MLC Computers (MLC) MLC is a successful private limited company that has been trading for 20 years in country K. The company makes a range of laptop computers. It is the market leader in a highly competitive market. MLC is developing a new touchscreen computer that will use the latest technology. Initially secondary market research was carried out, followed by primary market research. The market research data suggested a high potential demand for the new touchscreen computer. The Marketing Manager is planning the launch of the new touchscreen computer using price skimming. All computers are made in MLC's two factories in country K. Operations are capital intensive. New machinery is needed to manufacture the new touchscreen computer. Maria, the Managing Director, decided to use leasing for the new machinery. MLC has 350 employees. One of its objectives is to reduce labour turnover to 8% by 2026. Labour turnover rates currently vary across the two factories. The labour turnover for Factory A is currently 14%. Table 2.1 shows employee data for Factory B. [Table 2.1] Maria is the majority shareholder with 55% of shares. She is concerned about the future growth of the company. Over the next three years she plans to launch five new computers using the latest technology. At a recent board meeting Maria proposed that the company changes the ownership of the business to a public limited company.

Mark scheme

Marking points from the official mark scheme (Feb/Mar 2024). The mark or mark type is shown in brackets.

1. [1] (a)(i) Journal articles / Government data / census / textbooks / dictionaries and encyclopaedias / books / newspapers and magazines / accounts and reports / previous sales/internal data / competitor data / Data collected by other businesses / Feedback found on media / other sources (Accept any one valid response).
2. [1] (a)(ii) A legal contract to enable the lessee to use an asset in return for a payment / The ability to use something for a regular payment/rent.
3. [2] (a)(ii) Developed application of one relevant point to a business context (e.g., the lessee will never own the asset, which is instead owned by the lessor, or it allows a business to update equipment more often without large upfront capital expenditure).
4. [1] (b)(i) Formula for labour turnover: (Number of employees leaving business / Average number of employees within business) × 100.
5. [1] (b)(i) Calculation of labour turnover for Factory B: (25/200) × 100 = 12.5%.
6. [1] (b)(i) Calculation of difference: 14% (Factory A) - 12.5% (Factory B) = 1.5% (Award 3 marks for correct answer of 1.5% with or without percentage sign).
7. [1] (b)(ii) Knowledge of an advantage of low labour turnover, e.g., Reduced costs / Improved motivation/morale / More experienced/efficient employees / higher productivity / Better customer experience / Improved corporate culture / More attractive when recruiting new employees.
8. [1] (b)(ii) Explanation of how this advantage benefits MLC, e.g., lower induction costs for fewer new employees or higher quality production from experienced staff.
9. [1] (b)(ii) Contextual link to MLC, e.g., MLC's objective to reduce labour turnover to 8% by 2026, or its capital-intensive operations, or producing a range of laptop computers.
10. [2] (c) Knowledge of one advantage and one disadvantage of price skimming. Advantage example: Quicker return on investment or covers development costs. Disadvantage example: Customers may wait until the price reduces, or reduced sales volumes.
11. [2] (c) Application of these points to MLC's context, referencing the new touchscreen computer, the latest technology, high potential demand, or MLC being a market leader in laptops.
12. [4] (c) Developed analysis for one advantage and one disadvantage, identifying connections between causes, impacts, and consequences. For example: An advantage is a quicker return on investment (AO1) for MLC's new touchscreen computer, which uses the latest technology (AO2). This allows MLC to recover the development costs more rapidly and generate profits more quickly, which can be reinvested into the business for future growth (AO3). A disadvantage is that customers may choose to wait until the price reduces (AO1) before purchasing MLC's new touchscreen computer (AO2). This could lead to lower initial sales volumes, potentially hindering MLC's early revenue generation and giving competitors an opportunity to enter the market with alternative products (AO3).
13. [2] (d) Developed knowledge of the differences between a private limited company and a public limited company, such as how shares can be sold (stock market vs. family/friends) and implications for capital raising or control.
14. [2] (d) Developed application to MLC's context, referencing its plan to launch five new computers, its status as a market leader, Maria being the majority shareholder with 55%, or its capital-intensive operations.
15. [2] (d) Developed analysis for and against changing to a public limited company. For example: An advantage is that MLC could raise a large amount of capital by selling shares on the stock market (AO1) to finance its ambitious plan to launch five new computers (AO2), enabling significant future growth (AO3). A disadvantage is that changing to a public limited company exposes MLC to the risk of a hostile takeover (AO1), which could lead to Maria, as the majority shareholder, losing control of the business (AO2), potentially jeopardising her vision for future growth (AO3).
16. [6] (d) Developed evaluation, including a reasoned judgement whether MLC should change to a public limited company. This should involve balancing arguments, considering factors like the objectives of current shareholders, the level of control Maria wishes to retain (given her 55% share), the actual need for significant capital (considering they lease machinery), the economic climate, and the potential impact on brand image and new business opportunities.