Business Management

Trial Examination Higher Level

Paper 1

Date:

Candidate session number

2 hours 15 minutes
________________________________________________________________________________

Instructions to candidates

• Do not open this examination paper until asked to do so.

• A clean copy of the business management case study is required for this examination
paper. Read the case study carefully
• A clean copy of the business management formulae sheet is required for this
examination paper.
• Section A: answer two questions.
• Section B: answer question 4.
• Section C: answer question 5.
• A calculator is required for this examination paper
• The maximum mark for this examination paper is [60 marks]

4 pages
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Section A

Answer two questions from this section.

(a) 1. (a) Explain one advantage and one disadvantage of BRD targeting a niche
market for model train sets (line 89). [4]

(b) Use Pink’s drive theory to explain the benefit of BRD implementing the [6]
Design Team Freedom Month for the Design Department.

2. (a) With reference to BRD, explain one advantage and one disadvantage of [4]
the Just-in-case (JIC) method of stock control.

(b) Use Adam’s equity theory to explain potential issues for BRD’s Liverpool [6]
factory employees.

3. (a) Explain the importance of product innovation for BRD. [4]

(b) Explain why BRD is considering a change from batch production to cellular [6]
manufacturing for its model train sets (line 46).
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Section B

Answer the following question.

4. Following Julia Dentes’ presentation to the BRD’s board of directors, the finance
department has prepared the following information related to the transition from metal
to plastic model trains in 2024 (line 109):

• The initial investment cost of the 3D printer to produce plastic model trains is
£7,500,000

• The 3D printer has an expected life of 5 years. The expected net cash flow from
plastic model trains is shown in the table below

• Interest rates are currently around 5% per annum.

Year Net cash flow

(£)
0 (7,500,000)
1 3,700,000
2 2,880,000
3 2,110,000
4 1,550,000
5 1,030,000

(a) Define the term ethical objectives. [2]

(b) Calculate the following investment appraisal for the 3D printer required to [4]
produce plastic model trains (show all working):

(i) Payback period

(ii) Average rate of return

(c) Outline one method of primary market research and one method of secondary [4]
market research that could explain BRD’s falling sales (line 114).

(d) Evaluate the decision to change the production of BRD’s model trains from [10]
metal to plastic from 2024 (line 109).
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Section C

Answer the following question.

5. BRD’s board of directors understand that 2023 will be a crucial year for the
company (line 139). The £12 million raised from the sale of share capital gave
BRD sufficient liquidity to continue trading, but further strategic changes will be
needed if BRD is to avoid more difficulties in the future.

A strategic management consultant has advised that BRD consider two options:

Option 1: Product development

BRD could address the reasons for falling sales (line 115) by adapting existing
products and targeting the mass market at a global level.

Option 2: Diversification
BRD could invest in research and development to produce an innovative product
for a new industry. Existing factory facilities could be utilised, however BRD would
need to raise significant funds to finance the strategic change.

Use the case study and the additional information provided on page 4 to evaluate [20]
Option 1 and Option 2 as strategies to improve BRD’s financial performance.