Business Studies · May / June 2024 · Paper 21 · Question 1
0450
As printed in the paper
Show the answer and mark scheme
1(a)[8]
Explain two drawbacks for EP of having a tall organisational structure. Award 1 mark for each drawback (max 2). Award a maximum of 3 additional marks for each explanation of the drawback of having a tall organisational structure – one of which must be applied to this context. Relevant drawbacks might include:
Communication is slower – as a long chain of command – takes longer for messages to pass from senior managers to lowest level employeesMisunderstandings may occur – as more people for messages to be passed through – more chance of errors being passed onSenior managers are more remote from lower levels in the hierarchy – these managers are less aware of the views of employees – more likely for employees to feel demotivatedDecision making can be slower/weaker – as more levels to discuss issues and pass on decisions – react to customer changes more slowlyMay have a narrow span of control – which may reduce the opportunities for delegation – employees feel less trusted with more direct controlIncreasing managerial/supervisor costs – as likely to need more managers as there are more levels in the hierarchy For example: Communication is slower (1)as more employees for messages to be passed through (1)
giving more chance of errors in the messages (1)
about the production of pottery (app). Application could include: pottery;
cups;
plates;
bowls;
trading for 40 years;
new Marketing Manager;
Managing Director;
84 employees;
6 levels;
external recruitment/recruitment from outside the business;
high-quality products;
want to increase efficiency;
private limited company;
information from Appendix 2.
1(b)[12]
Consider the following two ways EP could use to increase added value. Which way should EP use? Justify your answer.
Increasing pricesReducing raw material costs Level Description Sound application of knowledge and understanding of relevant business concepts using appropriate terminology. Detailed discussion of both ways. Well-justified recommendation. Candidates discussing both ways in detail, in context and with a well-justified recommendation including why the alternative way was 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 way. Judgement with some justification/some evaluation of choice made. Candidates discussing at least one way in detail and applying it 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 ways with little/no explanation. Simple judgement with limited justification/limited evaluation of choice made. Candidates outlining both ways in context should be rewarded with the top marks in the band. 1–4 No creditable response. Relevant points might include: Increasing pricesImprove the quality even more – of the pottery – then customers will be willing to pay a higher price – but it depends on the prices charged by competitors for their pottery products – may lose salesImprove the brand image further – advertise the pottery – makes the products more well- known and hence EP may be able to raise prices as customers like to buy more well- known branded productsProvide extra services – such as gift wrap the cups and plates to give as a gift – customers will be willing to pay a higher price if the product is made to appear more attractive in its packagingHigher prices may lead to lower demand for pottery – possibly reducing revenue Reducing raw material costsBuying cheaper raw materials by changing supplier/buying in bulk to gain a discount/negotiating cheaper price – but customers may find the pottery products are of lower quality – unhappy customers may give EP a bad reputation – lower salesSource cheaper raw materials from imports instead of domestic raw materials – input costs reduce – but quality may be lower – lose salesReduce the amount of raw materials in each pottery item – makes pottery items smaller – will reduce amount of raw materials needed if output remains the same – may not be noticed by customers so no effect RecommendationIncreasing prices is the best way to increase added value because EP has a reputation for high-quality pottery products and customers are likely to be willing to pay higher prices. This is safer than potentially getting a bad reputation for poor quality products which might happen if lower quality raw materials are purchased.Reducing input/raw material costs is the best way to increase added value as customers may not notice this as long as the quality of the raw materials is not much lower reducing the quality of the products such as plates and bowls.
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