1

Business
Management

IBDP2

Standard Level &

Higher Level
Paper 1

MARKSCHEME

Section A

Answer all questions from this section.

1. Define the term corporate social responsibility (line 95). [2]

- CSR is a set of internal policies designed to demonstrate a firm’s commitment to its internal and
external stakeholders. It focuses on activities that improve the well-being of society by considering
the impact of business activity on all stakeholder groups, including local communities.
- Award [1 mark] for a vague definition that shows limited understanding of CSR
- Award [2 marks] for a clear and accurate definition that shows a good understanding of CSR
2. Outline how equipment and machinery (line 47) is recorded in NW's final accounts. [2]

- NW's equipment and machinery are types of fixed assets, i.e., non-current assets that are used in
the production of goods and services. As such, equipment and machinery are not intended for resale
and expected to have a useful life of more than 12 months from NW's balance sheet date.
- Award 1 mark for incomplete answer such as only stating as fixed as without mentioning balance
sheet or just balance sheet.

3. With reference to NW, explain one advantage and one disadvantage of an

organizational structure based on product (lines 10 - 14). [4]

Possible advantages include an explanation of any of the following points:

 It promotes clear lines of responsibility and accountability, as each product or division is managed by
a dedicated director and his/her team. This ensures that any issues that arise in relation to any
of NW's products can be identified and addressed quickly.

 It allows NW to focus on specific products (such as turbines, water purifiers, or fresh water
provision) and tailor its strategies to particular requirements of the division and customers. This can
result in better results for NW, as each division can make decisions based on product/division rather
than the needs of the organization as a whole.
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 Product-based structures gives NW the flexibility to expand and contract its product lines without
having to restructure the entire organization. This makes it easier to manage changes in demand
and respond to market changes faced by the large multinational company, with its operations
throughout the world catering for nearly 200 million customers.
Possible disadvantages include an explanation of any of the following points:

 It can lead to duplication of efforts and lack of integration across NW as a whole, such as human
resource or marketing functions that apply to the entire organization.

 It can lead to some operational inefficiencies, as different divisions can be competing for resources
and there is less of an emphasis on inter-departmental or inter-division collaboration.

 Problems can arise when different products require different resources and expertise, as NW may
not have the necessary resources to support multiple product lines effectively at the same time.
- Mark as a 2 + 2
- Award up to [2 marks] for each clearly explained reason, up to a maximum of [4 marks]. For full
marks, there must be clear application to NW

4. Explain two factors that NW should consider when deciding on a marketing strategy
for the WF15 water purifier (lines 116–138). [4]

- Factors include:
•market research carried out;
•marketing budget available;
•aspects of the 4 P’s.

Product:
•winning design;
•produces sufficient potable water;
•meets WHO standards.

Place
•not yet decided;
•would need to be able to deliver to remote places;
•use of agencies overseas?;
•no existing distribution channel;
•little experience of distributing consumer products in LEDCs.

Price
•under discussion but one proposal is not-for-profit;
•pricing strategy not yet agreed;
•impact on other products?;
•can NW afford this?;
•subsidize product? Affordable for families versus unhappy stakeholders?.

Promotion
•choice of media is important, few newspapers read, few televisions owned;
•however large and growing use of social media;
•can use the CSR aspect in general promotion for the business.

Candidates are not required to follow a 4P’s approach and may use different parts of the course to answer
this question. Finance, staffing etc. could be valid factors to consider. Accept any other relevant factor and
explanation. Award a maximum of [2] for a theoretical answer.

- Mark as a 2 + 2
- Award up to [2 marks] for each clearly explained reason, up to a maximum of [4 marks]. For full
marks, there must be clear application to NW
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5. Outline two non-financial rewards that NW could have used for the long-serving
employees that wanted to leave the company because of the implementation of the
flexible-working contract (lines 56–64). [2]

Non-financial rewards include (with brief explanation):

•Job enrichment
•Job rotation
•Job enlargement
•Empowerment
•Teamwork
•Purpose/the opportunity to make a difference

Accept any reasonable answer

In the case of NW, they offered a one-time incentive payment to those who agreed to the new contract—a
financial reward. The non-financial rewards listed above could have been considered as alternative
approaches, e.g., greater consultation around additional responsibilities / changes to job roles / enhanced
use of group or team working etc.

6. Explain the importance of sustainability to NW.

[6]

Sustainability refers to the ability of an organization such as NW to meet its current needs without compromising
the ability of future generations to meet their needs. It is important for NW for several reasons:
Social Sustainability

 Reputation - If NW adopts sustainable practices, this can enhance its reputation with customers
across the world, its employees, and various stakeholder groups, especially those who regard the
company as socially responsible and conscious.

 Long-term viability - Companies that adopt sustainable practices are better equipped to withstand
changes in the economic, social, and political environment, which can help ensure their long-term
viability.

 Addressing societal issues - Business organizations have a significant impact on society, and by
adopting sustainable practices, they can help address societal issues such as climate change,
poverty, and inequality.

Economic Sustainability

 Cost savings - Sustainability initiatives can often result in cost savings, such as reducing energy use
or improving waste management processes, which can help improve the bottom line.

 Increased efficiency - Sustainable practices can lead to improvements in resource efficiency,

reducing waste and increasing productivity, which can have a positive impact on the bottom line.

 Long-term viability - Companies that adopt sustainable practices are better equipped to withstand
changes in the economic, social, and political environment, which can help ensure their long-term
viability.

 Attracting investment - Investors are increasingly looking for companies that prioritize sustainability,
and a commitment to sustainability can help a company attract investment capital.

Environment Sustainability
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 Compliance with regulations - Many governments have implemented regulations aimed at reducing
the negative impact of business operations on the environment, and companies must comply with
these regulations to avoid legal and financial penalties.

- Award [1 – 2 marks] for a vague answer that shows limited understanding.

- Award [3 – 4 marks] for an attempt to explain the importance of sustainability with limited
explanation. Award up to 4 marks if there is no clear application to the case study.
- Award [5 – 6 marks] for a thorough discussion of the importance of sustainability using examples
from the case study.

Section B

Answer one question from this section.

7. Discus suitable sources of finance that NW may have used when taking over the small water filter manufacturers in
Europe and the United States of America (USA) (lines 91–92).
[10]

NW is a publicly held company so a range of sources could include:

- Loans/mortgages/bonds/debentures etc. business is profitable, works well,banks and other
investors may want to lend with favourable conditions(interest rates, terms, favourable conditions for
collateral etc.);
- share issue: conditions are good for a share issue: PLC, good reputation,sound profits successful
business;
- profits: are there any retained profits not yet spent? Sufficient for such a development?
- Joint ventures/venture capital: no real evidence that these are [Link] they want it?

- Accept any other relevant source of finance and explanation.

- Apply the mark band for 10-mark question below

8. With reference to STEEPLE factors, discuss changes in the external environment that may have affected
NW (lines 20–21) [10]

External environment can relate to aspects of Social; Economic; Technical; Political; Environmental; Legal;
and Ethical factors (STEEPLE)
- Social—potable water is now seen as a need, especially in LEDCs; short supply ofhigh skilled
and specialized employees in the UK (lines 68–69).
- Economic—recession; consumer confidence; interest rates etc., all impact on [Link] for
wind turbines is expected to grow (line 80); market for desalination is growing rapidly (line 39).
- Technical—innovations in engineering require NW to seek out new methods of production and
to enhance product development.
- Political—political instability has led to many issues in poorer countries increasing the demand for
NW’s products.
- Environmental—climate change has led to greater need for demand of potable water in many
countries around the world.
- Legal—safety regulations may have forced NW to develop more effective and safer products.
- Ethical—Stakeholders have a strong CSR approach leading to the development of the Outreach
Programme.

N.B. Only one answer can be accepted in each of the STEEPLE categories e.g only one economic factor
can count. Accept any other relevant external environment factor and explanation.
Marks should be allocated according to the mark bands below
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