UNIVERSITY OF CAMBRIDGE INTERNATIONAL EXAMINATIONS

GCE Advanced Level

MARK SCHEME for the May/June 2011 question paper

for the guidance of teachers

9707 BUSINESS STUDIES

9707/33 Paper 3 (Case Study), maximum raw mark 100

This mark scheme is published as an aid to teachers and candidates, to indicate the requirements of
the examination. It shows the basis on which Examiners were instructed to award marks. It does not
indicate the details of the discussions that took place at an Examiners’ meeting before marking began,
which would have considered the acceptability of alternative answers.

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Mark schemes must be read in conjunction with the question papers and the report on the
examination.

• Cambridge will not enter into discussions or correspondence in connection with these mark schemes.

Cambridge is publishing the mark schemes for the May/June 2011 question papers for most IGCSE,
GCE Advanced Level and Advanced Subsidiary Level syllabuses and some Ordinary Level
syllabuses.
 Page 2 Mark Scheme: Teachers’ version Syllabus Paper
GCE A LEVEL – May/June 2011 9707 33

1 Analyse the advantages and disadvantages for FPC of operating sawmills at nearly full
capacity. [10]

Knowledge Application Analysis

3 marks 2 marks 5 marks

Level 2 3 marks 2 marks 3–5 marks

Good knowledge of Points made are well applied Good use of theory to
relevant points and to case. explain advantages and
capacity utilisation. disadvantages.

Level 1 1–2 marks 1 mark 1–2 marks

One/two relevant Some application to case. Use of theory to explain
point(s) made or advantages or
knowledge of capacity disadvantages.
utilisation shown.

Answers could include:

Definition of full capacity (or capacity utilisation): output equal to capacity (proportion of total
capacity accounted for by current output).

Advantages:
• Lowers fixed costs per unit and therefore total costs.
• Increases competitiveness as a result – this is a competitive market.
• Gives staff job security.
• Cuts down on wasted time/resources.

Disadvantages:
• Little time for maintenance/repairs – see case. This may lead to breakdown of machinery.
• Worsens health and safety record – see case.
• Puts pressure on staff/managers.
• Not able to meet increased orders e.g. from established customers.

Calculation of capacity utilisation would provide evidence of application.

2008 42/45 93.3%

2009 44.5/46 96.7%
2010 47/48 97.9%

© University of Cambridge International Examinations 2011

 Page 3 Mark Scheme: Teachers’ version Syllabus Paper
GCE A LEVEL – May/June 2011 9707 33

2 (a) Draw up a forecasted Income Statement (Profit & Loss Account) for FPC for the 12
months ending 31 May 2012 based on the actual Income Statement shown in
Appendix C.
Assume that:
• the impact on sales and profit margins is based on the information and estimates
made on lines 33–35
• there are no other changes. [8]

Income Income
Income statement if
Statement Statement
15% mistakenly added
Year ending Year ending Marks
to total revenue
31/5/11 31/5/12
($m)
($m) ($m)

Sales revenue 50 56* 3 57.5 2 marks

Cost of sales 15 15.68 1 OFR 16.1 1 mark

Gross profit 35 40.32 1 OFR 41.4 1 mark

Overhead 28 29.4 2 29.4 2 marks

expenses

Net profit (profit 7 10.92 1 OFR 12 1 mark

before tax)

Notes: (1) Net profit of $10.92m should not be automatically rewarded with 8 marks. Each
element of the income statement must be shown.
(2) *Sales revenue to 31/5/12 = 50 + 15% of (80% × 50) = 50 + 15% of 40 = 56

Calculations:
Revenue 80% of 50 = 40 (1 mark)
15% of 40 = 6 (2 marks)

Overheads 5% of 28 = 1.4 (1 mark)

(b) Comment briefly on the usefulness of a forecasted Income Statement to the directors
of FPC. [4]

Knowledge Application Analysis Evaluation

1 mark 1 mark 1 mark 1 mark
Level 1 1 mark 1 mark 1 mark 1 mark
Some knowledge Applied to case. An explanation of Judgement given.
shown. usefulness.

Answers could include:

• Forecast of future profits/losses.

• Allows comparison with budgets and past performance to be made.
• Useful for decision-making – as in this case. ‘What if’ scenarios can be compared.
• Based on forecasts such as market research, cost estimates etc – so considerable
scope for inaccuracy.
• CEO in this case might be trying to justify the decision so could have used optimistic data.

© University of Cambridge International Examinations 2011

 Page 4 Mark Scheme: Teachers’ version Syllabus Paper
GCE A LEVEL – May/June 2011 9707 33

(c) Discuss, using your result from (a) and other information, whether FPC should
respond to pressure group threats and stop extracting wood from the Lotus forest. [14]

Knowledge Application Analysis Evaluation

2 marks 2 marks 5 marks 5 marks

Level 2 2 marks 2 marks 3–5 marks 3–5 marks

Two or more Points made are Good use of theory Judgement shown
relevant points well applied to to explain in considering both
made. case. advantages and advantages and
disadvantages. disadvantages with
well supported
recommendation.

Level 1 1 mark 1 mark 1–2 marks 1–2 marks

One relevant point Some application Good use of theory Judgement shown
made. to case. to explain one side but on one side
or limited use of only or poorly
theory to explain supported
one or both sides. recommendation.

Answers could include:

NO they should continue extracting timber:

• It is clearly profitable – see (a).
– Net profit margin (NPM) will increase from 14% to 19.5%.
– NPM will increase by 5.5 percentage points.
– There will be a 56% increase in net profit.
• FPC is a plc and has shareholders to satisfy.
– They will not be impressed by closing a forest so soon after purchasing it.
– They are demanding higher dividends.
• Operations will end in a few years anyway – environmental and other pressure groups
will be pleased about that.

YES they should stop now:

• Against mission statement – not living up to their stated mission.
• Pressure group activity may reduce FPC’s reputation and sales and have a long-term
impact on profitability.
• Only a small part of their operations and may be able to sell to another timber business
anyway.

Evaluation may include:

• How powerful are the pressure groups?

• Can the forest be sold to another business?
• Will shareholders take action against directors who seem to have paid too much for a
forest that they are now thinking of ceasing operations in?
• Business customers may not be driven by ethical considerations.

© University of Cambridge International Examinations 2011

 Page 5 Mark Scheme: Teachers’ version Syllabus Paper
GCE A LEVEL – May/June 2011 9707 33

3 (a) Refer to Appendix A.

(i) Identify the earliest start time (EST) and latest finish time (LFT) at node 5. [2]

EST = 5; LFT = 7

(ii) State the length of the critical path. [1]

16 weeks or accept CFIK

(iii) Calculate the total float on Activity J. [3]

LFT – Duration – EST (1 mark)

10 – 2 – 6 = 2

or LST – EST (1 mark)

8–6=2

(Award 2 marks for correct data identified but incorrect result.)

(b) To what extent will the use of critical path analysis ensure a successful completion of
the new sawmill? [8]

Knowledge Application Analysis Evaluation

2 marks 2 marks 2 marks 2 marks
Level 2 2 marks 2 marks 2 marks 2 marks
Good Good application to Good analysis Clear judgement
understanding of case e.g. use of shown. shown.
CPA. CP/durations etc.
Level 1 1 mark 1 mark 1 mark 1 mark
Shows some Some application Some use of Judgement used to
understanding of to case. theory to explain assess usefulness
CPA. answer. of CPA.

Answers could include:

• Definition/explanation of CPA.
• Should help because:
– Puts tasks in order; helps with identifying simultaneous activities.
– Float times can be used to allocate resources more efficiently.
– Delays can lead to managers using network to identify which activities need to be
speeded up; 16 weeks is length of CP so it should be possible to get yard ready
within time limit set.

Limitations:

• Only a planning tool – needs good management to see the project through to successful
completion. Does FPC have good enough middle managers to see project through on
time?
• Outside events could result in unforeseen delays e.g. planning permission problems.
• How reliable are the duration estimates?

Evaluation:

• Has this tool been used by FPC managers before and, if so, with what success?

© University of Cambridge International Examinations 2011

 Page 6 Mark Scheme: Teachers’ version Syllabus Paper
GCE A LEVEL – May/June 2011 9707 33

4 Refer to Appendix B and lines 36–41. Evaluate the most important changes that you consider
should be made to improve the organisational structure of FPC’s Operations Department. [14]

Knowledge Application Analysis Evaluation

2 marks 2 marks 5 marks 5 marks

Level 2 2 marks 2 marks 3–5 marks 3–5 marks

Good knowledge Good application to Good use of theory Good judgement
shown. case. to explain answer. shown.

Level 1 1 mark 1 mark 1–2 marks 1–2 marks

Some knowledge Some application to Some use of theory Some judgment
shown. case. to explain answer. shown.

Answers could include:

• Criticisms of existing structure: too tall with narrow spans of control; no separate divisions for
different countries or products.
• New structure may be drawn – allow up to 6 marks (2,2,2) for revised version with significant
differences that appear logical, e.g. separate divisions for products or countries or wider spans
of control (matrix structure possible too).
• Analysis of the claimed benefits of student’s own version, e.g. better vertical communication,
more delegation, clearer lines of authority.
• Will other departmental organisations need to be changed? Can just one department have a
different structure?

Evaluation may include:

• Will delayering be handled sensitively?

• Most important features of the new structure are…with justification.
• Will delegation and wider spans of control need a new management/corporate culture of trust
and will this occur?
• How long will the changes take? Will they be imposed from the ‘top’?

© University of Cambridge International Examinations 2011

 Page 7 Mark Scheme: Teachers’ version Syllabus Paper
GCE A LEVEL – May/June 2011 9707 33

5 Assess the potential impact of increasing globalisation on the marketing strategy for FPC
furniture. [16]

Knowledge Application Analysis Evaluation

2 marks 3 marks 5 marks 6 marks

Level 2 2 marks 3 marks 3–5 marks 4–6 marks

Good knowledge Good application of Good use of theory Good judgement
demonstrated. points to case. to answer question. shown.

Level 1 1 mark 1–2 marks 1–2 marks 1–3 marks

Some knowledge of One or two points Some use of theory Some judgement
globalisation or applied to case. to answer question. shown.
marketing strategy.

Answers could include:

• Definition or explanation of globalisation and/or marketing strategy.

• Existing marketing strategy: traditional Asian designs; low prices (discount stores); sold
through other retailers – no company-owned shops; no or little marketing budget.
• Current position: increased competition from cheaper imports due to free trade.
• How should marketing strategy be revised?
• Market research – are imports only in the lower price segments of the market?
• New market segment?
• Selling abroad – pan-global marketing or global localisation? For example, will new furniture
styles and promotions be needed in European and American markets?
• Selling directly over the Internet? How feasible is this with furniture?

Evaluation:

• More information needed e.g. market research.

• May depend on which strategic option FPC adopts.
• Is the process of globalisation and free trade likely to continue for the markets FPC operates in?

© University of Cambridge International Examinations 2011

 Page 8 Mark Scheme: Teachers’ version Syllabus Paper
GCE A LEVEL – May/June 2011 9707 33

Questions 6 and 7

Knowledge Application Analysis Evaluation

3 marks 3 marks 4 marks 10 marks

Level 3 6–10 marks

Good judgement
shown in text and
conclusions.

Level 2 3 marks 3 marks 3–4 marks 3–5 marks

Good understanding Good application to Good use of theory to Some judgement
shown. case. explain points made. shown in text and/or
conclusions.

Level 1 1–2 marks 1–2 marks 1–2 marks 1–2 marks

Some understanding Some application to Limited use made of Limited judgement
shown. case. theory. shown.

6 Evaluate the importance of both SWOT and PEST analysis to FPC’s directors as they
analyse the two strategic options. [20]

Answers could include:

• Definition/explanation of PEST and SWOT as techniques of strategic analysis.

• Benefits of SWOT – considers both internal (SW) and external factors (OT) in analysing the
situation in which the business is currently. This is important before major strategic decisions
are taken.
• Helps to identify areas for action to reduce weaknesses and the strengths that will allow
opportunities to be taken advantage of e.g., in this case, strength in primary products, profits
being made to finance expansion, new CEO with plans to reorganise the organisation.
• PEST focuses on external factors:
– Legal changes e.g. protection of natural parks.
– Environmental pressure groups – will it be easier to avoid pressure if FPC expands into
secondary sector?
– Social issues such as relocation of villagers.

Evaluation:

• PEST and SWOT need frequent updating.

• Major decisions such as this require other forms of analysis too, e.g. investment appraisal and
Porter’s 5 Forces.
• Can be subjective.
• Market research essential.
• Financial analysis of accounts needed for Option 1.

© University of Cambridge International Examinations 2011

 Page 9 Mark Scheme: Teachers’ version Syllabus Paper
GCE A LEVEL – May/June 2011 9707 33

7 FPC’s directors aim to increase profits. Recommend to FPC’s directors which one of the
two strategic options they should choose for the company, assessing the potential risks
and rewards of both options. [20]

Reward appropriate use of Ansoff.

Expansion into furniture making

Rewards: Risks:

• Moves away from primary products • Potential problems with further

with low value added and pressure takeovers/mergers e.g. paying too much (as
group activity. with case example) and culture clashes.
• Rising global incomes will allow • Lack of previous success in furniture making –
expansion into an income elastic will expansion overcome this?
market.
• Less risky than diversification?

Diversification into other primary products

Rewards: Risks:

• FPC understands primary product • Social/environmental objections.

markets. • Lack of detailed knowledge about extraction
• Existing land can be used – may be methods etc.
cheaper than other option. • More risky?

Evaluation:

• Overall judgement required e.g. recommendation given but may be conditional on other
information being provided, such as investment appraisal, PEST analysis for both options
etc.
• Quantitative analysis is essential to achieve the profit objective.

© University of Cambridge International Examinations 2011