Physics Practice Marks

N18/3/BUSMT/HP2/ENG/TZ0/XX/M
Markscheme
November 2018
Business management
Higher level
Paper 2
25 pages
–2– N18/3/BUSMT/HP2/ENG/TZ0/XX/M
This markscheme is the property of the International

Baccalaureate and must not be reproduced or distributed
to any other person without the authorization of the
IB Global Centre, Cardiff.
The markbands and assessment criteria on pages 3–5 should be used where indicated in
the markscheme.
Marks Level descriptor
0 The work does not reach a standard described by the descriptors below.
1–2  Little understanding of the demands of the question.

 Few business management tools (where applicable), techniques and
theories are explained or applied, and business management
terminology is lacking.
 Little reference to the stimulus material.
3–4  Some understanding of the demands of the question.

 Some relevant business management tools (where applicable),
techniques and theories are explained or applied, and some
appropriate terminology is used.
 Some reference to the stimulus material but often not going beyond
the name of a person(s) and/or the name of the organization.
5–6  Understanding of most of the demands of the question.

 Relevant business management tools (where applicable), techniques
and theories are explained and applied, and appropriate terminology
is used most of the time.
 Some reference to the stimulus material that goes beyond the name
of a person(s) and/or the name of the organization.
 Some evidence of a balanced response.
 Some judgments are relevant but not substantiated.
7–8  Good understanding of the demands of the question.

and theories are explained and applied well, and appropriate
terminology is used.
 Good reference to the stimulus material.
 Good evidence of a balanced response.
 The judgments are relevant but not always well substantiated.
9–10  Good understanding of the demands of the question, including

implications, where relevant.
and theories are explained clearly and applied purposefully, and
appropriate terminology is used throughout the response.
 Effective use of the stimulus material in a way that significantly
strengthens the response.
 Evidence of balance is consistent throughout the response.
 The judgments are relevant and well substantiated.
Assessment criteria for Section C
Criterion A: Knowledge and conceptual understanding

This criterion addresses the extent to which the candidate demonstrates knowledge and
understanding of the given concepts and relevant business management content (theories,
techniques or tools, depending on the requirements of the question).

1 Superficial knowledge of the given concepts is demonstrated. Business
management content is not selected or the content selected is irrelevant.
2 Satisfactory understanding of one or both of the given concepts is demonstrated.
Some business management content selected is relevant. The relevant content is
satisfactorily explained.
3 Good understanding of one or both of the given concepts is demonstrated.
The business management content selected is relevant, though it may not be
sufficient. The relevant content is generally well explained, though the explanation
may lack some depth or breadth.
4 Good understanding of both of the given concepts is demonstrated. The business
management content selected is relevant, sufficient and well explained.
Criterion B: Application
This criterion addresses the extent to which the candidate is able to apply the given concepts
and the relevant business management content (theories, techniques or tools, depending on
the requirements of the question) to his or her chosen real-world organization(s). The real-
world organization(s) must not be the organization featured in the prescribed case study
for paper 1.

1 The given concepts and/or any relevant business management content are
connected to the real-world organization(s), but this connection is inappropriate or
superficial.
2 The given concepts and/or relevant business management content are connected
appropriately to the real-world organization(s), but this connection is not developed.
3 The given concepts and relevant business management content are generally well
applied to explain the situation and issues of the real-world organization(s), though
the explanation may lack some depth or breadth. Examples are provided.
4 The given concepts and relevant business management content are well applied to
explain the situation and issues of the real-world organization(s). Examples are
appropriate and illustrative.
Criterion C: Reasoned arguments

This criterion assesses the extent to which the candidate makes reasoned arguments. This
includes making relevant and balanced arguments by, for example, exploring different
practices, weighing up their strengths and weaknesses, comparing and contrasting them or
considering their implications, depending on the requirements of the question. It also
includes justifying the arguments by presenting reasonable evidence or other support for the
claims made.

1 Statements are made but these are superficial.
2 Relevant arguments are made but these are mostly unjustified.
3 Relevant arguments are made and these are mostly justified.
4 Relevant, balanced arguments are made and these are well justified.
Criterion D: Structure
This criterion assesses the extent to which the candidate organizes his or her ideas with
clarity, and presents a structured piece of writing comprised of:
 an introduction
 a body
 a conclusion
 fit-for-purpose paragraphs.

1 Two or fewer of the structural elements are present, and few ideas are clearly
organized.
2 Three of the structural elements are present, or most ideas are clearly organized.
3 Three or four of the structural elements are present, and most ideas are clearly
organized.
4 All of the structural elements are present, and ideas are clearly organized.
Criterion E: Individuals and societies

This criterion assesses the extent to which the candidate is able to give balanced
consideration to the perspectives of a range of relevant stakeholders, including individuals
and groups internal and external to the organization.

1 One individual or group perspective is considered superficially or inappropriately.
2 One relevant individual or group perspective is considered appropriately, or two
relevant individual or group perspectives are considered superficially or
inappropriately.
3 At least two relevant individual or group perspectives are considered appropriately.
4 Balanced consideration is given to relevant individual and group perspectives.
Section A
1. (a) Describe one limitation of a break-even analysis. [2]
Some of the limitations may include:

 The break-even model assumes that all units produced are sold, therefore
total revenue received if not all of the dolls/quantity is sold can be lower, which
will have a negative impact on the break-even point.
 The break-even model assumes a linear relationship between output and total
variable cost, whereas in reality the costs per unit can go down due to
economies of scale. This will have a negative impact on the break-even point.
 The break-even model assumes that the price stays constant at all levels of
output. In reality, price can be reduced or increased with direct impact on the
break-even quantity.
Accept any relevant description. There is no need for further explanation of the
exact impact on the break-even point.
Application is not expected.
Award [1] for each relevant identification / list of one limitation of the model.
Award [1] for a description up to a maximum of [2].
(b) Calculate:
(i) the number of dolls that DD needs to sell to reach $4000 level of profit
(show all your working); [2]
Fixed costs + target profit = 10 000 + 4000 = 14 000 = 700 dolls
Contribution per unit = 50 – 30 = 20 [shows that it’s part of given formula]
OR
Profit = total revenue – total cost
4000 = 50X – (10 000 + 30X)
20X = 14 000
The number of dolls needing to be sold to reach a profit of $4000 = 700
Award [1] for working and [1] for the correct answer.
Award a maximum of [2].
For a correct response that demonstrates understanding and application of

the formula, even if no specific headings are presented, award full marks.
Working must be shown for full marks. Accept a graphical calculation of BE

if drawn and stated accurately ie sufficient to extract correct data (do not
penalize labeling errors).
(ii) the capacity utilization rate at break-even quantity for DD for the first year of
operation (show all your working); [2]
Fixed costs
Break-even quantity =
Contribution per unit
10 000
=
 $50 – $30  20
= 500 dolls
500 dolls
Capacity utilization rate = = 0.55  100 = 55.55 %
900 dolls
Accept 55.5% or 55.56 %
An alternative method would be:
Total revenue  total costs, where:

 total revenue  price  quantity sold
 total costs  total fixed cost  total variable costs.
500
Capacity utilization=  100 = 55.55 %
900
Accept 55.5% or 55.6 %
Do not credit for using the formula as it is given. Do not fully credit if the
figure is not expressed in %.
Award [1] for correct working, which includes the calculations of the break-
even point and [1] for the correct answer in %. Award up to a maximum of [2].
If only the correct breakeven is present, then award [1] only if working is shown.

the formula, even is no specific heading are presented, award full marks.
(iii) The profit or loss in the first year if DD sells 400 dolls (show all your
working). [2]
Margin of safety times contribution per unit

400–500 = (100)  20 = [$2000]
Do not credit for the calculation of the break-even point but allow OFR even
if correct. It is application of the MOS-BE formula which gets the mark for
workings.
Accept any other relevant method:
Total revenue – total costs
Price  quantity – (total fixed costs + total variable costs)
400 $50 – [$10 000 + (400 $30)]
$20 000 – [$10 000 + $12 000]
$20 000 – $22 000
$(2000) = a loss
Award [1] for correct working and [1] for the correct answer. Award up to a
maximum of [2].

the formula, even if no specific headings are presented, award full marks.
(c) Assuming that the quantity of dolls to be sold in the second year is 550 and costs
remain unchanged, calculate the price per doll that DD would need to charge to
make a $6500 profit. [2]
Target profit = total revenue – total costs
$6500 = $550X – [10 000 + ($30  550)]
$6500 = $550X – [10 000 + 16 500]
$6500 = $550X – $26 500
$6500 + $26 500 = 550X
$33 000 = 550X
X = $60
Price that DD has to charge is $60.
Accept any other method provided that working is shown.
Award [1] for working and [1] for the correct answer.
Award a maximum of [2].

2. (a) Define the term debtors. [2]
A debtor is a customer or a firm that has purchased a good or service from a

business and has not yet paid. A debtor may be allowed up to one month or more
to settle.
N.B.: no application required. Do not credit examples.
Award [1] for a basic definition that conveys partial knowledge and
understanding.
Award [2] for a full definition that conveys knowledge and understanding similar
to the answer above. – reference to repayment period is not necessary for full
marks.
(b) Using information from Table 1:
(i) construct a fully labelled balance sheet for Papel for the end of October
2018; [5]
Papel balance sheet as at 31 October 2018
000s 000s
Fixed assets
Net fixed assets 60
Current assets
Cash 3
Debtors 12
Stock 5
Total current assets 20
Current liabilities
Creditors 20
Total current liabilities 20
Net current assets (working capital) 0
Total assets less current liabilities 60
Long-term liabilities 20
Net assets 40
Financed by:
Share capital 26
Accumulated retained profit 14
Equity 40
N.B.: if the candidate does not follow the IB prescribed format, award a
maximum of [3].
N.B.: candidates should not be penalized for writing “retained profit”

omitting the word accumulated.
– 10 – N18/3/BUSMT/HP2/ENG/TZ0/XX/M
Allow OFR.
[0]
The B/S does not reach a standard described below.
[1–2]
The B/S is not accurately constructed, and/or the calculations within and
between the various components are not presented or largely incorrect.
However, there is limited evidence of a general understanding of the format
[3–4]
The principal elements of the B/S are constructed, but may not be entirely
accurate. The calculations under each heading/component/part are largely
correct.
Allow up to two mistakes in calculations and/or presentation for [3].
Allow for either one error in calculation or one error in presentation [4].
For an accurately constructed B/S with incorrect calculations, award up to a
maximum of [3].
Allow OFR.
For example, if one irrelevant figure that belongs to the P/L account is
added, obviously the rest will not match.
[5]
The B/S is accurately constructed in the expected IBO format. All the
relevant headings of each component/ parts are used and correctly
classified. Do not penalise for internal order of classification. All and only
the relevant figures are presented. No extra irrelevant figures that belong to
the P/L are included. The calculations under each part/ component of the
B/S are correct and well presented [5].
Deduct [1] for one omission including the overall heading provided the B/S
is accurately balanced.
N.B.: If the candidate did not follow the IBO format award up to [2] marks
(ii) calculate the current ratio for Papel for the end of October 2018. [1]
 current assets  20
Current ratio =   =1
 current liabilities  20
Award [1] for the correct answer. Award no marks merely for writing the
formulae. Award [1] mark with OFR but working must be shown
(c) Explain one possible strategy, other than elimination of credit sales, for Papel to
improve its liquidity position. [2]
Liquidity is the ability to pay short-term debts. Papel’s liquidity position is delicate.
Working capital is zero and Papel´s acid test is 0.75, which means that Papel has
less than $1 of liquid assets with which to repay every $1 of its short-term debts.
Papel could improve its liquidity position by keeping a tight credit control with
debtors. Many are not paying on time, which means that Papel does not keep a
check of customers’ accounts.
Papel could use a debt factoring service to recoup some of the debt as a way to
boost its liquidity.
Papel should monitor debtors and chase them to pay on time and to respect the
credit periods established and agreed.
Creditors are increasing even though 80 % of accounts are settled in cash. To

improve the liquidity position, Papel could try to negotiate improved credit terms
with its suppliers.
Reward candidates who highlight ‘surplus’ or ‘unused’ assets to sell but not a
generic response of ‘sell assets’. Award maximum [1] as no application is
possible.
Accept any other relevant strategy.
Award [1] for a relevant generic strategy identified or described and [1] for any
additional explanation in context to DD.
[2] cannot be awarded for the strategy if the response lacks either explanation
and/or application.
For example: For an identification or a description of the strategy either debtors
or creditors with or without application [1].
For explanation of the strategy with no application [1].
For explanation of the strategy and application [2].

Section B
3. (a) Define the term public limited company. [2]
A public limited company is an incorporated organization listed on a Stock

exchange with a legal right to sell shares to the general public.
Candidates are not expected to word their definition exactly as above. Eg may
omit mention of Stock Exchange if another feature of incorporation is present.
understanding.
Award [2] for a full, clear definition that conveys knowledge and understanding
similar to the answer above.
(b) With reference to QS, explain two features of cradle to cradle manufacturing. [4]
Cradle to cradle is a sustainable form of manufacturing. QS seeks to create

manufacturing principles that attempt to use production techniques that are
efficient but also sustainable and waste free. Two features of using cradle to
cradle with reference to QS are as follows:
As its name suggests, QS will design and produce its air conditioners in such a
way that most, if not all, of the materials used are recyclable. These materials
(like glass, metal, plastic) that form parts of the air conditioners will be recyclable
and used again for the production of future models. This will minimise waste.
Cradle to cradle manufacturing with also allow QS to reuse some of the ready
components of the old air conditions in the new models instead of disposing of
those parts. QS might have to offer some financial incentives for the customers to
return their old/outdated air conditioners.
The air conditioners will also be built with biodegradable materials if QS cannot
recycle the materials: for example, the carton for packaging of the air
conditioners. This aspect will allow QS to reduce the environmental impact of its
air conditioners.
Accept any other relevant examples and explanation.
Application here is very difficult – all of the stimulus info is about KA and gives no
real links to QS – hence I believe to avoid generic responses, candidates should
at least make reference to ‘air-conditioners” ie if responses just refer to QS and
this could be replaced with any other company – then this is generic and only [1].
Mark as 2 + 2.
Award [1] for each relevant feature explained and [1] for appropriate application
to the organization/type of products to a maximum of [2].
[2] cannot be awarded for the difference if the response lacks either explanation
and / or application.
For example:
 For an identification or a description of a feature with or without
application [1].
 For explanation of a feature with no application [1].
 For explanation of a feature and application [2].
(c) Explain two possible human resource strategies that KA management could use
to reduce employees’ resistance to change. [4]
Two possible change management strategies as part of overall HR strategies that

can be used by KA management to reduce the impact of employees’ resistance
to change.
The employees are currently not involved in any decision making, so it can be
assumed that there is not much communication between employees and
management; as such, open and clear communication with the employees can
be seen as one possible change strategy. The management should be honest
and fully explain the reasons for the change. The management should
emphasize the positive outcome of outsourcing as a way to overcome some of
the weaknesses of KA, like an opportunity to improve customers’ perceptions.
The possibility of new opportunities for employees in the marketing department
should be emphasized as a new and motivating challenge. The management
should not lie about some of the negative outcomes, like job losses of those who
are not going to be employed in the marketing department.
Before a final decision is taken, KA management should change the non-

participative way/culture/lack of involvement in decision making and encourage
bottom-up participation and consult with the employees and listen to their
suggestions and opinion. Some of the more motivated employees might come up
with some alternative strategies and/or express their preferences.
Management should acknowledge the fear of the unknown and the possibility of
resistance to change due to fear of inability to cope with new challenges. A
promise of training should be provided for those who are going to be employed in
the marketing department if option 2 is chosen or for all employees if option 1 is
chosen.
Another strategy is to appoint a change champion among the employees to

encourage those employees who are reluctant to change to see the benefits of
both option 1 and 2. Perhaps inviting the Trade Union to put forward solutions to
minimizing the negative effects or in fact making the union the change champion.
Do NOT accept – “raising salaries/wages” unless tied to Option 1. Clearly this

strategy is not feasible for those laid off in Option 2.
Accept any other relevant change HR strategy.
Award [1] for a relevant generic HR (change management) strategy identified or

described and [1] for any additional explanation in context.
[2] cannot be awarded for the chosen (change management) HR strategy if the
response lacks either explanation and / or application.
For example:
 For an identification or a description of an HR strategy with or without
application [1].
 For explanation of an HR strategy with no application [1].
 For explanation of an HR strategy and application [2].
Do not credit non-HR strategies. Analysis of strategies is not required.

(d) Evaluate the two options that KA is considering. [10]
Given the fact that KA redesigned their product, both options will have the same
starting point of being more energy efficient.
Some of the possible arguments for option 1:

 Option 1 will not result in redundancy and possible negative impact on the
motivation of the remaining employees. Moreover, with appropriate training in
order to implement the TQM and lean production practices, employees might
enjoy the new challenge and motivation might even increase further, resulting
in more efficiency and cost saving.
 The implementation of TQM/lean production should result in KA becoming
considerably more environmentally friendly and by adapting to the market
pressure/customers demand. KA might be able to capture part of the increase
in demand. Moreover, KA should further be able to benefit from a growing
demand in the market due to increase capacity of 10 %.
 However, the capacity will only increase by 10 %. One may argue that this is
a relatively small percentage for a growing market and perhaps suits KA well
in the short run but it will face a major strategic decision again in the medium
term. Still, with increasing competition perhaps a 10 % increase is sufficient.
 The financial return, albeit forecasted, seems reasonable (do not penalise if
candidates argue the opposite) although we do not have information on the
current interest rate for comparison. Three years of payback also seem
reasonable but technology is changing very rapidly and KA might have to
replace the machine quite soon afterwards.
 The current lack of finance perhaps should be judged as of less significance,
as KA is a PLC and shares can be issued, especially to ethical and
ecologically sustainable minded investors, who may also be encouraged to
purchase given the stated market growth.
Some of the possible arguments for option 2:

 With outsourcing, KA should be able to capture the growing markets and
satisfy the growing demand with excellent quality sustainable air conditions
and production process. One may judge this argument as highly significant
for this option.
 The excellent quality should enable KA to differentiate itself in a current
undifferentiated market and create a strong USP. The customer service –
which is possibly one of the reasons for a fall in demand in a growing market
– should also improve significantly. Making the marketing of KA its core
activity with the money saved should enable KA to be successful. KA now
has the finance to do so.
 However, the shareholders might disagree with such a risky strategic move
as KA will move away from its current core activity of manufacturing air-
conditioners This move might be perceived as too risky. There might be other
ways of improving customer service especially if TQM is to be implemented,
as customers are constantly listened to.
 Moreover, closing down the production facility is a significantly risky decision.
It will be very difficult to rebuild one. Perhaps KA should not rely on QS
especially given the fact that every 2 years the contract has to be negotiated.
Terms and conditions could be changed in favour of QS when KA lost its
bargaining power. KA’s management needs to pay attention to a potential
loss of control.
Overall, both options can potentially enable KA to become a more

environmentally and ecologically sustainable organization. The second option will
enable KA to achieve this in the short term, however the possibility of strike
action is real and this will require some significant conflict resolution strategies by
KA’s management. Some of the good will enjoyed by KA will be undermined by
this move.
Accept any other relevant argument for each option.
Accept any other substantiated judgment.
It is expected that candidates provide a conclusion with a substantiated

judgment.
Marks should be allocated according to the markbands on page 3.
For one relevant issue that is one-sided, award up to [3]. For more than one
relevant issue that is one-sided, award up to a maximum of [4].
If a candidate evaluates / addresses only one option, award a maximum of [5].
A balanced response is one that provides at least one argument for and one
argument against each option.
Candidates may contrast one option with another for a balance as long as at
least two arguments are given for each option.
Award a maximum of [6] if the answer is of a standard that shows balanced

analysis and understanding throughout the response with reference to the
stimulus material but there is no judgment/conclusion.
Candidates cannot reach the [7–8] markband if they give judgment/conclusions

that are not based on analysis/explanation already given in their answer.
4. (a) Define the term brand loyalty. [2]
Consumers’ faithfulness to a particular brand, which will allow a business to see

repeat purchasing by consumers and/or over the longer term, much more
acceptability in raising the price of its products/services.
Accept any other relevant definition.
N.B.: no application required. Do not credit examples.
understanding.
Award [2] for a full definition that conveys knowledge and understanding similar
to the answer above.
(b) Explain two advantages for LB of using on the job training. [4]
 On the job training is cheaper than sending recruits on external training. This
is particularly advantageous for LB, as there are no hotel training schools
nearby. External training will mean travelling and hosting costs that LB is
unlikely to face due to cash-flow problems. Adding on external training costs
could worsen LB’s cash-flow postilion.
 On the job training will enable new recruits to familiarize themselves with the
hotel’s culture and Felix´s way of doing things. A recent survey has revealed
that guests are pleased with LB due to employees’ polite and helpful attitude,
which means that Felix’s on the job training has been effective. It is unlikely
that new recruits will acquire this specific know-how with external training.
 With on the job training, trainees will actually serve guests while they receive
training. This could help LB with its cash-flow problems, as labour costs could
be saved.
 Felix will be able to watch the new recruits closely to follow their training. He
will be able to screen closely their potentialities and weaknesses and transmit
the hotel’s culture to them.
Accept any other relevant advantage

Do not credit an explanation of general training
Mark as 2 + 2.
Award [1] for each correct advantage identified or described and [1] for a
relevant explanation with application to LB. Award up to a maximum of [2].
[2] cannot be awarded per advantage if the response lacks either explanation
and/or application.
For example: For an identification or description of an advantage with or without

application [1]. For explanation of an advantage with no application [1].
For explanation of an advantage and application [2].
(c) Explain the importance to LB of two elements of the extended marketing mix. [4]
Physical evidence is referred to as the environment in which the goods or

services are delivered. It is a crucial element for hotels like LB, as hotel
customers make their choices based on the appearance and state of hotel
facilities to a great extent. Guests’ judgements will be based on LB’s physical
evidence, including its location at the beach, to decide whether or not to book a
room. There is, however, evidence from the stimulus that LB’s facilities need
upgrading.
People makes reference to the way employees relate to and communicate with
customers. This is another crucial element for a hotel. LB’s employees are polite
and helpful and particularly good with children. This has proved to be very
important for LB’s brand loyalty and customers’ perceptions of it, and also
provides a service that is perceived as very good value for money.
Process could be related to the way LB provides a unique way of making

payment for guests. LB provides a mechanism that allows customers the
opportunity to pay on departure and avoid paying in advance.
Accept any other relevant explanation.
Mark as 2 + 2.
Award [1] for each correct element of the extended marketing mix identified and
described and [1] for a relevant explanation of the importance with application to
LB. Award up to a maximum of [2].
[2] cannot be awarded per element of the extended marketing mix that has been
identified if the response lacks either explanation and/or application.
For example: For an identification or a description of an element of the extended

marketing mix with or without application [1].
For an explanation of an element of the extended marketing mix with no

application [1].
For an explanation of an element of the extended marketing mix and

application [2].
(d) Discuss whether LB should implement proposal 1 or proposal 2. [10]
Proposal 1
 LB could follow Felix’s proposal to solve its cash-flow problems by reducing
cash outflows and raising additional finance. It is probably a lower-risk
strategy than Rose’s.
 Negative cash outflows could be reduced by delaying payment to suppliers in
winter, instead of paying cash. However, LB could lose the generous
discounts they get, which in turn could lead to increasing direct costs.
Eventually, some suppliers may not accept delayed payments and may
demand cash on delivery.
 LB could also delay hotel maintenance and refurbishments. However, LB
already needs some upgrades. Deteriorated facilities could t negatively affect
customer perception and brand loyalty. Sales may eventually fall.
 LB can cut other overhead spending such as advertising or promotion costs.
These costs will reduce payments without affecting the quality of the service
provided. However, future demand may fall if LB is not promoted effectively.
 Felix could lay-off some hotel staff or ask them to switch to part-time working.
He may even close the hotel completely for the winter season. However this
risks losing the services and know-how of key staff, who may not return in the
high-season.
 Felix has also proposed to raise additional finance. LB could ask for a short-
term loan or look for a new business partner. Probably, interest rates will be
lower than overdraft rates and LB could save on some costs by substituting
the overdraft for a less expensive source of finance. A new business partner
will probably require some form of managerial control but fresh/innovative
thinking can be introduced into LB.
 Alternative short-term sources of finance, such as the sale of assets and
debts factoring, seem unlikely to work for LB. It seems that LB does not have
assets to sell and there is no evidence that LB has many debtors.
Proposal 2
 On the other hand, Rose believes that LB’s cash flow problems are due to
low capacity utilization in winter. She has proposed to attract a new segment
of customers.
 If new business customers come in winter, cash inflows will increase.
However, to attract these customers, LB will need to build new facilities, such
as a convention centre or a gymnasium, to cater for the needs of this
particular market segment. This would involve a significant amount of finance
that LB does not have.
 LB could try to find external finance, such as a long-term loan, equity finance
or a venture capitalist. However, these alternatives seem unlikely for LB in the
short term. All of them take time to be found. Bank loans are expensive and
LB may not have enough assets to present as collateral. Floating the
company could be quite expensive for a family-owned business.
 Venture capitalists are not easy to find, particularly if the business is not a
promise of extraordinary profits.
 LB will need to conduct extensive market research around the new market
segment and currently this will increase outflows at a time when monthly cash
flows are negative.
It can be concluded that Rose’s alternative seems to be more risky and

expensive than Felix’s. What if business customers are not attracted? LB will be
indebted with facilities that would remain obsolete for its current market segment.
Felix’s proposal, on the other hand, seems more plausible and conservative.
Some of the alternatives, such as delaying payments, could work without much
risk involved. However, LB should also find a way to increase inflows by tackling
its capacity utilization problem. Diversifying into another market segment (such as
elderly tourism?) that may not involve a great investment could help to increase
inflows in winter.
Marks should be allocated according to the markbands on page 3 with further

guidance below.
A balanced response is one that covers at least one argument for and one
against each proposal.
For one relevant argument that is one-sided, award up to [3]. For more than one
relevant argument that is one-sided, award up to a maximum of [4].
If a candidate evaluates/addresses only one proposal, award a maximum of [5].

stimulus material but there is no judgment/conclusion.
Candidates cannot reach the [7–8] markband if they give judgment/conclusions

5. (a) Define the term innovation. [2]
Innovation is about putting a new idea or approach into action. It can be

described as the process of translating an idea/invention into a service/good that
creates value. Innovation can be achieved by improving existing goods,
processes or services
Candidates are not expected to word the definition exactly as above.
N.B.: no application required. Do not credit examples on their own. It is not

necessary to highlight different types of innovation although credit where present.
Do not credit vague description of ‘change’
understanding.
Award [2] for a full definition.
(b) Explain two roles of Benno’s mission statement. [4]
The roles of a mission statement include:

 communicating the purpose of the organization to stakeholders
 informing decision making and strategy development
 developing the measurable goals and objectives by which to gauge the
success of the organization's strategy.
 Inspiring and motivating both internal and external stakeholders
N.B.: for full marks roles should be linked to some mention of stakeholders
For Benno, the mission statement has provided a way for the business to
differentiate itself from its competitors, especially at a time when competition in
the healthy soft drinks market is intense.
The mission statement is also a way to attract new investors who may have
empathy with the direction of Benno. This is an important role given the need for
Benno to be committed to innovation and CSR.
Award [1] for a basic answer that identifies a role of a mission statement.
Award [1] for a basic answer that identifies/explains a role of a mission statement
Award [2] for an answer that identifies/explains the roles of a mission statement
with application.
Do not reward marks for describing/defining a mission statement.
Mark as 2 + 2
(c) Explain one advantage and one disadvantage for Benno of using a focus group
of loyal customers. [4]
Advantages of a focus group of loyal customers:

 Can obtain detailed information about your own customers about their
feelings, perceptions and opinions.
 Are cheaper than performing individual interviews
 Less time-consuming than individual interviews
 Provide an opportunity to clarify any issues or problems.
Disadvantages of a focus group of loyal customers:

 They can be hard to control and manage.
 You are only getting the views of loyal customers – it tells you nothing about
consumers who prefer rival brands and why they prefer them to your soft
drink.
 The results are difficult to analyse, especially if the focus group provides
qualitative feedback.
 Members may not reveal their own feelings but are swayed by the majority
view.
 May not be representative of the target market as a whole.
Possible application:
For Benno, an advantage of using a regular focus group is that they will be aware
of the company’s products and mission. This will reduce the amount of statistical
noise and save time in the discussions when looking at new product ideas, such
as biodegradable rings. Can help to support or otherwise, secondary research
regarding the importance of ‘green’ credentials and of price in the soft drinks
market.
However, having a regular group for Benno increases bias and reduces
objectivity of the data researched. It might be a useful exercise for Benno to ask
customers who are not overly familiar with their products to achieve a more
balanced qualitative view. Difficult to organize particularly in the target group of
12-18 year olds since they are minors and need consent to participate.
Accept any other relevant advantage / disadvantage.
Accept any other relevant explanation.
Mark as 2 + 2.
Award [1] for a basic answer that identifies an advantage or disadvantage of

using a focus group.
Award [1] for an answer that identifies/explains an advantage or disadvantage of

using a focus group.
Award [2] for an answer that identifies/explains an advantage or disadvantage of

using a focus group and which is suitably applied to Benno
Mark as 2 + 2.
(d) Recommend whether Benno should replace its plastic drink rings with the new
biodegradable drink rings. [10]
For:
 It fits in well with its mission statement “to produce healthy drinks without
damaging the environment” and this may be important in maintaining
customer loyalty.
 It fits into its belief in corporate social responsibility, as the current drink rings
damage the environment and harm creatures in the seas, such fish.
 Competition in this drinks market is very intense – this could act as a
strengthening of its USP for Benno and retain loyal customers and attract
customers from rivals. It will strengthen its image as a business that has
“green” credentials.
 Sales of Benno’s drinks have fallen significantly over the last five years– so it
is important that Benno does something to stem this tide.
 Accept any other reasoned arguments.
Against:
 It will cost $5m to buy the machinery to produce the new rings and the
business has no accumulated retained profits – therefore the funds will need
to be raised, probably externally via a bank loan, which will lead to interest
charges and an increase in operating costs. It may take time to find a suitable
angel investor to help finance this project. Will the angel investor wish to exert
some control over Benno’s operations?
 The unit cost increase is 50 %, a rise from 10 cents to 15 cents per ring, and
the business only has a net profit margin of 10 %. As the market is
competitive and reports suggest that consumers are price sensitive, a price
rise – passing on the cost of the new rings – is probably not going to be
possible. The result is that Benno’s net profit margin will fall.
 Sales are falling, particularly to the 12–18 age group – are they going to be
energized into buying a product that is more environmentally friendly,
particularly when reports suggest purchases of green products are not
increasing?
 In terms of a new way forward for Benno, the introduction of the new rings
has a great deal of merit. There are a large number of marketing
opportunities available in a competitive market and this idea will strengthen
Benno’s brand. However, the forecasted financial implications of this idea are
not ideal and if sales volumes do not increase significantly then Benno may
find itself financially worse off if profits do not increase. One solution may be
to wait until some more objective market research via a new untested focus
group have given their thoughts on the new ring.
 Accept any other reasoned arguments.
Marks should be allocated according to the mark bands on page 3 with further
guidance below.
A balanced response is one that provides at least two arguments for and two
arguments against the option.
For one relevant issue that is one-sided, award up to [3]. For more than one
relevant issue that is one-sided, award up to a maximum of [4].

stimulus material but there is no judgement/conclusion.
Candidates cannot reach the [7–8] markband if they give judgement/conclusions

Section C
Marks should be allocated using the assessment criteria on pages 4 to 5 with further
guidance below.
N.B.: examiners should include a breakdown of each mark awarded per criterion and a
brief note explaining the mark awarded at the end of each candidate’s response.
The main aim of paper 2 (SL or HL) section C is to assess candidates’ understanding of the
six major concepts (change, culture, ethics, globalization, innovation, strategy) within a
business context. Candidates are to demonstrate their understanding through an
organization of their choice. The expectation of the use of an organization is to allow
assessment of the depth of candidates’ understanding through their ability to apply the
concepts and their knowledge.
Assessment of candidates’ knowledge of the organization itself is not an aim of the

assessment. If a candidate makes minor factual errors and these minor errors have no
genuine bearing on whether the candidate understands the concepts, examiners should not
penalize. For example, a minor error of historical fact (the year when a company was
founded, or the year in which a change was implemented) which has no genuine bearing on
candidates’ understanding of the concepts does not warrant penalty.
6. With reference to an organization of your choice, examine the impact of innovation on

promotional strategy. [20]
7. With reference to an organization of your choice, examine the impact of globalization

on change in operations management. [20]
8. With reference to an organization of your choice, examine the impact of ethics and
culture on human resource management. [20]
It is expected that the candidate explains the chosen theoretical direction / content of their
response.
Additional guidance in relation to the assessment criteria

For each criterion, the aim is to find the descriptor that conveys most accurately the level
attained by the candidate, using the best-fit model. It is not necessary for every single aspect
of a level descriptor to be met for that mark to be awarded.
 The highest-level descriptors do not imply faultless performance and should be

achievable by a candidate.
 A candidate who attains a high level of achievement for one criterion will not necessarily
reach high levels of achievement for the other criteria and vice versa.
If only one concept is addressed:

 Criteria A, B, C and E: award up to a maximum [3].
 Criterion D: full marks can be awarded.
Where the question asks for impacts of two concepts on content, examiners must allow for
unbalanced treatment of the two concepts throughout a candidate’s response. One concept
may be more significant than the other.
In section C, the question rubric explicitly states that “organizations featured in sections A
and B and in the paper 1 case study may not be used as a basis” to candidate’s answers to
questions 6, 7 and 8. When this happens please award marks as follows:
Criterion A
Award a maximum of [1]. The business management content cannot be relevant if the
organization is fictitious.
Criterion B
0 marks – there is no connection to a real-world organization.
Criterion C
Award a maximum of [1]. The arguments cannot be relevant if the organization is fictitious.
Criterion D
Mark as normal.
Criterion E
Award up to a maximum of [1]. The individual and/or group perspective(s) cannot be relevant
if the organization is fictitious.
Criterion B
For [2]: “…connection is not developed” should be treated the same as superficial.
Criterion C
 Questions 6 to 8 require consideration of the impact of one concept on a second concept
– therefore accept 2 + 2 arguments for a balanced response.
 Justification is through logic or data.
 For [2] there is no balance as there are no counter arguments at all, or the arguments are
 all one-sided then this would be unjustified.
 For [3] there is some balanced arguments – some of which are justified.
Criterion D
 Introductions need to be concise and related to the question.
 The candidate’s response does not to have explicit headings for each structural element.
 A body is the area in which the substance of arguments occur. It is usually located
between the introduction and the conclusion.
 Fit-for-purpose paragraph means that ideas are presented in a clear academic way. For
example, one idea per paragraph.
Criterion E
 One example of an “individual” could be an individual consumer or an individual
manager. However this could not be considered with a “group” of consumers or a
management team.
 For [4], a balanced response: need to look at the perspectives of both individual and
group(s). The chosen individual, group needs to be applicable and relevant to the
question with specific explanation.
 Candidates need to go beyond stating the stakeholder.
 Candidates need not explicitly say “stakeholders”.

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N18/3/BUSMT/HP2/ENG/TZ0/XX/M

This markscheme is the property of the International

Marks Level descriptor

1–2  Little understanding of the demands of the question.

3–4  Some understanding of the demands of the question.

5–6  Understanding of most of the demands of the question.

7–8  Good understanding of the demands of the question.

9–10  Good understanding of the demands of the question, including

Assessment criteria for Section C

Criterion A: Knowledge and conceptual understanding

Marks Level descriptor

Marks Level descriptor

Criterion C: Reasoned arguments

Marks Level descriptor

Marks Level descriptor

Criterion E: Individuals and societies

Marks Level descriptor

Some of the limitations may include:

Application is not expected.

Award [1] for a description up to a maximum of [2].

Fixed costs + target profit = 10 000 + 4000 = 14 000 = 700 dolls

Contribution per unit = 50 – 30 = 20 [shows that it’s part of given formula]

Profit = total revenue – total cost

4000 = 50X – (10 000 + 30X)

The number of dolls needing to be sold to reach a profit of $4000 = 700

Award a maximum of [2].

For a correct response that demonstrates understanding and application of

Working must be shown for full marks. Accept a graphical calculation of BE

Accept 55.5% or 55.56 %

An alternative method would be:

Total revenue  total costs, where:

Accept 55.5% or 55.6 %

For a correct response that demonstrates understanding and application of

Margin of safety times contribution per unit

Accept any other relevant method:

Total revenue – total costs

Price  quantity – (total fixed costs + total variable costs)

400 $50 – [$10 000 + (400 $30)]

$20 000 – [$10 000 + $12 000]

$20 000 – $22 000

For a correct response that demonstrates understanding and application of

Target profit = total revenue – total costs

$6500 = $550X – [10 000 + ($30  550)]

$6500 = $550X – [10 000 + 16 500]

$6500 = $550X – $26 500

$6500 + $26 500 = 550X

$33 000 = 550X

Price that DD has to charge is $60.

Accept any other method provided that working is shown.

Award a maximum of [2].

2. (a) Define the term debtors. [2]

A debtor is a customer or a firm that has purchased a good or service from a

N.B.: no application required. Do not credit examples.

(b) Using information from Table 1:

Papel balance sheet as at 31 October 2018

N.B.: candidates should not be penalized for writing “retained profit”

Creditors are increasing even though 80 % of accounts are settled in cash. To

Accept any other relevant strategy.

For explanation of the strategy with no application [1].

For explanation of the strategy and application [2].