with some justification / some evaluation of choice made. Candidates discussing in detail of how two or more stakeholder groups might use the financial information in Appendix 3 and applying them to the case should be rewarded with the top marks in the band. 5–8 Level Description Limited application of knowledge and understanding of relevant business concepts. Limited ability to discuss how the stakeholder groups might use the financial information in Appendix 3 with little/no explanation. Simple judgement with limited justification/limited evaluation of choice made. Candidates outlining how the three stakeholder groups might use the financial information in Appendix 3 and in context should be rewarded with the top marks in the band. 1–4 No creditable response. Relevant points might include: PH’s employees
    Whether to ask for a pay rise - may use the profit to indicate if PH can afford to increase its wages from just paying the minimum wage - $20m profit in 2022indicates that PH may have sufficient profit to increase wages the following year
    Whether to look for another job - revenue has increased 25% from $100m to $125m - may indicate that their jobs are secure as the business is doing well
    Whether there is sufficient revenue to improve working conditions PH's shareholders
    Whether to sell shares - profit margin has fallen from 20% to 16% which is a fall of 4%. May indicate losing control of expenses or costs are rising
    The level of profit has remained the same at $20m so dividend payments may remain the same
    Whether to buy more shares - business has made more revenue as it has increased by $25m which may indicate the business is successful and growing – buy more shares or keep existing shares Competitor considering taking over PH
    Whether to take over PH as revenue has increased by $25m from $100m so may be taking market share away from the competitor – may indicate the competitor should take over PH – although profit margin is falling and needs to have greater control of expenses – may indicate higher profit and profit margin possible if better managed
    Comparison with own revenue and profit to see if PH is doing better than competitor – may learn how to improve its own competitiveness - gross profit margin has increased indicating that the cost of sales is lower - may be due to cheaper materials being purchased - may lead to lower quality products and may not want to take over the business Conclusion Justification might include:
    PH's employees will find the financial information in Appendix 3 most useful as it will show if PH can afford to increase the wages of the 100 production employees higher than the minimum wage. Profit has remained at $20m and so PH should be able to afford higher wages. Without knowledge of the revenue increasing and profit it would be harder for employees to argue for an increase in their pay. Shareholders may find this information less important as they would want to know the dividends that were going to be paid out of the profit rather than just the profit figure. Competitors would also want to see the share price if they were considering taking over PH as well as the profit made so this information is less useful to them.
    PH's shareholders would find the financial information most useful as they want to know if profit has increased to indicate whether they are likely to receive a dividend. The profit margin of 16% would indicate that PH is still relatively successful, and their shares may remain at the same value.
    PH's competitors would find the financial information most useful as they want to know if PH is worth taking over. If the profit margin has fallen to 16%, then there may be room to increase the profit margin if the business is better managed after a takeover. This would allow a comparison with their own profit margin to see if it is higher than theirs and hence worth taking over.
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