Analyse two limitations to a business of capital intensive operations.

Mark scheme

Marking points from the official mark scheme (Feb/Mar 2025). The mark or mark type is shown in brackets.

1. [1] (Identification of limitation 1) expensive to set up / higher breakeven output / machinery may be designed for mass production only / can be inflexible / demotivates employees / skilled employees are needed to operate capital intensive operations
2. [1] (Application of limitation 1) new machinery must be purchased / fixed costs can be higher / large output of standardised product / may be difficult to adjust machines to produce different products / redundancies / less interest in work / stressful training / adaptation to new working style
3. [2] (Analysis of limitation 1) in the short-term new machinery can be more expensive than employing workers to do the same job. The business may not be able to afford this without taking out a loan which is expensive to repay / more products will have to be made to reach the breakeven output and make a profit. This will increase variable costs and the supplier may not be able to supply the necessary raw materials/components / demand may not be high enough to require capital intensive production so a business might operate under capacity therefore wasting resources / difficult to customise products to individual customer needs/changes in customer demand. Niche market customers may be lost to competitors / less need for employees/less labour intensive/jobs of retained employees may be boring or require extra training. HR problems may increase and costs of changes to workforce may be too expensive to make a change to capital intensive operations
4. [1] (Identification of limitation 2) expensive to set up / higher breakeven output / machinery may be designed for mass production only / can be inflexible / demotivates employees / skilled employees are needed to operate capital intensive operations
5. [1] (Application of limitation 2) new machinery must be purchased / fixed costs can be higher / large output of standardised product / may be difficult to adjust machines to produce different products / redundancies / less interest in work / stressful training / adaptation to new working style
6. [2] (Analysis of limitation 2) in the short-term new machinery can be more expensive than employing workers to do the same job. The business may not be able to afford this without taking out a loan which is expensive to repay / more products will have to be made to reach the breakeven output and make a profit. This will increase variable costs and the supplier may not be able to supply the necessary raw materials/components / demand may not be high enough to require capital intensive production so a business might operate under capacity therefore wasting resources / difficult to customise products to individual customer needs/changes in customer demand. Niche market customers may be lost to competitors / less need for employees/less labour intensive/jobs of retained employees may be boring or require extra training. HR problems may increase and costs of changes to workforce may be too expensive to make a change to capital intensive operations
7. [2] (Knowledge) manufacturer – secondary production, raw materials/components to finished product / sustainability – prevent waste use the minimum of non-renewable resources so levels of production are sustained in future / compete successfully
8. [2] (Application) soft drinks - non-alcoholic e.g. fruit juices, cordials, soda, lemonade / packaging - bottles (glass, plastic), cartons, recycle, refill
9. [2] (Analysis - Benefits) reduces negative impact of operations on the environment – part of CSR objective / climate change pressure groups and bad media reports are reduced – these can disrupt production and/or reputation / customers increasingly interested in production methods can influence purchasing decisions /expand customer base / may attract investors, employees and consumers who share values relating to sustainability / costs may be reduced through recycling and reusing resources or using fewer resources/less waste / governments may give support/grants to businesses to help improve sustainability
10. [2] (Analysis - Implications) costs of changing supply chain and/or production methods / reconsider what is produced e.g. low or no sugar soft drinks / find ways to be sustainable e.g. recyclable packaging, alternative energy / will involve change EVAL regarding HRM – planning, training
11. [6] (Evaluation) A judgement/decision is made on whether a soft drinks manufacturer must improve its sustainability if it is to compete successfully. / Consider factors such as: how sustainable are current operations, market competitiveness, customer attitudes to sustainability, cost of adjustments, and the relative importance of sustainability compared to other business aspects like marketing mix, product development, and employee quality.