Business Management Toolkit Workbook 9781398358409 Answers

Business Management Toolkit Workbook
Answers
1 SWOT analysis
1 a SWOT analysis is a strategic planning tool that considers the internal strengths and
weaknesses of the organization as well as the opportunities and threats in the external
environments of the business.
Award 1 mark for a limited response that shows some understanding.
Award 2 marks for a clear and accurate definition, similar to the example above.
b Possible answers could include the following:
• SWOT analysis is a business management tool commonly used as part of the process
of strategic planning by examining internal and external factors that affect the
organization.
• It enables a business to consider strengths, weaknesses, opportunities and threats
before it develops an appropriate business strategy.
• It involves exploring the current position of the organization in terms of its internal
strengths and weaknesses, and identifying potential opportunities and threats in the
external environment.
• It can enable managers and decision makers to examine how weaknesses can be
turned into strengths and threats turned into opportunities.
• In particular, consideration of weaknesses and threats enables managers and decision
makers to assess risks and to minimize the potential harm to the organization.
Accept any other relevant reason why SWOT analysis might be used as a strategic
planning tool.
Award 1–2 marks for a limited response that shows some understanding of the demands
of the question.
Award 3–6 marks for a clear and accurate answer that shows good understanding of the
demands of the question. There is appropriate use of terminology throughout the
response.
2 a Possible characteristics could include the following:
• The internal environment – the positive situations inside the company or
organization.
• The factors tend to be in the present (the current situation), although past strengths
can remain and apply to the current time period.
• Outlines what the business does better than its competitors.
Accept any other relevant characteristic of strengths in the context of SWOT analysis.
1
For each characteristic, award 1 mark for stating the feature and 1 mark for the

commentary.
b Possible characteristics could include the following:
• The internal environment – the negative or detrimental situations inside the company
or organization.
• Areas in need of improvement that are within the control of the business.
• The factors tend to be in the present (the current situation), although past weaknesses
can remain and still apply to the current time period.
• Outlines what the business does not do as well as its competitors.
Accept any other relevant characteristic of weaknesses in the context of SWOT analysis.
commentary.
c Possible characteristics could include the following:
• The external environment – the situations that present commercial prospects for the
company or organization.
• These factors can apply to the current and/or foreseeable future time period.
• Opportunities create the possibility for the business to increase the return on
investment.
Accept any other relevant characteristic of opportunities in the context of SWOT
analysis.
commentary.
d Possible characteristics could include the following:
• The external environment – the situations that present external barriers or genuine
risks to the company or organization.
• These factors can apply to the current and/or foreseeable future time period.
• Threats create risks for the business, so they are likely to reduce or eliminate any
potential return on investment.
Accept any other relevant characteristic of threats in the context of SWOT analysis.
commentary.
3 a Possible benefits of SWOT analysis include the following:
• It provides a useful framework for strategic planning, requiring managers and
decision makers to consider both internal and external factors that impact the
organization.
• It facilitates proactive thinking, rather than relying on the habitual or instinctive
reactions of managers or decision makers.
• It helps in identifying the core competencies of the organization, thereby facilitating
corporate strategy.
Business Management Toolkit Workbook for the IB Diploma 2

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• It encourages managers and decision makers to formulate strategies based on the

organization’s identified strengths, weaknesses, opportunities and threats:
o Build on the organization’s strengths.
o Reverse its weaknesses.
o Maximize its response to opportunities.
o Overcome threats to the organization.
Accept any other relevant benefit of SWOT analysis as a business management tool.
Mark as a 2 + 2.
For each benefit, award 1 mark for stating the benefit and 1 mark for the explanation.
b Possible limitations of SWOT analysis include the following:
• It is (to some extent) a subjective assessment of information and data – what might
be perceived by some as a weakness (or threat) could be regarded by others as a
strength (or opportunity).
• It is a static model – the SWOT factors will change over time as situations and
conditions change, so the analysis needs to be undertaken regularly.
• It does not guarantee that a strategy will be successful. For example, identifying
weaknesses and threats does not necessarily mean that the business has sufficient
resources to tackle these risks. Furthermore, the wrong strategy might be used and/or
it may be poorly implemented.
• The simplicity of the tool could mean that some users oversimplify the amount of
data used for decision-making. However, the use of insufficient data often leads to
poor decision-making.
• The data used in a SWOT analysis may be based on assumptions that later prove to
be unfounded or inaccurate.
Accept any other relevant limitation of SWOT analysis as a business management tool.
Mark as a 2 + 2.
For each limitation, award 1 mark for stating the limitation and 1 mark for the
explanation.
4 Answers will vary depending on the choice of organization. The examples in these answers
are for IKEA, the multinational conglomerate that designs and sells ready-to-assemble
furniture.
a Possible strengths of IKEA could include the following:
• Affordability – prices of furniture and home products are lower than those of other
companies with similar products.
• Creativity and innovation – IKEA’s products are updated regularly to reflect
changing trends without changing the company’s core values.
• Market leader – IKEA is the leading global brand in the furniture industry.
• Strong financial position – IKEA’s financial strength gives the company a
competitive advantage that allows it to expand in new and existing markets.
Accept any other strength written in the context of the chosen organization.
Award 1 mark for each strength that is outlined in the context of the chosen organization,

up to the maximum of 2 marks.
b Possible weaknesses of IKEA could include the following:
• Relatively low quality – some of IKEA’s products are of low quality, though at low
prices.
• Limited retail outlets – the size of IKEA’s outlets means that a large amount of land
is needed, so the company’s reach is limited to major cities or towns (in various
countries) only.
• The lack of efficient delivery services – IKEA does not offer a complimentary
delivery service, which can create huge inconveniences for many customers,
especially those who do not own their own vehicles.
• Over-reliance on shipping – IKEA relies on the shipment of its huge product range
to its retail outlets, so any delays in shipping will cause major logistical and
operational problems for the company.
Accept any other weakness written in the context of the chosen organization.
Award 1 mark for each weakness that is outlined in the context of the chosen
organization, up to the maximum of 2 marks.
c Possible opportunities for IKEA could include the following:
• Market development – there are opportunities for further expansion into less-
developed economies.
• E-commerce – the COVID-19 pandemic and subsequent national lockdowns have
increased the number of customers shopping online, creating more opportunities for
IKEA to expand its presence in the digital marketplace.
Accept any other opportunity written in the context of the chosen organization.
Award 1 mark for each opportunity that is outlined in the context of the chosen
organization, up to the maximum of 2 marks.
d Possible threats to IKEA could include the following:
• Increased competition – a key threat to IKEA is the increasing competition from
other furniture retailers attempting to emulate its success by developing their own
new products and services.
• Inflation – the increased cost of raw materials, such as wood, continues to raise
production costs for IKEA, while higher prices also deter some customers from
buying furniture from the retail giant.
• Sustainability issues – IKEA’s existence is built on the sales of low-cost furniture, so
its reliance on wood is likely to be a threat unless it is able to source sustainable
timber supplies for the foreseeable future.
• Pressure groups – with the rise in awareness of global warming and climate change,
IKEA may well become the target of environmental conservationists and activists,
jeopardizing its operations.
Accept any other threat written in the context of the chosen organization.

Award 1 mark for each threat that is outlined in the context of the chosen organization,

up to the maximum of 2 marks.
5 a High liquidity means that GSK can easily meet its short-term liabilities (debts).
This reduces the financial risks for the company, especially as it operates in a highly
competitive industry where returns on investments are volatile.
Award 2 marks for an answer that shows a clear understanding of the demands of the
question, similar to the example above.
b A patent is a form of intellectual property right, giving the patent owner the exclusive
rights to the production of certain products, such as vaccines or healthcare supplements.
The removal of patents or the deregulation of markets would enable rival companies to
launch their own versions of GSK’s best-selling products, thereby reducing GSK’s sales
and profits.

2 Ansoff matrix

1 a The Ansoff matrix is a business management tool that examines growth strategies in
terms of the products offered by a business to meet customer needs and wants and the
markets the business competes in. It is a framework for devising various growth
strategies for a business based on whether it markets new or existing products in new or
existing markets.
b
Award 1 mark for each correct answer, up to the maximum of 4 marks.

2 a A takeover (or acquisition) is a growth strategy that involves one company (PayPal)
purchasing another company (Pinterest) by purchasing a majority stake in the target
company. The business making the bid is the acquirer and the organization it wishes to
take control of is called the target company.
b PayPal’s growth strategy is likely to fall under the category of diversification in the
Ansoff matrix. Diversification is the growth strategy where a business, such as PayPal,
markets new products in new markets.
By acquiring Pinterest, PayPal would be able to enter the market for online retail using
Pinterest’s social media platform. Acquiring another company operating in another
market is inherently a high-risk growth strategy for PayPal because, irrespective of its
market capitalization or financial status, it would be moving into a market that it has
little or no experience of. For PayPal to adopt a diversification growth strategy, it must
have a clear idea about what it expects to gain from the takeover of Pinterest as well as
an honest assessment of the risks and potential rewards.
of the question.
response.
3 Answers could focus on an explanation of product development and diversification growth

strategies, outlining why it is not straightforward to classify the growth strategy of
McDonald’s using the Ansoff matrix:
• Product development – McDonald’s is offering a new product to existing customers.
The customer base is likely to be the same – loyal McDonald’s customers or fans of
McDonald’s. The wedding guests would be served from the existing menu items at the
existing restaurants.
• Diversification – This is a new service for McDonald’s and would require upskilling or
retraining of its employees to host weddings (to arrange unique venue decorations and
to host customized wedding party games). There may be legal issues to consider too,
such as licensing the restaurants as wedding venues. The risks are relatively high
because McDonald’s is entering a new market for new customers (people getting
engaged or married).
Award 1–2 marks for a limited response that shows some understanding of the demands of
the question.
demands of the question. There is appropriate use of terminology throughout the response.
4 a Market share refers to the proportion (percentage) of a market or industry that is
controlled by a particular business, product or brand. It is typically measured by the
sales revenue of the business as a percentage of the total sales revenue in the market as a
whole.
b Aiming to increase market share in an existing market is a feature of a market
penetration growth strategy. It involves the business marketing its existing products to
an existing customer base and gaining a larger share of the entire market. The growth
strategy of Pret A Manger is an attempt to increase sales by strengthening brand
recognition and brand loyalty in the coffee and sandwich retail market.
of the question.
response.
c Possible reasons could include the following:
• A saturated market suggests that sales may experience a slowdown as there are
minimal opportunities for market growth.
• It is difficult to gain market share as the market is dominated by market leaders such
as Starbucks and Subway.
Accept any other relevant reason written in the context of the case study.
Award 1 mark for a valid reason and 1 mark for the explanation.
d Possible benefits could include an explanation of the following:

• Enticing customers to visit Pret A Manger, even if the subscription service acts as a

loss leader, could help the company to gain market share from rivals in the industry
such as Starbucks and Subway.
• It is a relatively low-risk strategy because Pret A Manger is offering existing
products (coffee and drinks) to an existing market. It is sticking to its core
competencies.
• The growth strategy allows Pret A Manger to benefit from a recurring revenue
stream (US$28 per month) from subscribers rather than one-off transactions from
customers.
• Pret A Manger is also likely to benefit from subscribers purchasing other items, such
as sandwiches or snacks, when buying drinks.
• With a subscription service, Pret A Manger can begin to build a closer professional
relationship with its customers and start tracking their purchasing habits over time.
Accept any other relevant benefits written in the context of the case study.
Mark as a 2 + 2.
For each benefit, award 1 mark for stating the benefit and 1 mark for the explanation,
written in the context of Pret A Manger.
5 a A mission statement is a concise declaration of an organization’s reason for existing. It
communicates the organization’s purpose and direction for its various stakeholder
groups, such as its employees, customers, suppliers and local communities.
b A market development growth strategy involves a business selling its existing products
in new markets. Nike aims to sell its sports shoes and other products in new markets and
segments across the world in order to increase its sales revenues.
Award 2 marks for a clear and concise response, written in the context of Nike.
c Possible advantages could include an explanation of:
• attracting new customers in new markets
• increased sales revenue
• spreading risks by operating in multiple regions/markets across the world
• possible economies of scale by operating on a larger scale.
Accept any other relevant advantage written in the context of the case study.
Possible disadvantages could include an explanation of:
• risk associated with operating in new, unknown markets – especially overseas where
habits, tastes, fashion and culture may differ
• added costs associated with expanding into international markets
• different pricing strategies and/or marketing approaches possibly being required to
attract different customers or create new market segments in new markets.

Accept any other relevant disadvantage written in the context of the case study.

Mark as a 2 + 2.
For each point (advantage or disadvantage), award 1 mark for stating the point and 1
mark for the explanation, written in the context of Nike.
6 a Diversification (new products in new/unknown markets).
Award 1 mark for the correct answer.
b Product development (new product in existing markets with established competitors).
c Market penetration (existing products in existing markets).
d Product development (new products in existing markets).
e Market penetration (focusing on existing products in existing markets to gain market
share).
7 Possible advantages could include an explanation of:
• the tool providing four general/possible strategies for growth
• helping managers to assess the degree of risk involved with a particular growth strategy
• being relatively easy to construct and simple to understand.
Accept any other advantage that is clearly explained.
Possible disadvantages could include an explanation of:
• it does not quantify the risks of a particular growth strategy
• rewards are not recognized by the tool, only risks
• additional tools and techniques are still required before a growth strategy can be
pursued, such as market research.
Accept any other disadvantage that is clearly explained.
Mark as a 2 + 2.
Award 1 mark for the suitable advantage or disadvantage, plus 1 mark for each suitable
explanation.

3 STEEPLE analysis

1 a STEEPLE analysis is a strategic planning tool used to examine factors in the external
environment that affect a business or organization but are largely beyond its control,
namely social, technological, economic, environmental (ecological), political, legal and
ethical considerations.
b Possible answers could include an explanation of the following:
• It enables managers and decision makers to examine the factors outside the control
of the business (the STEEPLE factors that the business cannot easily influence on its
own).
• It enables a business to check the validity and reasonableness of its corporate
objectives and planned strategies.
• It allows managers to consider strategies to convert positive factors into action and
to devise methods to lessen the anticipated risks.
• It can be a useful way to prompt helpful discussions to find out where the business
stands (and its competitiveness) in the external environment.
Accept any other relevant reason why STEEPLE analysis might be used as a strategic
planning tool.
of the question.
response.
2 a Possible examples could include:
• lifestyle trends
• demographic changes, such as aging populations
• changes in consumer attitudes, opinions and buying patterns
• changes in ethical perspectives and issues
• the impact of pressure groups.
Accept any other relevant example of a social factor explained in the context of
STEEPLE analysis.
For each example, award 1 mark for stating the example and 1 mark for the commentary.
b Possible examples could include:
• technological advances and developments, such as internet technologies and e-
commerce
• research and development expenditure
• global communications

• manufacturing capacity

• new production processes, such as mass customization and 3D printing
• the widespread adoption of mobile technologies
• technology access, licensing and patents.
Accept any other relevant example of a technological factor explained in the context of
STEEPLE analysis.
c Possible examples could include:
• the state of overseas economies and trends
• business (trade) cycles
• the impact of changes in interest rates
• the impact of changes in exchange rates
• the impact of changes in inflation rates
• business and consumer confidence levels.
Accept any other relevant example of an economic factor explained in the context of
STEEPLE analysis.
d Possible examples could include:
• adverse or favourable weather conditions
• ecological issues, such as climate change, global warming and environmental
degradation
• seasonality issues
• sustainability issues, such as single-use plastics.
Accept any other relevant example of an environmental factor explained in the context of
STEEPLE analysis.
e Possible examples could include:
• government procedures and policies
• taxation policies
• trading agreements between governments of different nations
• trade restrictions such as tariffs (import taxes) and quotas (quantitative limits on the
amount that can be imported)
• wars and international conflicts
• investments in the country’s infrastructure.
Accept any other relevant example of a political factor explained in the context of
STEEPLE analysis.


f Possible examples could include:
• domestic and international legislation, such as employment rights, health and safety
regulations and consumer protection laws
• environmental protection legislation
• regulatory bodies and legal processes
• trading policies, such as licensing and intellectual property rights (copyrights,
trademarks and patents).
Accept any other relevant example of a legal factor explained in the context of
STEEPLE analysis.
g Possible examples could include:
• factors that society regards as right or wrong with respect to how a business behaves
towards its various stakeholder groups (this will vary from one country or region to
another)
• perspectives about equal opportunities in the workplace, employment rights,
working conditions and employment benefits such as paid maternity and paternity
leave
• issues related to corporate social responsibility (CSR)
• ethical sourcing (supply chain management)
• issues related to sustainability in relation to people, planet and profits
• the role of social media platforms and how they impact on business behaviour.
Accept any other relevant example of an ethical factor explained in the context of
STEEPLE analysis.
3 a Possible benefits of STEEPLE analysis include the following:
• It provides a useful framework for strategic planning, requiring managers and
decision makers to consider the external factors that impact the organization.
• It facilitates proactive thinking, rather than relying on the habitual or instinctive
reactions of managers or decision makers.
• It is an important part of strategic planning, with wide applications for most
businesses.
• It can promote critical thinking and problem-solving in business organizations.
• Completing a STEEPLE analysis is relatively simple and works well in
brainstorming sessions or meetings.
Accept any other relevant benefit of STEEPLE analysis as a business management tool.
Mark as a 2 + 2.

For each benefit, award 1 mark for stating the benefit and 1 mark for the explanation, up

to the maximum of 4 marks.
b Possible limitations of STEEPLE analysis include the following:
• It is not always clear whether a particular STEEPLE factor falls neatly into one of
the STEEPLE categories. For example, weather, taxation policies, economic
policies, political issues or legal issues.
• STEEPLE analysis does not guarantee that a strategy will be successful. For
example, identifying opportunities does not necessarily mean that the business has
sufficient resources to make the most of them.
• The information used in a STEEPLE analysis may be based on assumptions that
later prove to be unfounded or inaccurate.
• Strategic planning is not a precise social science – no business management tool is
mandatory to use or free of limitations.
• It is likely some factors will not be anticipated. For example, the real impact of
crises including natural disasters, financial crises and outbreaks of infectious
diseases.
• It is often unnecessary to use all seven components of a STEEPLE analysis,
rendering the tool somewhat limited.
Accept any other relevant limitation of STEEPLE analysis as a business management
tool.
Mark as a 2 + 2.
explanation, up to the maximum of 4 marks.
4 Possible answers could include an explanation of the following:
• A SWOT analysis considers both internal and external factors that impact a business,
whereas a STEEPLE analysis focuses only on the external environment.
• A STEEPLE analysis focuses on the market or industry, whereas a SWOT analysis
focuses on a particular business entity.
• A STEEPLE analysis is usually conducted before a SWOT analysis, which allows a
business to identify both opportunities and threats as external factors in a SWOT
analysis.
Accept any other difference that is accurately explained.
Award 1–2 marks for a limited response that shows some understanding of the demands of
the question.
demands of the question. There is appropriate use of terminology throughout the response.
5 a Opportunities could include:
i new markets, such as fitness programmes or overseas holiday packages specifically
for the elderly
ii care homes
iii health insurance.
Threats could include:

i the costs of company pensions increasing
ii change being needed for workforce planning, such as the recruitment and retention
of older members of staff, especially in countries where the retirement age is
increased
iii there being fewer people of working age in the workforce, which increases the
average wage rate in the economy, thereby reducing the international
competitiveness of the business.
Mark as a 2 + 2.
For each scenario, award 1 mark for an appropriate opportunity or threat and 1 mark for
a suitable explanation.
b Opportunities could include:
i moving retailing online, enabling a business to access more customers, 24 hours a
day, every day
ii the business being able to reduce its overhead costs, such as rent and salary
payments
iii relatively easy access to international markets.
i certain businesses lacking the expertise to operate competitively online
ii high initial set-up costs
iii technological breakdowns
iv potential online fraud, including the hacking of personal data.
Mark as a 2 + 2.
c Opportunities could include:
i existing car manufacturers such as Tesla gaining competitive advantages as
producers of full-electric vehicles
ii car manufacturers developing their range of environmentally friendly electric
vehicles
iii chances to invest in sustainable car manufacturing processes beyond 2030.
i the potential collapse of oil producers and/or diesel engine manufacturers
ii the burden of huge capital investments that may not guarantee any financial return in
the future
iii intense rivalry in the industry as all car manufacturers shift towards more
environmentally friendly production methods.
Mark as a 2 + 2.


6 a The term exchange rate refers to the price of one currency measured in terms of other
currencies, for example £1 = US$1.35.
b US$1 = €0.92 so, at a ratio or exchange rate of 1:0.92, 70 = 64.4. Therefore, the price of
the textbook is €64.40.
Award 1 mark for the correct answer, and a further 1 mark for showing appropriate
working out.
c £1 = HK$10.5, so 7,000 ÷ 10.5 = 666.67. Therefore, the price of the iPad is £666.67.
Award 1 mark for the correct answer, and a further 1 mark for showing appropriate
working out.
d The likely effects of a currency appreciation include an explanation of the following:
• Domestic customers are more likely to buy imported products as their domestic
currency is worth more on the foreign exchange market.
• Domestic MNCs are likely to sell fewer exports as foreign buyers need more of their
domestic currency to pay for the imported products of the MNC.
• This will tend to cause more money to flow out of the economy than the money
coming into the country, which is detrimental to domestic businesses in the long
term.
Accept any other relevant response that is clearly explained, such as consideration of the
magnitude of the currency appreciation or consideration of non-price determinants of
demand for the MNC’s exports (such as product quality).
Award 1–2 marks for a brief answer that shows limited understanding of the demands of
the question.
Award 3–4 marks for an answer that shows good understanding of the demands of the
question. There is effective use of appropriate terminology throughout the response.

4 Boston Consulting Group (BCG) matrix

1 a The Boston Consulting Group (BCG) matrix is a management tool used to examine the
product portfolio of a business. It does this by analysing the sales and/or market share
for each product in the organization’s portfolio and determining whether there is high or
low market growth in the market.
b
Award 1 mark for each correct label, up to the maximum of 4 marks.

2 a Cash cows are products that have a high market share but are selling in a slow-growing
market, leaving little room for further expansion. The product may be the market leader
in a mature market.
Award 2 marks for a clear and accurate definition.
b Dogs are products that have a low market share and are selling in a slow-growing
market. Typically, a business is likely to get rid of these products unless it thinks it can
improve sales revenues through product-extension strategies.
c Stars are products that have a large share of a market that is growing rapidly. Such
products have huge potential for a business but can be expensive to support as they may
need further investments in terms of marketing.
d Question marks are products that have a small market share in a fast-growing market.
These products may go on to be highly successful but, equally, they may fail. Question
marks are so called because their future is uncertain.
3 Possible answers could include the following:

a Question marks:
i They have low market share.
ii They have high market growth.
iii They are not well established but exist in growing markets.
iv They require cash to develop and promote.
v Businesses may choose to invest in them to help promote and distribute them to a
larger market.
vi They may provide significant income in the future.
b Stars:
i They have high market share.
ii They have high market growth.
iii They may be cash neutral.
iv They are doing well, in terms of sales revenues, in fast-growing markets.
v They may need further investment to support them and maintain or increase their
market share (these funds are likely to come from the firm’s cash cows).
c Cash cows:
i They have high market share.
ii They have low market growth.
iii They are well established and generate revenues but may not need heavy investment
to promote.
iv Businesses may use the earnings from them to generate finance to fund other
products.
d Dogs:
i They have low market share.
ii They have low market growth.
iii They are unlikely to generate much cash.
iv Businesses may need to revive these dogs (product extension strategies) or stop
producing them.
For each answer, mark as a 1 + 1.
Award 1 mark for stating an appropriate characteristic.
4 a Question marks = products A and C.
Award 1 mark for each correct answer, up to 2 marks.
b Star = product D.
c Cash cow = product E.
d Dogs = products B and F.

Award 1 mark for each correct answer, up to 2 marks.
5 a Possible interrelated answers could include an explanation of the following:
• It could be useful for a business trying to manage a diverse range of products in its
portfolio. It is a tool for devising and implementing effective product portfolio
management.
• Product portfolio management can be used to maximize the profitability of an
organization’s product range and product mix. For example, it helps to provide
balance in a firm’s product portfolio as different products go through their life cycles
at different paces.
• It can help improve financial planning and financial management at the business. For
example, an organization that has too many dogs in its product portfolio will
experience cash flow problems.
Accept any other relevant use that is fully explained.
of the question.
response.
b The explanation should refer to the four quadrants in the BCG matrix and their stages in
the typical product life cycle:
• Question marks = launch
• Stars = growth
• Cash cows = maturity
• Dogs = decline
of the question.
response.

5 Business plan

1 a A business plan is an official written document that sets out key aspects of a business
idea and how it will be developed.
b A business plan will typically include a combination of:
• an outline of the owners, their backgrounds and business experience
• an overview of the business idea and its product portfolio
• a situational analysis of market conditions and the positioning of the business, along
with its products within the market
• an outline of how the business and/or its product is to be promoted
• an estimate of the sales of the business (sales forecasting)
• a financial section that is likely to include a cash-flow forecast, a profit forecast and
a statement of what the business owns and owes
• details of the human resource requirements of the business.
Accept any other suitable component or element of a typical business plan.
Mark as a 1 + 1.
Award 1 mark for each suitable element that may appear in a typical business plan, up to
the maximum of 2 marks.
c Possible interrelated reasons could include the following:
• A business plan is often produced by entrepreneurs when setting up a business to try
to anticipate likely and potential problems and opportunities, and to put in place
appropriate actions to address them.
• As a business-management planning tool, a business plan helps managers and
decision makers to think logically, objectively and holistically about the issues that
are likely to impact on the firm’s activities.
• A business plan sets the strategic direction for the organization and its key internal
stakeholder groups, such as employees and managers.
• Business plans are often used in an attempt to secure external sources of finance
from commercial banks and other lenders, as well as potential investors.
Accept any other reason why a business might choose to use business plans that is
clearly explained.
Mark as a 2 + 2.
For each reason, award 1 mark for stating the reason and 1 mark for the explanation.
2 a In order to create a business plan, it is important for managers and decision makers to
know the current situation facing the organization. SWOT analysis requires business
owners and executives to consider the strengths and weaknesses of the business, as well
as the expected opportunities and threats (such as the competition), in the context of the
business idea or business proposal. For example, there is a need to consider what

resources are available to the business in order to set and pursue its goals. Hence,

SWOT analysis as a situational analysis tool has to happen as part of the business plan.
of the question.
response.
b Possible responses include an explanation of the following:
• A budget is a financial statement (quantitative plan) of a business, prepared for a
specific period of time.
• A budget enables managers and decision makers to monitor the operations and
financial performance of the business.
• Including a financial budget for each functional area (such as marketing, production,
human resource management and research and development) within a business plan
assists with cost control.
• If the business is seeking external sources of finance, lenders will look at the budget
within the business plan to assess whether the business has the ability to make
regular interest payments on the amount loaned.
• Essentially, it is not possible to implement the business idea or proposition without
sufficient finance and budgeting.
Accept any other explanation of the relationship between a budget and a business plan
that is clearly explained.
of the question.
response.
3 a Possible responses could include:
• a lack of sufficient finance
• cash flow (liquidity) problems
• marketing problems, such as brand awareness and brand recognition
• a small or insignificant customer base
• legal barriers and problems, which are further complicated by a lack of knowledge of
the new business owner
• managerial inexperience
• external influences that could make the new business vulnerable.
Accept any other problem that new businesses might face that can be identified in a
typical business plan.
Mark as a 2 + 2.
For each problem, award 1 mark for stating the problem and 1 mark for the explanation.

b Possible reasons could include the following:

• Sufficient sources of finance are necessary for any business idea or venture to
succeed, especially in highly competitive markets. Including financial information in
a business plan is essential to raising finance from external providers, such as
commercial banks, business angels and venture capitalists.
• Identifying potential problems can help managers and decision makers to plan ahead
and minimize risks, such as anticipating and dealing with cash flow (liquidity)
problems.
• Financial information provides a clear (financial) focus on the business idea or
proposition. While many business ideas might seem good, business owners and
executives need to be able to determine whether any of these are actually financially
feasible.
• Without an effective business plan, it can be difficult for the organization to secure
suitable and sufficient sources of finance.
• As a business planning tool, it can help to test the financial viability of the business
proposition or idea, such as whether the business can achieve the level of
profitability required by its owners.
Accept any other reason why a new business should include financial information in its
business plan.
of the question.
response.
4 a A detailed and comprehensive business plan allows entrepreneurs to make objective and
informed decisions about their business, thereby minimizing the risks involved in
running the organization.
Award 2 marks for a succinct explanation, similar to the example above.
b A commercial bank would be interested in an organization’s business plan before
deciding whether to lend the business any money. The business plan will enable bank
managers to determine whether a business would be able to pay back a loan or mortgage.
c Potential investors, such as shareholders, business angels or venture capitalists, would
want to see a business plan to make sure their investment is safe and to assess the
potential for a financial return on their investment.

5 a A marketing plan is a formal document that outlines an organization’s marketing goals

and strategies. It is part of an overall business plan covering aspects of the marketing
function, such as market research, target markets, the marketing mix and marketing
strategies.
b The marketing mix refers to the management process responsible for identifying,
anticipating and satisfying customer needs and wants in a profitable way. It comprises
the 7Ps: product, price, promotion, place, people, processes and physical environment.
c Possible benefits of including a marketing plan are as follows:
• A marketing plan provides a framework for the introduction of new products to the
market. This is particularly important for new businesses.
• Creating a marketing plan requires marketing managers to consider appropriate
marketing strategies, covering all key elements of the marketing mix (product, price,
promotion and place).
• Creating a marketing plan prompts marketing managers to construct and consider
marketing budgets, which is particularly important for new businesses that have
limited sources of finance.
• Including a marketing plan encourages entrepreneurs and decision makers to develop
marketing objectives and marketing goals in order to appeal to potential customers
and target markets.
• Including a marketing plan helps to keep key stakeholder groups informed about the
organization’s marketing.
Accept any other relevant benefit of a marketing plan that is clearly explained.
Mark as a 2 + 2.
Award 1 mark for each benefit identified and 1 mark for the explanation.

6 Decision trees

1 a A decision tree is a visual business management tool that can be used by managers and
decision makers to help them make the right decision. It enables them to analyse and
make estimates about the possible outcomes of different courses of action and work out
the likelihood of these outcomes occurring, based on a quantitative understanding of
risks.
b
• Success = 0.65 × US$500,000 = US$325,000
• Failure = 0.35 × US$50,000 = US$17,500
• Expected outcome = US$325,000 + US$17,500 = US$342,500
• Net expected value = US$342,500 − US$250,000 = US$92,500
Award 1 mark for the correct answer and 1 mark for showing appropriate working out.
c An advantage of decision trees as a decision-making tool is that they consider
quantitative aspects of a key decision, thereby making such a decision more logical,
objective and rational.
Accept any other relevant advantage of decision trees.
Award 1 mark for a correct advantage and 1 mark for the explanation.
2 a Option one:
• Expected value = (US$120,000 × 0.7) + (US$40,000 × 0.3) = US$96,000
• Net gain = US$96,000 − US$80,000 = US$16,000
Option two:
• Expected value = (US$90,000 × 0.8) + (US$60,000 × 0.2) = US$84,000
• Net gain = US$84,000 − US$60,000 = US$24,000
Mark as a 2 + 2.
For each option, award 1 mark for the expected value and 1 mark for the correct net gain.
b Based on the data (calculations); Ed Jaen should pursue option two (upgrading entire
machinery at existing site). This is because the expected net gain of option two
(US$24,000) is US$8,000 more than the expected net gain for option one (US$16,000);
option two has an expected net gain that is 50% higher than option one.
Apply the own-figure rule (error carried forward) as appropriate.
Award 1 mark for the correct option and 1 mark for the brief reason (outline).
c Possible answers include the following:
• They enable managers and business owners like Ed Jaen to assess the risks
associated with pursuing certain decisions.
• They provide a quick and visual interpretation of the likely outcomes of decisions
that need to be made.
• They set out decision-making problems in a clear and logical manner.

• They consider the financial costs of investment decisions.
• They encourage managers to make decisions based on logic and rationality rather
than emotions.
• They help managers to realize some of the difficulties or attractions of different
options that they might not have considered.
Mark as a 2 + 2.
For each advantage, award 1 mark for stating the advantage and 1 mark for the
explanation.
d Possible answers include the following:
• The probabilities are only estimates, so the outcomes are somewhat uncertain.
• The value of the tool depends on managers’ ability to accurately estimate the options
and their likelihood.
• The weights assigned to the probabilities can be biased to sway certain decisions or
the preferences of managers.
• As a quantitative tool, decision trees ignore intuitive and qualitative factors that
affect decision-making, such as social factors and legal constraints.
Mark as a 2 + 2.
For each disadvantage, award 1 mark for stating the disadvantage and 1 mark for the
explanation.
3 a
Working out the expected values:

• There is an estimated 60% chance of success if the new campaign is chosen, which
is expected to gain the firm US$130m in sales revenue. Hence, the likely outcome is
US$130m × 0.6 = US$78m.

• There is a 40% chance of failure for the new advertising campaign, with expected

revenues of only US$75m. Hence, the probable outcome is US$75m × 0.4 =
US$30m.
• Therefore, the combined outcome for the new advertising campaign is US$78m +
US$30m = US$108m. After the costs of the project are accounted for, the likely
yield (return) of this is US$108m − US$80m = US$28m.
• If the firm sticks with the current campaign, there is an 80% chance of success of
earning US$80m. Hence, the likely outcome is US$80m × 0.8 = US$64m.
• There is a 20% chance that the current campaign will fail, earning just US$35m for
the firm. The probable outcome is therefore US$35m × 0.2 = US$7m.
• Hence, the combined likely outcome of the current campaign is US$64m + US$7m
− US$30m = US$41m.
Award 1–2 marks if there is some evidence of a general knowledge of decision trees but
it is not accurately constructed. The calculations of each option are not all presented or
are inaccurate.
Award 3–4 marks if the main elements of the decision tree are constructed but may not
be entirely accurate or the working may not be shown. For 4 marks, the calculations for
each option are largely correct and presented clearly.
Award 5–6 marks if the decision tree is accurately constructed. The calculations of each
option are correct and well presented, with appropriate working out shown. For 6 marks,
an appropriate key is provided.
b The outcomes of the decision tree suggest that the current advertising campaign should
be pursued. Despite the lower absolute financial returns of doing so, there is a larger risk
of failure should VSRC choose to use a new advertising campaign. Essentially, the lower
cost investment (US$30m vs US$80m) yields a higher probable return (US$41m vs
US$28m).
Award 1 mark for an answer that shows some understanding of the demands of the
question but without clear application of the data in the decision tree.
Award 2 marks for an answer that shows clear understanding of the demands of the
question with relevant use of the data in the decision tree.

4 a

are inaccurate.
b The outcomes of the decision tree suggest that Ahmedabad is the best location to expand
to, based on financial (quantitative) grounds. Despite the relatively high cost compared
to Bengaluru, there is a smaller chance of success should Tilak KC Co. choose to expand
there. While Chennai has the highest chance of success (65%), the higher investment
cost (US$100m) and lower absolute return (US$190m), mean that Ahmedabad is the best
option, financially. Essentially, the lower cost investment (US$95m vs US$100m) yields
a higher probable return (US$71m vs US$55m).
question, with relevant use of the data in the decision tree.

5 a

are inaccurate.
b Findings shown in the decision tree suggest that MHB should pursue option two, namely
building a new factory to improve its productive capacity. Despite being the most
expensive option, the potential return (US$8m) is the highest of the three options, should
the economy improve. Similarly, even if the economy sees no change or improvement,
the expected return from option two is still the highest (US$5m) of the three options.
question, with relevant use of the data in the decision tree.

6 a

Award 1–2 marks for an incomplete answer that shows some understanding of the
demands of the question or an answer that contains two or more errors. Apply to own
figure rule as appropriate.
Award 3–4 marks for a complete answer that shows good understanding of the demands
of the question. For 3 marks, allow up to one error or omission, with the own figure rule
applied as appropriate. For full marks, the undesired branch (option) must be clearly
identified.
b Possible reasons for option one could include an explanation of the following:
• Option one is in line with the organization’s mission statement (the pursuit of
growth), whereas Option two does not necessarily enable growth as Gözde Torun
Florists would remain a single-store business.
• Option one still yields an estimated gain of $100,000, whereas option three (not
doing anything) means the business cannot grow. Even with option two, refurbishing
the store does not guarantee success (the 75% probability of success might prove to
have been too optimistic and unrealistic).
Accept any other relevant qualitative or quantitative reason that is explained clearly.
Mark as a 2 + 2.
For each advantage, award 1 mark for a plausible answer and 1 mark for the explanation.
c Possible reasons for option two could include an explanation of the following:
• The existing store may be in need of refurbishment, given it has been over five years
since the business started. As part of the marketing mix, the physical environment is
important for Gözde Torun Florists as a service provider, making the store more
appealing to its customers.
• Option two is far cheaper than option one, yet the expected value is 32.5% higher
($132,500 for option two versus $100,000 for option one).
• Opening another store nearby (option one) could mean both stores compete for the
same customers.

Accept any other relevant qualitative or quantitative reason that is explained clearly.

Mark as a 2 + 2.
For each advantage, award 1 mark for a plausible answer and 1 mark for the explanation.
7 a TTL is an integrated approach to promotion, where an organization uses both ATL and
BTL methods of promotion. In theory, this helps the business to gain from the best of
both worlds in order to maximise the effectiveness of its promotional activities and
expenditure.
b
Based on the above calculations, Kinny Baloo Corp. should pursue option one (ATL
promotion) as this yields the greatest estimated monetary value of $245,000.
Award 1–2 marks if there is some evidence of a general knowledge of decision trees, but
are inaccurate.

7 Descriptive statistics

1 a The mean (or arithmetic mean) is the most common form of expressing an average, by
calculating the sum of all numbers in the data set divided by the total number of items
in the data set.
b 5,000 units (the most recurring number in the data set)
c (5,000 + 6,000 + 5,000 + 5,000 + 4,000 + 3,500) = 28,500 / 6 = 4,750 units
d Median = (3,500 4,000 5,000 5,000 5,000 6,000) = 10,000 / 2 = 5,000 units
2 a
Award up to 2 marks for the axes labels and a further 2 marks for the accurate
construction of the bar chart with reference to the data.
b Bar charts are used to show data that are independent of one another, such as a
supermarket’s sales revenue per store or region, or the profit per product.
Award 2 marks for a clear and accurate description, similar to the example above.

c

Maximum price Frequency (number Total
(US$) of customers)
5.00 10 50.0
4.50 15 67.5
4.00 20 80.0
3.50 25 87.5
3.00 30 90.0
100 375
Average price = 375 / 100 = US$3.75

Award 1 mark for the correct answer and up to an additional 2 marks for showing all
appropriate working out.
d The relative size of the bars in a chart is clear so this visual tool can help with the
strategic analysis. However, as with all data, the context behind what is presented in a
bar chart should also be considered, and that context is not shown in a bar chart.
Mark as a 1 + 1.
Award 1 mark for an advantage that is clearly outlined and 1 mark for a disadvantage
that is clearly outlined.
3 a A pie chart is a visual tool used to show how a whole is divided into different elements,
such as showing the total sales of a business divided by region within the overall sales.
b

Award 1–2 marks for a response that shows some understanding of the demands of the

question. The pie chart contains some errors and/or omissions.
Award 3–4 marks for a response that shows good understanding of the demands of the
question. The pie chart is constructed accurately, with each segment correctly drawn and
correctly labelled. For 3 marks, allow one error or omission.
c Possible limitations of using a pie chart, such as the one in the answer above, include the
following:
• There is no real context in the data because the toys have not been clearly identified
but are labelled numerically.
• The data do not reveal the prices of the various toys, so while toy 4 is the least best-
selling product this does not necessarily mean that toy 1 earns the most sales
revenue.
• There is no information about the life cycles of the five different products, nor is
there any indication of sales forecasts, so it is not possible to determine whether
these figures are satisfactory or unacceptable.
Accept any other reasonable limitation that is clearly outlined.
Mark as a 2 + 2.
explanation.
4 a Infographics are visual representations of data, shown as a combination of texts, charts,
graphs or images that convey information in an easy-to-understand manner.
b The infographic enables managers and decision makers to see the countries that are not
on track to meet the vaccination target by the end of 2021, such as most African
countries, Guatemala, Syria, Iraq and Yemen. This would tend to reduce business
confidence, which could negatively affect investment and expansion decisions in these
countries.
Note: It is not necessary for students to refer to specific countries in the infographic.
Award 1 mark for a limited response that shows some understanding of the demands of
the question.
Award 2 marks for a succinct response that shows a clear understanding of the demands
of the question, similar to the example above.
c Infographics can display data and information in an engaging way which can help to
make a point effectively and in a striking manner. This can inform decisions. However, a
key limitation of infographics is that they are often open to interpretation, as images,
graphs and charts do not always reveal the whole picture, nor do they necessarily include
any context.
Accept any other benefits or limitations of using infographics to represent information.
Mark as a 2 + 2.
For each point (benefit or limitation), award 1 mark for stating the point and 1 mark for
the explanation.
5 a Quartiles divide the data collected (such as sales revenue over a given period of time)

into four parts in order to aid statistical analysis and decision-making. Using quartiles
enables a business to see the distribution of data, such as the ranking of salespeople
based on the value of the sales revenue they account for.
Award 2 marks for a clear and accurate answer, similar to the example above.
b The interquartile range is used to show the spread of data in a data set. It measures the
difference between the first and third quartiles, thereby showing the middle spread of
the data. Outliers (extreme values that are high or low and hence can distort the mean
average) do not affect this result.
Award 2 marks for a clear and accurate explanation, similar to the example above.
c The standard deviation is a statistical measure of how spread out numbers are within a
data set. It shows whether there is a small or large spread of results in the first instance.
d To calculate the standard deviation (σ):
• Work out the mean – in this case, it is the sum of the sales of all 5 products
(US$150,000) divided by the number of products (5). So, the mean is US$150,000 /
5 = US$30,000.
• Calculate the deviations of each data point from the arithmetic mean. For example,
the deviation for product A is US$25,000 − US$30,000 = −US$5,000.
• For each data point, square the difference from the mean. For example, for product
A, this is −52 = US$25,000.
• Finally, find the square root of the average of the squared differences to determine
the standard deviation. In this case, σ = √400 = 20.
Difference from Squared
Product Sales (US$k) Mean
mean difference
A 25 30 −5 25
B 35 30 5 25
C 20 30 −10 100
D 25 30 −5 25
E 45 30 15 225
Total 150 400
Standard
Mean 30 20.0
deviation (σ)
question, although there are several errors and/or omissions.


question. The calculation of the standard deviation is carried out accurately, with
appropriate working out shown. For 3 marks, allow one error or omission.
6 a 8,443 8,892 8,937 9,245 9,365
Median = 8,937 candidates
Award 1 mark for the correct answer. There is no need to show any working out (this has
been included above for illustrative purposes only).
b i Business management = (25,692 + 24,196 + 21,687 + 20,277 + 18,636) / 5 = 110,488 /
5 = 22,098 candidates.
ii Economics = (25,955 + 25,831 + 25,569 + 25,147 + 24,235) / 5 = 126,737 / 5 = 25,347
candidates.
Award 1 mark for each correct answer, up to 2 marks, plus a further 1 mark for showing
appropriate working out. For 3 marks in total.
c
Award students who round figures (there is no expectation to show these figures to 2
d.p.).
Award 1 mark for each of the following: accurately constructed pie chart, key (legend),
and suitable title, up to the maximum of 3 marks.
7 a 3,000 × 0.25 = 750 cappuccinos
Award 1 mark for the correct answer, plus a further 1 mark for showing appropriate
working out.
b Percentage of customers who did not purchase a cappuccino last week = 1 − 0.25 = 0.75
3,000 × 0.75 = 2,250 cappuccinos.
Alternatively, customers who bought a cappuccino last week = 750. Hence, 3,000 − 750
= 2,250 customers who did not purchase a cappuccino last week.
working out.
c 3,000 × 0.4 = 1,200 drinks sold last week
1,200 × 3.75 = US$4,500 from the sale of Americano coffee drinks last week.


working out.
d While the pie chart allows us to calculate the volume of sales, it does not reveal anything
about the selling price of each drink, nor does it show anything about the unit cost of
each product. Profit is the positive difference between a firm’s total revenue and its total
costs, so, to determine which drink is the most profitable, it is necessarily to calculate the
unit contribution (not given in a pie chart) rather than just the sales volume (which can
be inferred from the pie chart).
Furthermore, to determine profitability, it may be necessary for the business to allocate
fixed costs (if the business opts to use contribution pricing or absorption costing). After
all, profit cannot be declared until both fixed costs and variable costs are covered.
Award 1–2 marks for an answer that shows some understanding of the demands of the
question, although the explanation lacks depth.
question. The explanation is thorough, and there is appropriate and effective use of
terminology throughout the response.

8 Circular business models

1 a Traditional business models have been concerned only about the financial costs of
resource use and whether profit can be generated on the products sold by businesses.
There is little, if any, consideration of what happens to these products once they have
been bought by customers, and how the goods and packaging are disposed of.
By contrast, circular business models place emphasis on the environmental impact of
business activities. For example, there is greater awareness and concern about carbon
emissions, the unsustainable use of fossil fuels and a disposable society in which goods
are replaced well before the end of their expected life cycle.
of the question.
response.
b A disposable society is one in which consumers change (replace or upgrade) products,
such as smartphones and clothing items, simply because they are bored with them rather
than because they actually need to change them.
c Possible answers could include:
• doing less damage to the environment, therefore acting in a socially responsible way,
which can have implicit and explicit benefits for the business
• using fewer resources, which enables the business to cut production costs
• meeting the needs and wants of a broader customer base, in a more effective way,
because of the firm’s environmentally friendly behaviour
• attracting better staff as more people/employees are concerned about the
environmental stance of the businesses they work for
• attracting investors who are looking to support businesses that care about the natural
environment and ecosystems
• avoiding negative media coverage or media criticism
• gaining a competitive advantage over other businesses that do not adopt a more
circular approach
• the use of environmentally friendly resources in order to protect the planet and its
people.
Accept any other advantage that is clearly explained.
Mark as a 2 + 2.
explanation.

2 a The central purpose of organizations developing a circular business model is to allow

them to reduce, reuse and recycle waste inputs and outputs from business activity. This
helps to ensure the sustainability of business operations by preserving rather than
depleting non-renewable extracted resources.
Award 2 marks for a clear and accurate outline, similar to the example above.
b A circular supply model is a type of circular business model that focuses on replacing
scarce natural resources with renewable, recyclable and/or biodegradable resource
inputs in a sustainable way.
3 a A resource recovery model is a circular business model that aims to reuse (or “recover”)
resource outputs, and reprocesses waste materials into new and usable resources.
b Possible benefits could include an explanation of:
• safeguarding the planet’s scarce and natural resources
• reducing the risks to people and the planet (including nature and ecosystems), of
resource depletion
• preventing landfill space from running out due to excess waste disposal and
accumulation
• cutting pollution caused to the land, air and waters.
Accept any other benefit that is clearly explained.
Mark as a 2 + 2.
c A product life extension model is a type of circular business model that focuses on
extending the life of products in order to reduce the need to use more resources to
produce new output. Materials that otherwise would be wasted or thrown away are
maintained or even improved, thereby reducing the need for a disposable society based
on traditional business models.
Award 2 marks for a clear and accurate outline, similar to the example above.
d Possible benefits could include an explanation of the following:
• By extending the lifespan of the product for as long as possible, businesses prevent
products being thrown away so there is less waste in the economy and less pressure
on scarce landfill sites.
• Designing products that can easily be repaired or upgraded reduces the need to
replace products, lessening the need to use scarce non-renewable resources.

• A product life extension model reduces the rate of resource extraction and waste

generation.
• As with other circular business models, adopting a product life extension model
helps to reduce production costs, waste, greenhouse gas emissions and the need for
raw material inputs.
Accept any other relevant benefit that is clearly explained.
Mark as a 2 + 2.
4 a A sharing model is a circular business model that focuses on offering services where
people share products rather than own them for themselves.
b Airbnb uses a sharing circular business model that relies on customers sharing existing
properties rather than new private accommodation, hotels and resorts (that would need to
be built). This enables properties and accommodation to be used more fully, thereby
making better use of the planet’s limited resources.
the question.
Award 2 marks for a clear and accurate explanation that shows good understanding of
the demands of the question, similar to the example above.
5 a A product service system model is a form of circular business model that allows
customers to lease or rent products rather than buy them outright. The business keeps
ownership and rents out the asset to other customers, thereby keeping the product in use
for longer.
b Possible limitations could include an explanation of the following:
• The traditional non-circular business model (produce, sell, use and throw away) can
be significantly cheaper for a business than adopting a circular business model.
• Despite the growing interest in corporate social responsibility (CSR),
implementation of a circular business model such as the recycling and reuse of
resources can be expensive for businesses, especially in the transition and set-up
stages.
• Adopting new business models is time-consuming, including time for market
research, product design, product development, testing and implementing the
necessary changes.
• Stakeholders do not all have the same concerns and priorities, nor do they always
want the same thing or have the same values. Sustainability may not be their main
concern or priority. For example, customers may regard price as the key concern.
For many investors, short-term profits may be more important than long-term
sustainable business practices.

Accept any other limitation that is clearly explained.

Mark as a 2 + 2.
explanation.

9 Gantt charts (HL only)

1 a A Gantt chart provides a visual representation of the timeline for all the tasks involved
in a project. It highlights what has to be completed, when and in what order.
Award 1 mark for a vague definition that shows some understanding.
Award 2 marks for a clear and accurate definition that shows good understanding,
similar to the example above.
b The following can be identified in a Gantt chart:
• the start and finish dates of the project
• all of the tasks that are part of the project
• the start and finish dates of each task
• how long each task takes to complete
• the tasks within the project that can be undertaken simultaneously.
Mark as a 1 + 1.
Award 1 mark for each valid point that is clearly stated.
c Possible advantages could include an explanation of any two of the following:
• They allow managers and decision makers to assign and distribute resources
appropriately for a particular project.
• They enable managers and decision makers to identify the shortest amount of time
needed to complete a particular project.
• They assist project managers in completing a project in the quickest time possible,
thereby minimizing production costs.
• They allow project managers to monitor progress and, if a task falls behind schedule,
take appropriate action to get the project back on track.
• They can include the name of the manager responsible for each activity, thereby
holding a specific person and team accountable. This helps people to focus on their
designated areas and incentivizes the teams to get their tasks completed on time.
Accept any other valid advantage of using Gantt charts.
Mark as a 2 + 2.
explanation.
2 a Possible features include the following:
• Each bar in a Gantt chart shows the planned start date, duration and end date of an
activity.
• The length of each bar in the Gantt chart shows the duration of the task.
• Directional arrows are used to link activities that depend on each other within the
project in order for the project to complete on time.
Accept any other valid feature of Gantt charts.
Mark as a 1 + 1.
Award 1 mark for stating a relevant feature.

b Possible limitations could include an explanation of any two of the following points:
• A traditional or simple Gantt chart does not show which activities are dependent on
each other. It is not immediately obvious, looking at horizontal bars, which tasks are
dependencies.
• It can be difficult to include and see everything for large and complex projects,
especially on a single sheet of A4 paper.
• Gantt charts are static, so to be of value they need to be continually updated. As a
project progresses, things are likely to change, so the Gantt chart needs to be
changed and updated frequently.
• If the project is unfamiliar, the Gantt chart is likely to have incomplete elements and
therefore inaccurate outcomes, especially if the manager is inexperienced.
Accept any other valid limitation of using Gantt charts.
Mark as a 2 + 2.
explanation.
3 a
Award 1–2 marks for a Gantt chart that shows some understanding of scheduling,
although there are two or more errors.
Award 3–4 marks for a Gantt chart that shows a good level of understanding of
scheduling, including the correct unit of measurement (number of weeks to complete the
project). Award 3 marks if there is one error or omission in the Gantt chart.
b The Gantt chart shows that the renovations of the house can be completed within 10
weeks.
Note: Without the use of a Gantt chart, the duration of the individual tasks adds up to 14
weeks.
Award 1 mark for the correct answer (10 weeks).

4 a

Award 3–4 marks for a Gantt chart that shows a good understanding of scheduling,
including the correct unit of measurement (number of weeks to complete the publication
b It is unlikely, especially with large and complex projects, that everything will go to plan.
For example, there may be unexpected delays or challenges that arise. It is important
therefore that a Gantt chart is regularly updated, with managers monitoring and
controlling the progress of the project and adjusting the plan accordingly.

5 a

Award 3–4 marks for a Gantt chart that shows a good level of understanding of
scheduling, including the correct unit of measurement (number of days to complete the
b The Gantt chart shows that the project can be completed on the 12th day. Without using
this planning tool, the sum of all the individual activities is 23 days. Hence, the use of a
Gantt chart can save project managers 9 whole days.
Award 2 marks for a clear and accurate commentary, similar to the example above.

10 Porter’s generic strategies (HL only)

1 a Porter’s generic strategies are the different ways in which businesses can compete to
gain a competitive advantage. The generic strategies relate to the extent to which the
operations of a business are narrow or broad and the extent to which the business seeks
to differentiate its products.
b A competitive advantage is an edge or advantage that a business has over its competitors
that is gained by offering consumers greater added value. This can be achieved by
offering lower prices or by providing greater benefits and services that justify higher
prices, such as providing better-quality products.
2 a One of Porter’s generic strategies is cost leadership. A cost leadership strategy involves
a business becoming the lowest-cost organization in the industry, often by achieving
economies of scale, thereby giving it a competitive advantage by being able to charge
lower prices.
b Possible interrelated methods could include the following:
• Lower average costs (economies of scale) – a business may have cost advantages by
operating on a larger scale than its rivals. For example, the business may be able to
spread its fixed costs over more units of output, thereby reducing unit costs of
production.
• Lower input costs – a business might try to find a way of reducing the various costs
of its inputs (factors of production).
• Cost minimization – the business might choose to cut out all unnecessary costs,
thereby reducing its overall costs. For example, budget airlines choose to provide
only a basic service for customers who do not pre-book their seats, and do not
provide meals as part of the standard ticket price.
• Automation – the use of machinery, robots and automated equipment to reduce unit
costs of production in the long run. Capital equipment, such as conveyor belts, can
often be used for production 24 hours a day.
• Entrepreneurial and managerial experience – the greater the scope and scale of
experience that decision makers have in an organization, the lower the unit costs can
be. Highly experienced executives, managers and employees enable the business to
source cheaper materials and components, as well as to make more efficient (cost-
effective) decisions.
• Outsourcing – using a third-party specialist for part of the production process helps a
business to reduce its average costs of production.

Accept any other relevant method that a business might use as part of a cost leadership

strategy.
Mark as a 2 + 2.
For each method, award 1 mark for stating the method and 1 mark for the explanation.
c By being a cost leader, a business can charge relatively low prices in the market. The
prices can be similar to the prices of its competitors (called “cost leader with parity”),
allowing the business to earn higher returns as its costs are lower.
Alternatively, the business can reduce its prices to gain a price advantage, at the same
time as lowering its costs (called “cost leader with proximity”). This enables the business
to gain a competitive advantage by charging lower prices than its rivals, albeit at the
expense of lower profit margins.
of the question.
Award 3–4 marks for a clear and accurate distinction between cost leadership with
proximity and cost leadership with parity.
3 a Porter’s differentiation strategy occurs when a business provides some degree of

uniqueness to its products relative to those of its competitors. This difference must be
sufficiently valued by customers to gain a competitive advantage.
b
• It can offer better customer service than its rivals, such as free packing and/or
delivery services.
• It can specialize in the supply of certain products, such as cultural exports of food
items from a specific country or region of the world.
• The use of creative advertising and marketing campaigns to appeal to the mass
market.
• The use of the latest technologies to enhance the customer experience of shopping at
the supermarket chain, such as enhanced e-commerce options.
• Added-value services, such as complimentary parking facilities.
Accept any other relevant example of differentiation in the supermarket industry.
Mark as a 1 + 1.
Award 1 mark for each suitable example of differentiation.
c Possible advantages could include the following:
• Having a unique selling point (USP) (the quickest acceleration of any electric
vehicle in production) allows Tesla to charge premium prices for its vehicles.
• Successful differentiation enables Tesla to earn a higher profit margin because of the
perceived added value created by the company.
• The uniqueness of Tesla’s electric vehicles increases the level of customer
satisfaction and therefore improves loyalty to the company and brand.
Accept any other relevant advantage of a differentiation strategy for Tesla that is clearly

explained.
Mark as a 2 + 2.
Award 1 mark for each relevant advantage and 1 mark for the explanation.
4 a Porter highlighted that a low-cost (cost leadership) strategy or differentiation strategy

could be aimed at a small part of the market. This is called a focus strategy. He
suggested that a business can focus on a cost leadership strategy or differentiation
strategy aimed at customers in a narrow (niche) market.
b A local car repair business might choose to focus on narrow markets, such as
specializing in the repair of classic cars and/or high-end sports vehicles (differentiation
focus). Alternatively, it might choose to specialize in the provision of relatively cheap
car repair services, focusing on lower-income customers and accepting lower profit
margins. This would enable the business to gain a competitive advantage, rather than
having to compete with larger and well-established car repair companies such as Kwik
Fit in the UK or Midas International in the USA.
Award 1–2 marks for a limited response that shows some understanding.
Award 3–4 marks for a clear and accurate explanation, similar to the example above.
5 a Porter said that a business should avoid being “stuck in the middle” where it is not clear
either internally or to customers what the organization’s strategy actually is. Porter
argued that a business should focus on being low-cost or differentiated – it cannot
combine the two. At the same time, the business should operate in mass (broad) markets
or narrow (focused) markets, but not both.
Note: There is no need for students to draw a diagram showing Porter’s generic
strategies. Award the appropriate use of examples that might be used to clarify the
answer.
b Being “stuck in the middle” means the business is neither a cost leader nor a
differentiator and that it does not specialize in a narrow (focused) market or a broad
(mass) market. This creates confusion for both internal and external stakeholders of the
business, without any competitive advantages and with the inability to gain customer
loyalty.
6 a Cost leadership.
b Cost focus.

c Differentiation.

d Differentiation focus.

11 Hofstede's cultural dimensions (HL only)

1 a Hofstede’s cultural dimensions is a business management tool that measures different
aspects of national cultures (such as short-termism and individualism) and how cultures
may differ within the same organization as well as across the world.
b As a situational business management tool, Hofstede’s cultural dimensions is important
for managers to understand as it gives them insight into the cultural spectrum of their
employees. Understanding the various cultures enables managers to recognize what
motivates the workforce, how and why employees behave the way they do, what they
value and how they make decisions.
It is particularly important when people from different regions are working together
within the organization, or different parts of the business in different parts of the world
are working together. By contrast, culture clashes can occur if managers do not
understand cultural differences within and between organizations, so fail to plan and
adapt accordingly.
of the question.
response.
2 a Individualistic cultures are those that emphasize the needs of the individual over the
needs of the group as a whole. By contrast, collectivism emphasizes the importance of
the group and social cooperation rather than the needs of any individual in the group or
society as a whole.
the question.
Award 2 marks for a clear and accurate distinction between individualism and
collectivism.
b This aspect of Hofstede’s cultural dimensions considers the approach to time that people
in different parts of the world have. Short-termism refers to individuals who tend to plan
for only a few years ahead, whereas long-termism refers to people who plan many years
ahead. In the world of business, these different outlooks will impact on investment
decisions. Some managers may look three years ahead, while other managers are willing
to take longer-term decisions and risks.
the question.
Award 2 marks for a clear and accurate distinction between short-termism and long-
termism.
c According to Hofstede’s theory of cultural dimensions, masculinity includes traits that
focus on the self, work, being competitive, winning and material rewards. By
comparison, femininity refers to an approach that is more relationship-centred,
consultative, caring and involving, as well as focused on a work–life balance.


the question.
Award 2 marks for a clear and accurate distinction between masculinity and femininity.
3 a Power distance refers to the extent to which there is a clear sense of rank and status in
society. The greater the power distance, the more there is a hierarchy and the greater the
difference between, for example, senior executives and new employees. The degree of
power distance in an organization will directly impact the number of layers in an
organizational structure: the greater the power distance, the taller the organizational
structure. A high degree of power distance reflects a business and/or a society where
seniority matters.
of the question.
response.
b Possible responses could include the following:
• Differences in the power distance dimension of culture mean that people will think
and act in different ways. Such differences can cause culture clashes and make it
difficult for people from very dissimilar regions to work together effectively.
• A high degree of power distance can create a sense of alienation between senior
management and employees. Workers may feel isolated, disconnected and
unappreciated, especially if they have minimal, if any, influence on decision-making.
• While some people or societies are expected and allowed to challenge the views of
their superiors, in others they are simply expected to “do as they are told”. In the
latter type of society, people are not encouraged to challenge the ideas put forward
by their managers. Such differences in outlook can cause culture clashes within an
organization.
Accept any other reason that clearly explains why differences in power distance may
cause culture clashes.
of the question.
response.
4 a Uncertainty avoidance refers to the extent to which individuals in an organization or
society are comfortable with uncertainty. It refers to differences in expectations and
practice in terms of giving people precise guidelines as to what to do and when to do it.
In other societies, people are accustomed to broader outlines and do not need to be told
or shown how to do things.
b Employees who dislike uncertainty want specific instructions, guidelines and policies.
They prefer certainty and routines. By contrast, people who are comfortable with

uncertainty may find that having too many instructions about what to do can be too

restrictive and demotivating. They prefer to be told the goals and to be free to work out
how to achieve them independently.
the question.
Award 2 marks for a clear and accurate response that shows some understanding of the
demands of the question. There is effective use of appropriate terminology throughout
the answer.
5 a Corporate culture can be defined as the social norms, values and beliefs that shape how
people in the workplace behave and respond to different situations. The corporate
culture of an organization helps to determine how a business interacts with its various
stakeholder groups and the rest of society.
b Possible responses could include an explanation of:
• Culture clashes and misunderstandings may have left employees of Omnicom and
Publicis feeling isolated, unsupported and unsure about what the future held. Such
uncertainty may have derailed the merger, which could otherwise have been a
success (creating the world’s largest advertising agency).
• Understanding cultural dimensions across organizations, especially those operating
in different parts of the world, may help prevent the failure to realize significant
synergies from a proposed merger.
• Understanding cultural differences and dimensions has a significant impact on
whether a planned merger will succeed. The differences in leadership styles and
approaches to decision-making, as well as the ability and willingness to accept
change and adapt, have a direct impact on whether a planned merger will succeed.
Accept any other reason, explained in the context of the case study.
of the question.
response.
c Possible responses could include the following:
• Globalization has caused the corporate world to become more integrated and
interdependent. The trend towards hiring a workforce that is culturally diverse means
that managers and employees may not make decisions in the same way as described
by Hofstede. Numerous subcultures may therefore exist in organizations.
• What may seem to be a strength in one country (such as individualism or
collectivism) could be interpreted as a weakness in other countries.
• While Hofstede’s research was comprehensive, it is somewhat outdated. For
example, describing cultural dimensions as “masculine” or “feminine” may seem
sexist or offensive in today’s business world.

• There are many factors that influence culture, not just the factor of national identity

that Hofstede’s work and research focused on (although he was a social psychologist
rather than a corporate business manager).
Accept any other limitation of Hofstede’s cultural dimensions as a business management
tool that is clearly explained.
Mark as a 2 + 2.
Award 1 mark for each relevant limitation and 1 mark for the explanation.
d Possible responses could include an explanation of:
• Misunderstandings and miscommunications, which may have prevented the
successful merger of Omnicom and Publicis.
• Discontented staff, which results in lower morale and lower productivity.
• Compromises must be reached which prevents optimal decisions being made and
strategies being implemented.
• Resistance to change from the workforce, and possibly the management team.
• Costs of training staff to align differences in perceptions in order to successfully
implement the desired change.
Accept any other relevant consequence that is explained clearly.
Mark as a 2 + 2.
Award 1 mark for each relevant consequence and 1 mark for the explanation.

12 Force field analysis (HL only)

1 a Force field analysis (FFA) is a situational and business decision-making tool used to
examine the forces that drive change and the forces that resist change.
b In a FFA, driving forces are the factors or reasons in favour of change or a particular
choice, while restraining forces are the factors or reasons against the change or choice.
Award 2 marks for a clear and accurate answer, similar to the example above.
2 a Possible advantages of FFA as a framework for decision-making include the following:
• It provides a visual representation of the forces for and against change, which makes
it easier to interpret the various factors under consideration: what exactly is driving
the proposed change and what might be preventing it from happening.
• It can be useful for managers and entrepreneurs to clarify their own thinking about a
decision and to develop an appropriate plan to help bring the change about, if this is
the desired outcome.
• As a quantitative tool, it makes decision makers consider the relative strengths of the
driving and restraining forces.
• By attaching statistical weights to quantify the relative degrees of importance of each
driving and restraining force, FFA can help decision makers to make the overall
decision of what to do more objective.
Accept any other possible advantage of using FFA as a framework for decision-making.
Mark as a 2 + 2.
explanation.
b Possible limitations of FFA as a framework for decision-making include the following:
• It relies on managers and entrepreneurs correctly identifying all relevant driving and
restraining forces. Otherwise, the results are likely to be biased and misleading.
• The omission of a driving force and/or restraining force, deliberate or otherwise, that
turns out to be a significant force may lead to a wrong or suboptimal decision being
made.
• Potential bias of managers and entrepreneurs in the subjective allocation of statistical
weights to the restraining and driving forces can lead to misinformed and unreliable
outcomes.
Accept any other possible limitation of using FFA as a framework for decision-making.
Mark as a 2 + 2.
explanation.

3 a

question, although the FFA contains some errors and/or omissions.
question. The FFA is constructed accurately, with the decision under consideration
(whether to increase production capacity of the firm’s factory) placed in the middle of
the diagram. For 3 marks, allow one error or omission.
b The FFA suggests that the business should invest in increasing the production capacity
of its factory. This is because, based on the FFA, the sum of the driving forces (11)
outweighs the sum of the restraining forces (10). However, should another restraining
force be identified, it could change the decision of the business.
Award 2 marks for a clear and accurate commentary, similar to the example above.
4 a The steps for constructing an FFA include:
• establishing the change or decision to be made
• determining the driving forces that will help to achieve the goal and the restraining
forces that will work against achieving the goal
• assigning statistical weights to each force, where 1 = weak, 3 = medium and 5 =
strong
• adding up the numerical values for the driving forces and restraining forces
• devising strategies to reduce the restraining forces, as well as strategies to strengthen
the driving forces
• developing action plans to implement the decision, including any necessary updates
to the analysis.
Accept any other relevant step in the formation of an FFA.
Note: Do not accept answers that express restraining and driving forces as separate steps
in the process of constructing an FFA.

Award 1 mark for each relevant step, up to the maximum of 3 marks.

b Possible driving forces could include:
• raising more capital to fund the expansion of the business
• increased potential to grow the business
• greater economies of scale and cost savings in the long run.
Accept any other driving force that is clearly outlined.
Possible restraining forces could include:
• higher costs associated with being a public limited company
• increased administrative requirements, such as compliance with the reporting of
company accounts
• a reduced level of control due to the larger number of shareholders involved.
Accept any other restraining force that is clearly outlined.
question. The FFA contains some errors and/or omissions.
question. The FFA is constructed accurately, with the proposed change (converting to a
public limited company) placed in the middle of the diagram. For 3 marks, allow one
error or omission.
There must be three appropriate driving forces and three restraining forces included in
the diagram for full marks.
Note: The value of the statistical weights assigned by the student is immaterial (due to
the subjective nature of weights in an FFA) but must be included for full marks.
5 FFA is a situational and decision-making tool that provides an overview of the forces that
drive change in a business and the forces that oppose the change. FFA can help businesses
to decide whether they should go ahead with the change, such as allowing workers to
continue to work from home following the lifting of lockdowns caused by the COVID-19
pandemic.
FFA also enables managers to consider how to strengthen the driving forces (such as
“higher levels of employee happiness and labour productivity” as well as savings on office
costs for employers). At the same time, managers can also consider how best to tackle the
restraining forces (such as the lack of trust in remote employees to get their jobs done and
hence the need to micromanage their work).
Therefore, FFA can be used for informed and rational decision-making, particularly in
planning and implementing organizational change.
question but lacks detail and application of the stimulus material.
Award 3–4 marks for an accurate and comprehensive answer that shows good
understanding of the demands of the question. There is effective application of the
information in the case study and relevant use of business management terminology
throughout the answer.

13 Critical path analysis (HL only)

1 a Critical path analysis (CPA) is a visual tool used to represent all the activities involved
in a project, the order in which they must be undertaken and the time each task will
take.
Award 1 mark for an answer that shows partial understanding.
Award 2 marks if the definition is accurate and clear, similar to the example above.
b Possible advantages include the following:
• It helps managers and decision makers to allocate resources in the efficient and cost-
effective way needed to implement and complete a project.
• It identifies the critical path for a project, determining the shortest possible time
needed to complete the project, which cuts out waste and inefficiencies in the
production process.
• It can help managers to compare planned and actual progress in order to improve
operational efficiency.
Accept any other advantage of using CPA that is clearly explained.
Mark as a 2 + 2.
explanation.
c Possible limitations include the following:
• The reliability of CPA as a business management planning tool is largely based on
using accurate data to estimate the duration of the different tasks and the project as a
whole.
• CPA does not guarantee the success of a project or prevent delays from happening.
Hence, the project still needs to be monitored and managed properly.
• Some tasks and certain resources might not actually be as flexible as suggested by
managers in a CPA, so float times might not materialize.
• Including too many activities in a network analysis can be overcomplicated. With
large and complex projects, these activities might themselves have to be split into
smaller and separate projects.
Accept any other limitation of using critical path analysis that is clearly explained.
Mark as a 2 + 2.
explanation.
2 a A network diagram is a visual portrayal of the various activities of a project. It shows
how each task or activity relates to others in the project, the generation of each task and
the sequence of activities as part of the project management process.
Award 1 mark for an answer that shows partial understanding.
Award 2 marks if the definition is accurate and clear, similar to the example above.
b The critical path is A, B, C, E because there is no float time along this (critical) path for
this project.
Award 1 mark for identifying the correct critical path.

Award 1 mark for the brief explanation.
c The calculation should be as follows:
• In node 5 (activity D) the EST = 12 weeks while the LFT = 15 weeks.
• Hence, there is a float time of 15 − 12 = 3 weeks.
Award 1 mark for identifying the correct float time.
Award 1 mark for showing appropriate working out.
3 a Critical path = B, E, G
b Node 2 shows that task D can start on the third day at the earliest but must be completed
by the sixth day in order to be completed on time.
• The free float time for activity D = 8 − 2 − 3 = 3 days.
• The free float time for activity F = 8 − 2 − 4 = 2 days.
For each activity (D and F), award 1 mark for calculating the correct free float time.
Award a further 1 mark for showing appropriate working out.
4 a
Award 1–2 marks for including figures in the network diagram that show some
understanding of the demands of the question but there are errors and/or omissions.
Award 3–4 marks for including accurate figures in the network diagram that represent
the duration of the activities shown, including the correct EST and LFT for each node.
Allow up to one error for 3 marks. Apply the own figure rule (error carried forward) as
appropriate.
b Critical path = A, C, E, F, H, J
c The calculation should be as follows:
• Total float for activity D = 8 − 3 − 2 = 3 months

• Total float for activity I = 18 − 3 − 12 = 3 months

For each activity (D and I) award 1 mark for calculating the total float time.
d As activity G is not on the critical path, a delay of two months means that activity I can
still start on the 14th month and be completed by the 17th month at the earliest. Activity
J cannot start until the 18th month at the earliest. Hence a delay of two months should
not delay the overall project.
Award 1 mark for an answer that shows partial understanding of the demands of the
question.
5 a
• Activity E cannot start until both A (3) and B (4) have been completed.
• Hence, the EST for node 3 = 3 + 4 = week 7
• Activity H cannot start until both E (3) and F (4) have been completed.
• Hence, the EST for node 6 = 7 + 3 = week 10
Mark as a 1 + 1.
For each node, award 1 mark for calculating the correct EST.
b The calculation should be as follows:
• The LFT for node 2 = LFT node 3 − duration of activity B
• LFT for node 2 = 7 − 4 = week 3
• The LFT for node 5 = LFT node 7 − duration of activity G
• LFT for node 5 = 12 − 4 = week 8
Mark as a 1 + 1.
For each node, award 1 mark for calculating the correct LFT.
c Critical path = A, B, E, H


d The calculation should be as follows:
• Total float time for activity C = 6 − 2 − 3 = 1 week
• Total float time for activity D = 8 − 3 − 3 = 2 weeks
For each activity, award 1 mark for calculating the correct total float time.
e The calculation should be as follows:
• Free float time for activity F = 10 − 4 − 5 = 1 week
• Free float time for activity G = 12 − 4 − 6 = 2 weeks
For each activity, award 1 mark for calculating the correct free float time.
6 a The total float represents the amount of delay available on any activity that does not
delay the duration of the project as a whole.
Total float = LFT − duration – EST
Activity LFT Duration EST Total float
A 8 5 0 3
B 21 9 0 12
C 19 19 0 0
D 21 1 5 15
E 26 7 19 0
F 30 6 19 5
G 26 4 9 13
H 32 8 9 15
I 32 3 26 3
J 36 6 25 5
K 36 10 26 0
L 40 9 25 6
M 40 4 36 0
N 40 8 29 3

Deduct 1 mark for each error, applying the own figure rule as appropriate.

b The free float represents the amount of delay available on each activity that does not
delay the EST of the next activity.
Free Float = EST (next activity) − duration − EST (current activity)
Activity EST (at end) Duration EST (at start) Free float
A 5 5 0 0
B 9 9 0 0
C 19 19 0 0
D 9 1 5 3
E 26 7 19 0
F 25 6 19 0
G 26 4 9 13
H 29 8 9 12
I 29 3 26 0
J 36 6 25 5
K 36 10 26 0
L 40 9 25 6
M 40 4 36 0
N 40 8 29 3

7 a

b 35 days
Award 1 mark for the correct answer, which must include the number of days as the unit
of measurement (do not accept answers that state only “35”).
Apply the own figure rule as appropriate.
c Critical path = A, C, E, F, G
(Activities B and D are not on the critical path).
Award 1 mark for identifying the correct critical path, and 1 mark for showing this
accurately on the network diagram.
d Free float for each activity = EST at the end − EST at the start of the activity − duration
from the EST at the end
Total float for each activity = LFT − EST – duration

Activity Number of days
Duration EST LFT Free float Total float
A 4 0 4 0 0
B 6 4 13 0 3
C 7 4 11 0 0
D 8 10 21 3 3
E 10 11 21 0 0
F 9 21 30 0 0
G 5 30 35 0 0
Note that activities on the critical path do not have any float time.

14 Contribution (HL only)

1 a Contribution can be defined as the difference between the sales revenue of a product
and the variable costs of production.
b Break-even occurs when the in-house costs = outsourced costs for the business.
• US$250,000 + US$10Q = US$15Q
• US$250,000 = US$15Q − US$10Q
• US$250,000 = US$5Q
• 50,000 = Q
Award 1 mark for the correct answer (50,000 units) and a further 1 mark for showing
appropriate working out.
c The make or buy calculation suggests that it would be more cost-effective for Don Pak to
buy the component parts if demand for its product is less than 50,000 units, and that it
should make the component parts if demand exceeds 50,000 units.
Award 1 mark for a response that shows limited understanding of the demands of the
question.
2 a A make or buy decision refers to the technique of assessing whether to manufacture a
product in-house (make) or to purchase it from a third-party provider (buy). The
outcome of this quantitative decision-making tool is based on the assumption that
businesses aim to maximize the long-term financial outcome.
b
• CTM 2,500 water pumps = $20,000 + ($90 × 2,500) = $245,000
• CTB 2,500 water pumps = $110 × 2,500 = $275,000
Based on the sales forecast of selling 2,500 water pumps, the CTB < CTM. This means it
is more financially desirable for RPP to purchase the necessary capital equipment for in-
house production of the water pumps instead of buying them from the supplier. Based on
the sales forecast, RPP would save $30,000 by doing so.
Award 1 – 2 marks for an answer shows some understanding of the demands of the
question. There is one or more errors in the calculation and/or the working out is not
shown.
Award 3 – 4 marks for an answer shows good understanding of the demands of the
question. The calculations are correct, with appropriate working out shown to
demonstrate that the firm would save money by choosing to produce the water pumps in-
house.
c Possible factors could include an explanation of:

• costs of production versus the cost of purchase

• the degree of in-house expertise versus the expertise of an outsourced supplier
• whether the business has sufficient capacity
• the reputation of the supplier
• supplier contract (terms and conditions of using a third-party provider).
Accept any other factor that could affect a make or buy decision that is clearly explained.
Mark as a 2 + 2.
For each factor, award 1 mark for stating the factor and 1 mark for the explanation.
3 a Fixed costs, such as rent or interest repayments on bank loans, do not change with the
level of output. Variable costs, such as the costs of raw materials and component parts,
do change with the level of output.
question, although the distinction is not made explicitly clear.
question, with the distinction made clear. There is effective use of appropriate
terminology throughout the answer.
b Break-even quantity (BEQ) = total fixed costs / unit contribution
• Original BEQ = US$15,000 / (US$1.10 − US$0.60 − US$0.20) = US$15,000 /
US$0.30 = 50,000 units
• If the manufacturer uses a new supplier for the packaging, its packaging cost will
halve from US$0.20 per unit to US$0.10
• Hence, new BEQ = US$15,000 / (US$1.10 − US$0.60 − US$0.10) = US$15,000 /
US$0.40 = 37,500 units
• Therefore, the change in BEQ = 50,000 − 37,500 = 12,500 units
question. There are two or more errors in the calculations or the working out is not
shown.
question. The calculations are correct, with appropriate working out to show the change
in the firm’s break-even quantity.
c The make or buy analysis suggests that the manufacturer would reach break-even at
37,500 units instead of 50,000. This significantly reduces the break-even quantity and
therefore increases the firm’s margin of safety. Hence, based on financial grounds, it is
sensible for the manufacturer to switch suppliers.
Award 1 mark for a response that shows limited understanding of the demands of the
question.
Award 2 marks for a clear and accurate response that shows good understanding of the
demands of the question, similar to the example above.
4 a A cost centre refers to a part or division of a business as a whole, for which costs can be
allocated. The approach is used in large organizations because managers and
entrepreneurs need to know the costs of different products or departments.

b The completed table should look like this:
Product A Product B Product C Product D Total
Sales revenue 120 150 80 95 445
Direct costs 70 90 50 60 270
Contribution per product# 50 60 30 35 175
Indirect costs* 140
Profit^ 35
Hence, the overall profit for the business is US$35,000.

#
The contribution per product is the difference between the product’s sales revenue and
its direct costs.
*
The firm’s total indirect costs are US$140,000 but the contribution costing method does
not split or allocate this between the four cost centres.
^
The profit for the business is the difference between its contribution and the indirect (or
fixed) cost allocation.
question. There are two or more errors in the calculations.
question. The calculations are correct. Award 3 marks if there is one error or omission
from the answer.
Note: There is no need to show working out in this particular question.
5 a The completed table should look like this:
Profit centres Department A Department B Department C Total
Sales revenue 250 200 300 750
Direct costs 137.5 130 150 417.5
Contribution# 112.5 70 150 332.5
Allocation of fixed costs* 50 50 50 150
Profit per department^ 62.5 20 100 182.5
#
The contribution per product is the difference between the sales revenue of each
department and its direct costs.
*
The firm’s total indirect costs are $150,000, which is split equally between the three
profit centres (so the cost allocation is $50,000 per department).
^
The profit for each department is the difference between its contribution and the
allocation of indirect (or fixed) costs.
Apply the own figure rule (error carried forward) as necessary.


from the answer.
b The completed table should look like this:
Profit centres Department A Department B Department C Total
Sales revenue 250 200 300 750
Direct costs 137.5 130 150 417.5
Contribution# 112.5 70 150 332.5
Proportion of sales* 33.33% 26.67% 40.00% 100.00%
Allocation of fixed costs 50 40 60 150
Profit per department^ 62.5 30 90 182.5
#
The contribution per department is the same as previously.
*
The firm’s total indirect costs are US$150,000, which is split between the three profit
centres based on the proportion of sales from each department:
• Department A = 250 / 750 = 33.33% = 0.3333 × 150,000 = US$50,000
• Department B = 200 / 750 = 26.67% = 0.2667 × 150,000 = US$40,000
• Department C = 300 / 750 = 40.00% = 0.4 × 150,000 = US$60,000
^
The profit for each department is the difference between its contribution and the
allocation of indirect (or fixed) costs. Department C is the largest and accounts for 40%
of the firm’s overall sales, so a larger proportion of the fixed (indirect) costs are allocated
to this department.
Apply the own figure rule (error carried forward) as necessary.
from the answer.
c Absorption costing enables the business to see which departments are the most profitable
(product C in this case), those that are less profitable (product B in this case as it earns
US$30,000 on sales of US$200,000) and those that may be draining the firm’s cash.
Managers can use absorption costing analysis to help control costs and consider ways to
increase sales for each profit centre. For example, the direct costs for department C are
noticeably higher than those for department A and department B. Managers can then
investigate the cause of this to improve the profitability of the various profit centres.


question.
question. There is effective use of the data/calculations and appropriate use of relevant
terminology throughout the response.

15 Simple linear regression (HL only)

1 a Linear regression refers to statistical techniques used to map the relationship between
two variables, such as advertising expenditure and sales revenue.
b
There is likely to be a negative correlation (relationship) between the price of Nike sports
apparel and the demand for, or sales of, Adidas sports apparel. As the two brands are
regarded as substitute products, all things being equal, an increase in Nike’s prices will
tend to cause some of its customers to switch to buying the rival products from Adidas.
Mark as a 2 + 2.
Award up to 2 marks for an accurately drawn and fully labelled diagram, including the
accurate labelling of axes, which shows understanding of the demands of the question.
Award up to a further 2 marks for an accurate explanation of the diagram, with reference
to both businesses mentioned in the question (Nike and Adidas).
Accept diagrams that use the variables in reverse to the example diagram above.
2 a A scatter diagram shows the relationship between two variables by plotting the values of
one variable on the horizontal axis (x-axis) and the other variable on the vertical axis (y-
axis).

b

Award 1–2 marks for a diagram that shows some understanding of the demands of the
question but there are errors or omissions.
Award 3–4 marks for an accurate scatter diagram that represents the data in the table,
including the accurate labelling of axes. Allow up to one error or omission for 3 marks.
c The scatter diagram suggests there is a strong relationship between advertising spending
and sales revenue. The correlation is positive because advertising expenditure and sales
revenue move in the same direction. This suggests a strong correlation, or relationship,
between the two variables.
Award 2 marks for a clear and accurate comment, similar to the example above.

3 a

question. There are errors and omissions, which possibly include the inaccurate labelling
of the axes and/or the data points not being accurately plotted.
Award 3–4 marks for a diagram that shows good understanding of the demands of the
question. There are no errors or omissions. The labelling of the axes is accurate and all
the data points are accurately plotted.
b Award 1 mark for a line of best fit that is drawn accurately, similar to that shown above.
c A line of best fit is a statistical technique that involves drawing a line through the various
data points plotted on a scatter diagram that best expresses the relationship between the
variables being measured.
d The data and line of best fit suggest there is a strong correlation between the length of
teaching service at a school and the school’s average IB Diploma Programme exam
score. However, the correlation does not explain causation. Note that extrapolating the
trend would suggest that any school that can retain its teachers for an average of 14 years
will get 45 points in the Diploma Programme exam (which is highly unrealistic, of
course).
Other possible impacts on exam results could include an explanation of:
• different class sizes
• breadth and depth of the different subjects offered

• whether the schools are highly selective (students being admitted to the school based

on entrance exams) or fully comprehensive
• consideration of candidates who may have special learning needs
• consideration of the different cultures, environments and values of schools
• the curriculum priorities of different schools, including different teaching and
learning priorities
• different approaches to behaviour and inclusion (of staff and students)
• budgetary considerations, such as the amount of spending on training and
professional development
• the level of staff morale and student motivation.
Accept any other reasonable factor that is explained in the context of the given question.
of the question.
response.
4 a
question. There are errors and omissions, which possibly include the inaccurate labelling
of the axes and/or the data points not being accurately plotted.
Award 3–4 marks for a diagram that shows good understanding of the demands of the
question. There are no errors or omissions. The labelling of the axes is accurate and all
the data points are accurately plotted.


b Award 1 mark for a line of best fit that is drawn accurately, similar to that shown above.
c The line of best fit shows about 120 units of ice cream are likely to be sold.
5 a Extrapolation is a forecasting technique that makes future predictions of sales (in units
or dollars) based on trends identified from using past data. This is done by extending the
line of best fit for a future time period.
b An example is shown below. Award 1 mark for appropriate axes labels (the sales
revenue axis should be in an appropriate currency) and 1 mark for showing the trend in
actual sales and extrapolated trend line.
c Possible limitations could include an explanation of the following:

• The major problem with using extrapolation is that the technique assumes the future
looks like the past. Past data and trends do not necessarily reveal what will happen in
the future, especially if the business operates at a fast pace in a changing
environment.
• The further into the future that trends are extrapolated, the less accurate any
prediction is likely to be, simply because there is so much scope for so many things
to change.
• Extrapolated values can be unreliable, especially if the regression line shows there
are disparities and irregularities in the existing data sets.
Accept any other limitation of using extrapolation to predict a firm’s sales revenue
figures.
Award 1 mark for a valid limitation and 1 mark for an appropriate explanation.


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