Designer Clothing (DC) DC is a medium sized private limited company. DC has three main shareholders. It has been trading for ten years. DC makes luxury dresses for women using job production methods. DC has an excellent reputation for quality. A DC designer has a meeting with every customer to design a dress that satisfies the customer's individual needs, including choice of fabric and colour. Cost-based pricing is used with 50% added to the total costs. DC's employees are highly skilled and paid hourly rates (a time based system). Ikram, one of the designers, has just had a meeting with a new customer, Lydia. She wants him to design and make a new dress for her. Ikram has worked out the following information for the dress. Table 1: Production data for the dress for Lydia Production time: 20 hours Hourly rate (time based): $10 Material costs: $250 Other costs such as packaging: $50 Jenny, the Managing Director, wants to use DC's excellent reputation and move into a new market. Jenny wants to create a new range of DC branded trousers for women. She has developed some elements of a marketing mix for the new trousers (see Table 2). Table 2: Elements of a marketing mix for the new trousers Product: Quality trousers aimed at women aged 25-50 years Distribution channel: Sold in large shops Promotion: Branded with the DC logo Jenny is waiting for a market research report including feedback from a focus group. She thinks that the pricing strategy DC currently uses will not be appropriate for the new trousers. The new product range will be made using a batch production method. The Production Director, Khaleal, has identified the machinery needed for the new production method. Khaleal is worried about the problems that introducing the new production method will cause DC's employees.

Mark scheme

Marking points from the official mark scheme (May/June 2017). The mark or mark type is shown in brackets.

1. [2] A correct definition
2. [1] A partial, vague or unfocused definition
3. [0] No creditable content
4. A correct definition must show the difference between a shareholder and an owner / (part) owner of a company, has limited liability etc.
5. A shareholder is the owner/part owner of a company/incorporated business. Can be private or public limited company. A shareholder tends to buy shares and sell when they increase in value. A shareholder will expect dividends from the profits as a return on their investment. A shareholder has voting rights at the AGM and invests in a business/has voting rights.
6. Answer: A shareholder is a stakeholder. Mark: 1. Reason: Partial definition.
7. Answer: A shareholder is an owner of a business. Mark: 0. Reason: Could be a sole trader.
8. Answer: A shareholder is part-owner of a company. Mark: 1. Reason: Refers to part ownership and company so not a sole trader or partner but only partial.
9. Answer: A shareholder invests money in a business and receives dividends. Mark: 2. Reason: Two correct elements.
10. [1 mark] Example of some other way of showing good understanding, i.e. Accuracy can be affected by bias, Opinions may not be representative of the general population/target market. Not statistically significant. Can aid decision making
11. [1 mark] Consumers/potential consumers/target market/customers
12. [1 mark] Primary/qualitative/opinions/feedback/led by interviewer
13. This is a method of primary research. Used by businesses to get a group of customers together for feedback on a product or service. Can be expensive. Gives more accurate and qualitative data. Allows dialogue during the research process. Accuracy can be affected by bias. Opinions may not be representative of the general population/target market. Not statistically significant. Interviewer is present to lead discussion.
14. Answer: A group of people. Mark: 0. Reason: Too vague.
15. Answer: A group of customers. Mark: 1. Reason: B mark for customers.
16. Answer: An interviewer carries out primary research on a group of customers. Mark: 2. Reason: 2xA points with 'interviewer' and 'primary research' and a B mark for customers. No C element so 2 marks.
17. Answer: Primary research on potential consumers to help make decisions about a product. Mark: 3. Reason: All 3 - A, B and C elements.
18. [3 marks] Correct calculation of price (with or without working or $)
19. [2 marks] Correct calculation* of total costs (with or without $)
20. [1 mark] Correct formula or correct calculation* of wages
21. [0 marks] No creditable content
22. (FC+VC) + mark-up = Price
23. Wages = 20 hours × $10 = $200
24. Total costs = $200 + $250 + $50 = $500
25. Add 50% = $250
26. So selling price will be $750
27. *Working required or explicit identification of TC/wages
28. Common incorrect answers: Answer: 10 x 20 = 200. Mark: 1. Rationale: Correct calculation of wages.
29. Common incorrect answers: Answer: $200 + $250 + $50 = $500. Mark: 2. Rationale: Total costs calculated with working.
30. Common incorrect answers: Answer: 500 × 150%. Mark: 2. Rationale: Correct calculation, answer missing.
31. Common incorrect answers: Answer: FC + VC then add mark up. Mark: 1. Rationale: Correct formula.
32. Common incorrect answers: Answer: $500. Mark: 0. Rationale: A wrong answer with no working.
33. Common incorrect answers: Answer: $200. Mark: 0. Rationale: A wrong answer with no working.
34. Common incorrect answers: Answer: Wages=200. Mark: 1. Rationale: Explicit identification of wages.
35. Common incorrect answers: Answer: TC=500. Mark: 1. Rationale: Explicit identification of TC.
36. [3] Explanation of a payment method other than time based in context
37. [2] Explanation of a payment method other than time based
38. [1] Identification of a payment method other than time based
39. [0] No creditable content
40. Context and content is likely to come from: Piece rates, e.g., employees could be paid per pair of trousers in the new batch production
41. Context and content is likely to come from: Salary where dress designers are paid a an annual salary which is paid monthly
42. Context and content is likely to come from: Commission for designers per dress (% of the value e.g. of the $750)
43. Context and content is likely to come from: Bonuses linked to the profits paid for DC, more sales of designer clothing will lead to bonuses being paid
44. Context and content is likely to come from: Similar approach for performance related pay and profit sharing.
45. Context - designers, employees on the batch production method, designer clothing, reputation for quality
46. Identification: Piece rate. Explanation: Payment based on output. Possible context: Quality may be sacrificed and DC have an excellent reputation for quality.
47. Identification: Commission. Explanation: Payment based on the value produced. Possible context: Dress designers would be paid commission on $750 price of a dress.
48. Shows understanding of two (or more) human resource problems in context. Marks: 4 (ANAN + ANAN)
49. Good analysis of two (or more) human resource problems that DC might experience from the introduction of the new batch production method. Marks: 4
50. Shows understanding of one human resource problem in context. Marks: 3 (ANAN)
51. Good analysis of one human resource problem that DC might experience from the introduction of the new batch production method. Marks: 3
52. Shows knowledge of two (or more) human resource problems. Marks: 2 (AN + AN)
53. Limited analysis of two (or more) human resource problems. Marks: 2
54. Shows knowledge of one human resource problem. Marks: 1 (AN)
55. Limited analysis of one human resource problem. Marks: 1
56. No creditable content. Marks: 0
57. Contextual analysis likely to come from: Lower morale/job satisfaction – workers are used to working on unique clothing and will have immense pride in their work. This may fall if working on a batch production line.
58. Contextual analysis likely to come from: Deskilling – if machinery is being used, this may replace the skills of the employees used to make unique clothing
59. Contextual analysis likely to come from: Training needs – the new machinery will involve training, how will Khaleal manage this?
60. Contextual analysis likely to come from: Fear of change/communication issues – employees are likely to be very wary of the new machinery/batch production. Khaleal needs to have a clear communication and employee participation strategy.
61. ARA
62. Justified evaluation based on arguments in context. Marks: 7
63. Developed evaluation based on arguments in context. Marks: 6
64. An evaluative statement based on arguments in context. Marks: 5
65. Shows understanding of one or more pricing strategy in context. Marks: 4
66. Arguments (two sided) based on one or more pricing strategy in context. Marks: 4
67. Identifies one or more pricing strategy in context. Marks: 3
68. Argument (one sided) based on one pricing strategy in context. Marks: 3
69. Shows understanding of one or more pricing strategy. Marks: 2
70. Two or more pieces of limited analysis of one or more pricing strategy. Marks: 2
71. Identifies one or more pricing strategy. Marks: 1
72. One piece of limited analysis of one pricing strategy. Marks: 1
73. No creditable content. Marks: 0
74. Context must be explicit not just implied but the strategy, i.e. penetration for a new product is not context, but penetration because DC have a new range of trousers is contextual
75. Context/content: Competitive - the trousers are being sold to department stores. They are likely to have other competitors and so they will need to be competitive to persuade the department stores to stock the trousers. This may be feasible as the department stores will know the prices they are prepared to pay.
76. Context/content: Penetration - DC are moving into a new market. They may look to offer high discounts on initial orders, build their relationship with the department stores and then increase prices. Can DC afford this? How will competitors react?
77. Context/content: Skimming - unlikely to be effective as these are batch produced products – they may have a reputation for quality but batch production will mean the uniqueness of each piece of clothing will be lost so unlikely to be able to charge higher prices especially to a department store.
78. Context/content: Price discrimination – unlikely to be effective as difficult for DC to separate the market for trousers particularly by geography. They are selling direct to the department stores who will then decide which stores to sell them in. DC does not have control of this. They are also trying to break into a new market so unlikely this will work.
79. Evaluation is likely to come from a candidate: Judging which pricing strategy is best for DC to use and justifying this in the context
80. Evaluation is likely to come from a candidate: Weighting their response, for example, justifying why a strategy is unlikely to be effective