Great Desks (GD) GD is a co-operative owned by all of its employees. It manufactures desks for schools, offices and home use. The products are handmade using job production. GD uses just in time (JIT) inventory control. GD operates in a highly competitive market and uses personal selling to promote its products to wholesale and retail outlets. GD's employees accept low salaries as most of their income comes from a share of profits at the end of the year. Following five years of rapid growth in sales and profits, GD plans to open its own retail shop. This is because the number of people who work from home is predicted to grow, which will lead to higher demand for desks for home use. GD will need 2m to open the shop. GD's forecast cash flow from 2023 to 2025 is shown in Table 2.1. [Table 2.1] GD's forecast cash flow 2023 to 2025 (m) | | 2023 | 2024 | 2025 | |---|---|---|---| | Cash inflow | | | | | Revenue | 4.0 | 6.0 | 9.0 | | Total inflow | 4.0 | 6.0 | 9.0 | | Cash outflow | | | | | Utilities (power, water etc.) | 1.5 | 1.5 | 2.0 | | Employee costs | 0.5 | 0.5 | 0.5 | | Purchases | 2.0 | 3.5 | 4.5 | | Marketing | 3.0 | 5.5 | 5.0 | | Total outflows | 7.0 | 11.0 | 12.0 | | Net cash flow | (3.0) | (5.0) | | | Opening balance | 9.0 | 6.0 | | | Closing balance | 6.0 | 1.0 | | GD's employees are concerned about the management style of Steve, the Managing Director, who they say: * spends too much time trying to make people happy rather than solving problems * responds to opinions rather than setting long-term plans * fails to recognise threats to the business and does not see the need for new ideas * takes decisions on the votes of employees rather than the merits of the arguments.

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) (High) quality product / Can customise orders/wants / Workers involved in the entire process.
2. [1] (a)(ii) Just-in-time production minimises the time, labour, and materials in a manufacturing process / only producing goods as they are needed.
3. [1] (a)(ii) Aims for minimal on-site raw materials, minimal wait times, small batch sizes / inventory control system where inventory is bought when needed.
4. [1] (a)(ii) Applies knowledge of JIT to an example of inventory AND an example of when it is needed (e.g., Components for making desks will be ordered when GD needs them, reducing storage costs).
5. [1] (b)(i) Formula/implied formula: closing balance = net cash flow + opening balance.
6. [1] (b)(i) Net cash flow (2025) = Revenue (9.0) – Total outflows (12.0) = -3.0 ($m).
7. [1] (b)(i) Opening balance (2025) = Closing balance (2024) = 1.0 ($m).
8. [1] (b)(i) Closing balance (2025) = Net cash flow (2025) + Opening balance (2025) = -3.0 + 1.0 = -2.0 ($m) (accept 2 in brackets).
9. [1] (b)(ii) Knowledge of a disadvantage (e.g., Complex decisions leading to uncertainty/poor performance; Unpredictable income; Conflict/disagreements; Management roles unclear).
10. [1] (b)(ii) Applies knowledge to GD (e.g., Low wages compensated by profit share, so income is unpredictable).
11. [1] (b)(ii) Develops answer (e.g., If sales fall or costs rise, employees could face lower income due to reduced profit share).
12. [1] (c) Knowledge of a source of finance (e.g., Bank loan).
13. [1] (c) Application of source to GD (e.g., GD needs $2m for the shop, a long-term loan may be suitable).
14. [1] (c) Analysis of source (e.g., A bank loan incurs interest payments, increasing cash outflow for GD).
15. [1] (c) Knowledge of a second source of finance (e.g., Retained profits / Owners' capital).
16. [1] (c) Application of second source to GD (e.g., GD has had 5 years of rapid growth, so retained profits could contribute).
17. [1] (c) Analysis of second source (e.g., Using retained profits would not increase GD's debt or give up ownership, but it would reduce the amount available for profit-sharing for employees).
18. [1] (c) Further analysis point 1 (e.g., Bank might be reluctant to lend to a co-operative or require high collateral).
19. [1] (c) Further analysis point 2 (e.g., Owners/employees may not agree to reduce profit share to fund the new shop, creating conflict).
20. [1] (d) Knowledge of management styles (e.g., Democratic, Laissez-faire, Autocratic, Paternalistic).
21. [1] (d) Knowledge of functions of management (e.g., planning, organising, directing, controlling).
22. [1] (d) Application of Steve's style to GD (e.g., Steve spends too much time trying to make people happy/responds to opinions - suggesting a democratic/paternalistic approach).
23. [1] (d) Application of Steve's style to GD's context (e.g., Fails to recognise threats/doesn't set long-term plans - indicating a lack of strategic management).
24. [1] (d) Analysis of positive aspects of Steve's style (e.g., Builds good relationships with employees, who are owners, fostering security and participation).
25. [1] (d) Analysis of negative aspects of Steve's style (e.g., Lack of long-term planning and failure to recognise threats could put GD at risk in a competitive market).
26. [1] (d) Further analysis (e.g., Taking decisions on votes rather than merits might lead to inefficient decisions, especially for a $2m investment).
27. [1] (d) Further analysis (e.g., Suitable for GD's highly skilled/motivated staff, but could lead to power struggles).
28. [1] (d) Developed evaluation in context (e.g., Weighing up pros and cons, suitability for a co-operative, impact on productivity/sales).
29. [1] (d) Developed judgement/conclusion in context (e.g., Steve's style has strengths in employee relations but weaknesses in strategic planning, requiring him to adapt to ensure future success).
30. [1] (d) Developed evaluative comments balancing arguments (e.g., While a democratic style fits a co-operative, a more authoritative/visionary approach might be needed for the new shop investment).
31. [1] (d) Developed evaluative comments balancing arguments (e.g., Impact on success depends on whether GD's growth can continue despite lack of strategic planning and how external threats are handled).