CP is a public limited company which sells candy (sweets) to its national market and international markets. CP has benefitted from internal growth over the past eight years and has a good working capital position. The total market sizes are shown in Table 2.1. [Table 2.1: Market data for candy] | | 2017 | 2018 | |---|---|---| | National market | $550m | $550m | | International market | $60bn | $61.5bn | CP is a capital intensive business but it does employ 40 workers to operate and maintain the machines. These employees have part-time contracts. The candy is made using flow production. Each variety of candy is made on a separate production line. Some of the machinery is over 25 years old. CP has 20 separate production lines in its factory and there are diseconomies of scale. The Operations Director of CP has proposed that the company changes from having many production lines to a single production line using process innovation. The business has carried out research into new machinery that would allow for mass customisation and an increase in the number of products produced each month. This would mean CP could have just one production line which would make every type of candy which CP sells. CP could also increase its product portfolio. The new machinery would cost $75m and its installation would require CP to stop production for six months. Most of the current workforce would face redundancy. The Finance Director has concerns about how CP could finance this new machinery. CP does not have any retained earnings which it could use and the business has already been told that a bank loan is not possible.

Mark scheme

Marking points from the official mark scheme (Oct/Nov 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. [1] Award one mark for each point of explanation:
5. [3] All three elements – allow any point which shows further/good understanding for the C mark
6. [2] A and B – no further/good understanding
7. [1] Use of the word 'capital' is a tautology – however B can still be awarded
8. [1] A only - C cannot be awarded without B
9. [0] Tautology
10. [2] Correct answer with or without correct working (no % sign required)
11. [1] Formula or correct calculation of change in market size (i.e. 1.5 bn)
12. [0] No creditable content
13. [4] Explanation of two ways in which CP's marketing may differ between national and international markets
14. [3] Explanation of one way in which CP's marketing may differ between national and international markets
15. [2] Identification of two differences between marketing for national and international markets
16. [1] Identification of one difference between marketing for national and international markets
17. [0] No creditable content
18. [4] Good analysis of one internal and one external source of finance in context
19. [3] Good analysis of one internal or one external source of finance in context
20. [2] Limited analysis of one internal and one external source of finance
21. [1] Limited analysis of one internal or one external source of finance
22. [4] Shows understanding of one internal and one external source of finance
23. [3] Shows understanding of one internal or one external source of finance in context
24. [2] Shows knowledge of one internal and one external source of finance
25. [1] Shows knowledge of one internal or one external source of finance
26. [0] No creditable content
27. [7] Justified evaluation based on argument in context
28. [6] Developed evaluation based on argument in context
29. [5] An evaluative statement/recommendation based on argument in context
30. [4] Argument based on the use of two benefits to CP of the proposed process innovation
31. [3] Argument based on one benefit to CP of the proposed process innovation
32. [2] Limited analysis of two benefits of process innovation
33. [1] Limited analysis of one benefit of process innovation
34. [4] Shows understanding of two aspects process innovation in context
35. [3] Shows knowledge of one aspect of process innovation in context
36. [2] Shows knowledge of two aspects of process innovation
37. [1] Shows knowledge of one aspect of process innovation