Fretter's Music (FM) FM is a private limited company based in country Z. FM manufactures a range of musical instruments, such as guitars and keyboards, for the consumer market. FM uses batch production to produce its range of instruments. However, FM is in the process of changing to mass customisation. FM's customers are all in country Z and include musicians and students. It sells through its own chain of retail stores. FM's marketing mix has been successful; sales increased by 45% in the last two years. The changes in the production process and the increase in sales have put pressure on employees to maintain quality and speed of production. FM employs 108 people. The Human Resource Manager, Kylie, is concerned about the high labour turnover. Kylie has produced Table 1.1, which shows reasons why employees left in 2022. [Table 1.1] Reason for leaving | Number of employees who left --------------------|----------------------------- Better job in another industry | 4 Higher pay at a competitor | 6 Lack of promotion opportunities at FM | 5 Unhappy with the work environment | 3 Retirement | 6 FM's directors would like to grow the business and plan to enter international markets. FM's brand is not well-known internationally and they will have to compete against established musical instrument businesses. FM will have to change its supply chain and increase production.

Mark scheme

Marking points from the official mark scheme (May/June 2023). The mark or mark type is shown in brackets.

1. [1] (a)(i) Place / Price / Product / Promotion
2. [1] (a)(ii) Somebody who buys goods or services.
3. [1] (a)(ii) For their own personal use/is the end user/final consumer.
4. [1] (a)(ii) Applies knowledge of consumer market to a product AND a business (e.g., FM sells musical instruments to musicians and students who are the final users).
5. [1] (b)(i) Numbers leaving = 4 + 6 + 5 + 3 + 6 = 24
6. [1] (b)(i) Total staff = 108
7. [1] (b)(i) Labour turnover = 24 / 108 × 100 = 22.2% (Accept 22)
8. [1] (b)(ii) Knowledge of a method that may reduce labour turnover (e.g., Financial methods like commission/bonus; Non-financial methods like training/job enrichment; Reference to theorists).
9. [1] (b)(ii) Applies knowledge to FM (e.g., Pay is a major factor, 25% of those leaving did so for higher pay at a competitor).
10. [1] (b)(ii) Develops answer to explain a benefit of the method given (e.g., if FM increase wages employees will be more satisfied and less likely to leave).
11. [1] (c) Knowledge of increased costs (e.g., labour, delivery, capital, documents, marketing, research).
12. [1] (c) Application to FM context for increased costs (e.g., Extra distribution costs as FM delivers over a longer distance).
13. [1] (c) Analysis of increased costs (e.g., So, FM will need to pay more in delivery costs as the delivery driver will take a longer time and there will be higher fuel costs).
14. [1] (c) Knowledge of reduced costs (e.g., bulk buying, cheaper labour/land in another country).
15. [1] (c) Application to FM context for reduced costs (e.g., Mass customisation could allow economies of scale).
16. [1] (c) Analysis of reduced costs (e.g., Mass customisation - benefit from economies of scale).
17. [1] (c) Further analysis point 1 (e.g., High cost of investment – if take out a loan interest will add to costs).
18. [1] (c) Further analysis point 2 (e.g., Higher marketing costs as FM is not a well-known brand internationally).
19. [1] (d) Knowledge of batch production (manufacturing process in which items or products are produced in groups).
20. [1] (d) Knowledge of mass customisation (manufacturing process that combines flexibility/personalisation with low unit costs of mass production).
21. [1] (d) Knowledge of stakeholders (person/organisation that has an interest in a company and can either affect or be affected by the business/ examples of stakeholders).
22. [1] (d) Application of batch/mass customisation to FM (e.g., FM moving from batch to mass customisation for musical instruments).
23. [1] (d) Application to FM stakeholders (e.g., impact on shareholders, employees, customers, suppliers).
24. [1] (d) Analysis of impact on employees (e.g., Change of working practices – employees must learn new skills / Redundancies could be an issue).
25. [1] (d) Analysis of impact on shareholders (e.g., Forego dividends in the short term – due to the costs of the investment / Long-term gains – from increased profits).
26. [1] (d) Analysis of impact on customers (e.g., Better choice - tailored to customer wants / Higher prices – due to increase in costs/quality).
27. [1] (d) Analysis of impact on suppliers (e.g., More business/more profits – but might need different suppliers).
28. [1] (d) Developed evaluation in context (e.g., Weighing up of risks v reward / Short term costs v long term costs / Costs v benefits).
29. [1] (d) Developed judgement/conclusion in context (e.g., Judgement on overall impact on a stakeholder(s) / Judgement on stakeholder(s) it will most likely impact).
30. [1] (d) Developed evaluative comments balancing arguments (e.g., To conclude, mass customisation can have both positive and negative impacts on FM's shareholders. Therefore, FM should carefully weigh the benefits and costs of this change and implement it in a way that maximises the value, profits and dividends for the shareholders).