AS Paper 2 Solutions

Business Activity

Business Structure 11 marks

d) Evaluate the likely impacts on the local community if FM changes from a co-operative to a public limited company. [11]

A PLC can sell shares so FM can gain more capital. It could use the capital to open more local farm shops and provide more educational programmes. It can afford to employ more people from the local community and living standards would rise. If shops are nearby then this will be more convenient for local people who will buy their daily foods more easily which will reduce travelling costs.

A PLC’s main business objective is profit maximization. FM may cut costs by using lower quality seeds. To increase profits, prices may go up or lower quality products offered. The rise in the price of products will impact the local community, especially the poorest, as they will be unable to buy as much and food is a necessity.

The impact on the local community will be negative as they will not be offered programmes to increase their skill levels and employability. At the same time, they will face lower living standards as there is a greater impact on income, from paying higher prices for a necessity.

People in Organisations

Motivation 11 marks

d) Recommend how RS could improve the motivation of its employees in team A. Justify your recommendation. [11]

RS could pay its workers better to motivate them. This may be effective because 40% of people who leave think that RS has poor pay. This is likely to lead to less people leaving team A, which will decrease the recruitment costs of RS.

However, money does not motivate everyone, and there are many other reasons why employees leave RS, such as the 24% of people who leave because of poor leadership. So, the extra pay may not motivate the employees but will increase costs. This means that RS has less money available to meet its mission statement.
Overall pay could help to improve the motivation of the employees in Team A because it has the highest labour turnover rate and the biggest reason is poor pay. However, it depends on whether RS can afford to increase pay enough to make a real difference to the motivation of the employees.

Management 8 marks

(d) Recommend which of Mintzberg’s management roles is likely to be the most important for the new Managing Director of PP. Justify your recommendation. [11]

The new MD needs to be a figurehead. Mike was a good figurehead because he was well-liked for over 50 years. A good figurehead will have the trust and loyalty of the workforce. To improve the morale of the demotivated workforce.

He also needs to be an entrepreneur, to diversify as demand is falling. This means he will find new ways to boost demand to increase profits/ revenue.

The entrepreneur role is the most important. Without new ideas, the business will not have enough demand and this is the most immediate concern for PP. However, this depends upon the MD being able to have some interpersonal skills.


Promotion 8 marks

c) Analyse one above the line promotional method and one below the line promotional method which EE could use to gain new customers. [8]

Above the line – leaflets. Can highlight offers e.g. 3 months free service which can stimulate interest and meet the requirements of new customers.

Below the line – social media. People who are interested in new internet deals may follow the company. But research suggests few people switch providers so uptake may be low.

Market Research 8 marks

(c) Analyse one method of primary market research and one source of secondary market research that the Marketing Manager could use to help develop a new variety of ice cream. [8]

Questionnaire – asking parents about what varieties of ice-cream their children like most. Which could give IC useful information about the new product so they can gain high sales. However, questionnaires are expensive to ask enough people to make them representative so this could increase IC’s costs.

The internet to see what flavours of ice-cream IC’s competition are selling. This would be a cheap way of finding out secondary data which lowers the cost of the research. However, it will not tell IC about flavours that are in development so the research may be a waste of time.


Economies of Scale 8 marks

c) Analyse one economy of scale and one diseconomy of scale that may affect RS. [8]

Marketing economies of scale. Because JS has an outlet in every major town and city, JS can usenationwide advertising campaigns which are likely to have less cost per potential customer who sees it. This means RS has more money to spend on finding people jobs.

Communication diseconomies of scale. Because RS is spread out over the whole of country X. This means that messages may not get properly communicated, and some jobs might not get filled. This means that RS does not get as many people out of unemployment.


Sources of Finance 8 marks

(c) Analyse two sources of finance, other than selling shares, EFF could use to purchase the neighbouring farm.

Bank loan – FM has been established for 10 years, so likely loan will be granted. But interest will have to be repaid which may mean that EFF has even worse cashflow.
Mortgage – The farm is a property so a mortgage would be suitable. Mortgage would have a lower interest rate than a bank loan but still reduces the profits of the business.

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