Mark scheme
2. ADN is a food retailer. It has 5 shops and 300 full-time employees. All ADN’s employees
receive off-the job training. AND has a tall hierarchical structure. Managers have a narrow
span of control and all use an autocratic leadership. ADN’s director are planning to expand
the business and cannot decide whether it is better for a business to use internal growth or
external growth.
a) Define ‘span of control’.
Answer: Number of subordinates working directly under a manager [2]
b) Define ‘autocratic leadership style’.
Answer: Leader/manager makes all the decisions [2]
c) Outline two benefits to ADN of having full-time employees.
Consistent service [k] at the 5 shops [app]
Workers likely to be loyal/less likely to leave [k] the food retailer [app]
Easy to communicate with/update [k] the 300 employees [app]
d) Explain one benefit and one limitation to ADN of using off-the-job training
Benefit:
Learn the latest/new methods [k] for use in the 5 shops [app] so
business can remain competitive [an]
Broad range of skills can be taught [k] to the full-time employees
[app] so they can be become more efficient [an]
Can learn from experts/specialists [k] which may be helpful as
trying to expand [app]
Workers do not learn bad habits [k] so mistakes are avoided [an]
It does not disrupt work of other employees [k]
Increase motivation (K)
Limitation:
High cost/expensive [k] as have 300 employees [app] which increases
expenses [an]
Loss of working time [k] leading to less work done/fewer sales [an]
made form selling food. (app)
Additional qualifications mean it is easier for the employee
to leave/find another job [k] increasing time and cost of
recruitment [an] as they need full-time employees. (app)
e) Do you think it is better for a business to use internal growth or external
growth when planning to expand? Justify your answer.
Internal growth:
Easier to control [k] which can help avoid diseconomies of scale [an]
Lower investment may be needed [k] so less need to borrow (as
much) [an]
Slow method [k] so business may become uncompetitive/may miss
business opportunities [an]
Less risk [k]
External growth:
Quick method [k] so able to take advantage of new market
opportunities [an] which can increase revenue [an]
Removing a competitor [k] increases market share/power [an] may be
able to set/influence prices [an]
Large amounts of finance may be required [k] which increases
finance costs [an]\
Model answer:
One advantage of internal growth is it is easier to control the rate of
growth [k] which can help avoid diseconomies of scale [an]. However,
external growth can be faster [k] so the business can take advantage of
opportunities [an]. Overall external growth is better as by taking over a
competitor market share can be increased [eval] increasing market
power [eval].
Answer:
Cheaper than full-time/reduce labour costs/no need to pay when not
working
More flexible hours of work
Can ask/more likely to work at busier times
Can/more likely to extend working hours
Provides a wider range of skills/experience
Helps attract well-qualified employees who need flexible hours
Helps retain experienced workers
(b) Define ‘organisational structure’.
Answer:
It shows levels of management and division of responsibilities within an
organisation [2]
(c) Identify four reasons why effective internal communication is important for a business.
Answer:
Fewer mistakes(k) as they need experienced employees such as 18
months working in other business (app)
faster decision-making(k) as it a tall structure (app)
Improve motivation(k)
Improve coordination(k)
Improve efficiency/productivity(k)`
increase output {K)
(d) Using Table 4.1, explain two reasons why MTO should select applicant A as its
new manager.
Answer:
Knows what the job involves/experience [k] as has been a manager
for 3 months [app] so less likely to make mistakes/may need less training
[an]
Has qualifications [k] as has got a degree in Business [app] so should
be able to do the job [an]
Good at decision-making [k] which can help the bank [app] may help
improve efficiency [an]
May bring in new ideas [k] so may be able to help the business achieve
its objective of growth [app]
(e) Explain two reasons why a business might want to grow. Which
reason is likely to be the most important? Justify your answer.
Answer:
Increase market share [k] so able to set/control prices [an] which may
reduce competition [an]
Benefit from economies of scale [k] leading to lower unit/average
costs [an] which can increase its profit margin [an]
Increase sales [k] which could lead to additional revenue [an]
Spread risk [k] so that if no sales in one market, can still gain revenue
from other markets [an]
Increase profit [k] which can act as a source of finance/reinvest
back into business [an]
Increased status/reputation [k] could attract customers [an]
Protect against risk of takeover [k]
Survival [k]
For EVALUATION:
for a justified decision as to which reason (for growth) is likely to be the
most important.
Model answer:
One reason is to increase sales [k] which could mean the business can increase
revenue [an]. Another reason is to benefit from economies of scale [k] which
will allow the business to achieve lower unit costs [an]. Economies of scale are
likely to be the most important because lower unit costs will also increase the
profit margin [eval] whereas the ability to increase sales may depend on the
level of competition. [eval]
