Wood's Logs (WL) WL was set up by Robert Wood 50 years ago. It is a private limited company with all of the shares owned by the Wood family. Robert has managed the business since it began and he is well liked as the figurehead of the business. WL cuts down trees and processes them into logs. The logs are loaded onto trucks and trains for delivery to customers. All of WL's logs are sold in industrial markets. WL is a labour intensive business which has over 100 employees. Demand for logs is seasonal. WL maintains a steady rate of production but the business cannot afford to hold high levels of inventory. Table 1.1 shows a cash flow forecast for the next three months. Table 1.1: Cash flow forecast for WL | | Month 1 (000) | Month 2 (000) | Month 3 ($000) | |---|---|---|---| | **Cash Inflows** | | | | | Revenue | 250 | 300 | 100 | | Total cash in | 250 | 300 | 100 | | **Cash Outflows** | | | | | Labour | 150 | 150 | 150 | | Inventory storage | 10 | 5 | 50 | | Expenses | 5 | 5 | 5 | | Total cash out | 165 | 160 | 205 | | Opening balance | 20 | 105 | 245 | | Closing balance | 105 | 245 | 140 | The workforce is currently demotivated. Employees receive a basic wage and a share of the profits. In the last four years, profits have been falling and the company is struggling to break even. The demand for logs is decreasing, as businesses use more recycled products. WL does not have any environmental targets and this has also reduced demand. Robert is now 70 years old and wants to stop managing WL. His grandson, Brad, is keen to become the new Managing Director. Brad went to university and studied Mintzberg's management roles. He believes that he has all the skills needed to become the next Managing Director of WL.

Mark scheme

Marking points from the official mark scheme (May/June 2019). 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. Break-even can be defined in a number of ways:
5. ∞ expenditure (costs) and income (revenue) are equal
6. ∞ the level of sales/units where there is no profit or loss
7. ∞ TR = TC
8. Exemplar: When a business makes enough sales/revenue/income to cover all the costs. [2] Both elements covered
9. Exemplar: TC = TR [2] Both elements covered
10. Exemplar: Cost of sales is equal to sales revenue. [1] No understanding of total costs (CoS only covers direct costs)
11. Exemplar: The business makes no profit or loss [1] No understanding of the level of sales/units
12. Exemplar: The point at which a business stops making a loss and can start to make a profit [1] No understanding of the level of sales/units
13. Exemplar: Where the business has made enough sales to have broken even. [0] Tautological, no understanding
14. Award one mark for each point of explanation:
15. [1] C Example or some other way of showing good understanding
16. [1] B Understanding that it is not the end user, i.e. used to produce, not to end user etc. – anything to do with manufacturing and production
17. [1] A Understanding of business to business
18. Content: When a business sells to another business, in contrast to selling to the end user. Industrial markets usually supply components for use in the production of products and services.
19. Exemplar: An industrial market is when a business sells components to another business who then sells it to another business or the end user [3] A clear understanding of all three elements
20. Exemplar: When a business sells to another business who is not the end user [2] An understanding of B2B and not an end user but no C mark
21. Exemplar: Selling business to business [1] Point A only
22. Exemplar: When you sell to someone who is not the end user [1] Point B only
23. [3] Correct answer with or without correct working or $ or 000s
24. [2] Attempt at calculating Month 3 closing balance using correct figures
25. [1] Formula or correct calculation of Inventory storage for any one month
26. [0] No creditable content
27. Content: Closing balance = Opening balance + Cash in – Cash out
28. Month 1 Inventory storage: 10 * 1.20 = 12
29. Month 2 Inventory storage: 5 * 1.20 = 6
30. Month 3 Inventory storage: 50 * 1.20 = 60
31. New Total cash out Month 1: 150 + 12 + 5 = 167
32. New Closing balance Month 1: 20 + 250 - 167 = 103
33. New Total cash out Month 2: 150 + 6 + 5 = 161
34. New Closing balance Month 2: 103 + 300 - 161 = 242
35. New Total cash out Month 3: 150 + 60 + 5 = 215
36. New Closing balance Month 3: 242 + 100 - 215 = 127
37. Answer = $127000 (accept 127 as the '000 is in the column header)
38. Exemplar: 127 (127,000) [3] Does not require the '000 of the $ sign
39. Exemplar: 50 x 20% = 60; cash out for mth 3 = 215 closing balance = 124 [2] Calculated one month, closing balance is incorrect as other two months ignored
40. Exemplar: 12 Or 6 OR 60 (with working) [1] Calculated at least one correct new inventory
41. Exemplar: Closing balance = opening balance + cash in – cash [1] Correct formula
42. [3] Explanation of a benefit of holding inventory in context
43. [2] Identification of a benefit of holding inventory in context
44. [1] Identification of one benefit of holding inventory
45. [0] No creditable content
46. Content: ∞ To meet changing demand – seasonal demand
47. Content: ∞ To meet unexpected demand – primary business, trees take time to grow – unexpected demand can only be met by holding stock
48. Content: ∞ Respond to customer needs – Industrial market – importance of customer service, repeat customers etc.
49. Content: ∞ To be able to maintain a steady level of production
50. ARA Exemplar: To meet changing demand [1] As demand is seasonal [2] So there is always stock ready for sale [3]
51. ARA Exemplar: To meet unexpected demand [1] As it takes time to cut down trees/for them to grow [2] So potential sales/revenue /profit are not lost [3]
52. ARA Exemplar: To have a steady rate of production [1] As it is a labour intensive business [2] To ensure their 100 employees have constant work [3]
53. [4] Shows understanding of two (or more) factors which may have affected location of WL
54. [3] Shows understanding of one factor which may have affected location of WL
55. [2] Shows knowledge of two (or more) factors which may affect location
56. [1] Shows knowledge of one factor which may affect location
57. [0] No creditable content
58. Analysis (4 marks): Good analysis of two (or more) factors which may have affected location of WL [4]
59. Analysis (4 marks): Good analysis of one factor which may have affected location of WL [3]
60. Analysis (4 marks): Limited analysis of two (or more) location factors [2]
61. Analysis (4 marks): Limited analysis of one location factor [1]
62. Content: ∞ Geographic - Likely to need a relatively rural area to grow trees and process them. However, cannot be too rural as there is a need for a workforce (labour intensive).
63. Content: ∞ Demographic – WL is a labour intensive business – will need to be close enough to a populated area to provide the workforce. Alternatively, may need to offer accommodation.
64. Content: ∞ Legal - There are likely to be legal restrictions on how many and what type of trees can be felled. May have needed to locate in a country where the laws are more relaxed.
65. Content: ∞ Political - Environmental concerns/leanings of the political party in charge (e.g. Green party)
66. Content: ∞ Resources - Need to be near trees/raw materials for production
67. Content: ∞ Infrastructure - Need to be near a road and rail network for deliveries.
68. Content: ∞ Marketing - there may be types of wood/areas where certain trees grow which have a higher value than others.
69. ARA Example of a factor (K): Location/resources [1] Examples of application/context (APP): As they need to be on/ near woodland [2] Examples of possible analysis (AN + DEV): So they can have easy access (AN) to reduce overheads (DEV)
70. ARA Example of a factor (K): Infrastructure [1] Examples of application/context (APP): Need t be close to rail/road network [2] Examples of possible analysis (AN + DEV): To ensure easy access for deliveries (AN) to reduce delivery costs (DEV)
71. ARA Example of a factor (K): Demographic [1] Examples of application/context (APP): As WL is a labour intensive business [2] Examples of possible analysis (AN + DEV): Need to have a populated area to provide workforce (AN) to meet staffing levels (DEV)
72. [4] Shows understanding of two or more uses of Mintzberg's management role(s) in context
73. [3] Shows understanding of one use of Mintzberg's management role(s) in context
74. [2] Shows knowledge of Mintzbergs management theory AND one management role OR two management roles
75. [1] Shows knowledge of Mintzbergs management theory OR one management role
76. [0] No creditable content
77. Analysis and Evaluation (7 marks): [7] Justified recommendation based on argument in context
78. Analysis and Evaluation (7 marks): [6] Developed recommendation based on argument in context
79. Analysis and Evaluation (7 marks): [5] An evaluative statement/recommendation based on argument in context
80. Analysis and Evaluation (7 marks): [4] Two or more arguments based on the importance of Mintzsberg's management role(s) in context
81. Analysis and Evaluation (7 marks): [3] One argument based on the importance of Mintzsberg's management role(s) in context
82. Analysis and Evaluation (7 marks): [2] Limited analysis of two or more of Mintzberg's management role(s)
83. Analysis and Evaluation (7 marks): [1] Limited analysis of Mintzberg's management theory/ one management role
84. Content: Interpersonal – is related to anything a manager does which relates to relationships with staff (use examples from below)
85. Content: Informational – is related to providing information
86. Content: Decisional - is related to making decisions
87. Content: Figurehead – Robert has been the MD for 50 years and is well liked as the figurehead. New MD will have to replace him but may be unknown.
88. Content: Leader/to lead – Over 100 employees – labour intensive – important to lead well to maintain/improve efficiency
89. Content: Liaison/ to liaise – Workforce is demotivated, new MD will need to liaise with them
90. Content: Monitor/to monitor/receiver – Demand and profit is falling - therefore the need to monitor this to avoid any more loss is important.
91. Content: Disseminator/to disseminate – Over 100 workers – need to get information to them quickly and efficiently, especially with poor motivation
92. Content: Spokesperson – May need to represent the company to governments, environmentalist and the workforce
93. Content: Entrepreneur – demand/profits have been falling – need to diversify, find an environmental solution. Need to take risks and bring business back into profit.
94. Content: Disturbance Handler/to handle disturbances – demotivated work force, may start industrial action. Seasonal business – a poor winter may disturb both supply and demand.
95. Content: Resource Allocator/to allocate resources – Inventory management I important – storage costs – also trees cannot be easily replaced, or replaced I the short term – need to efficiently manage resources.
96. Content: Negotiator/to negotiate – May need to negotiate with customers (businesses) as well as the demotivated workforce.
97. ARA K: The new MD needs to be a figurehead [APP] Robert was a good figurehead because he was well liked for over 50 years [AN] A good figurehead will have the trust and loyalty of the workforce [DEV] To improve the morale of the demotivated workforce [EVAL] The entrepreneur role is the most important as without new ideas the business will not have enough demand
98. ARA K: Entrepreneur [APP] to diversify as demand is falling [AN] Which will find new ways to boost demand [DEV] To increase profits/revenue [EVAL] And this is the most immediate concern for WL However this depends upon the MD being able to have some interpersonal skills
99. ARA Routes to evaluation: ∞ Which firm is best/worst ∞ Which set of financial data is most important ∞ The relative importance of financial performance compared to other areas – i.e. sales performance