CCL is a family business in country Y. It manufactures and sells coffee powder, which is used to make coffee drinks. To make coffee powder CCL transforms coffee beans purchased from primary sector businesses into a fine powder. To make the powder, CCL roasts the beans, then grinds them into large pieces. Hot water is added to these large pieces, which transforms them into a liquid. When this liquid is cool, it is frozen and broken into tiny pieces that form the coffee powder. The coffee powder is then put in jars. CCL uses product differentiation when selling the jars of coffee, as shown in Table 2.1. Table 2.1 CCL's coffee products Product | Description | Boston matrix analysis | Forecast proportion of total revenue (2024) ---|---|---|--- A | CCL's own brand | Cash cow | 29% B | A national supermarket's own label product | Question mark | 30% C | Quality product sold in a niche market | Question mark | 15% D | Non-branded product sold to wholesalers | Cash cow | 26% In 2023 CCL's total revenue was $10 million. Total revenue is forecast to increase by 10% in 2024. The owners are concerned about CCL's long-term future, given the position of each product within the Boston Matrix. The market for coffee products in country Y is forecast to grow by 25% over the next five years. CCL would like to increase the added value of its coffee products to benefit from the forecast market growth.

Mark scheme

Marking points from the official mark scheme (Oct/Nov 2024). The mark or mark type is shown in brackets.

1. [1] Strengths ✓ may include: • joint personal stake • united sense of purpose • trust • tend to take a long-run view • commitment • can be passed on to future generations • knowledge continuity Note: Must relate to a family business, for example, continuity on its own not enough Accept all valid responses.
2. [1] Knowledge of one relevant point is used to answer the question.
3. [2] Developed application of one relevant point to a business context.
4. Indicative content A01 Knowledge and understanding Knowledge of a niche market [K] (max 1 mark), including: • (small) segment of a large market • unique/specialised products • luxury • high quality AO2 Application Explanation of a niche market [APP] including: • often unprofitable for large companies • profits often higher/can be sold at a premium price • few competitors • limited quantities produced • customers have similar qualities/preferences Context applied to niche market [APP] , including: • examples of niche markets • CCL sell product C in a niche market Accept all valid responses.
5. [3] Correct answer $1.65 million
6. [1] Total revenue x proportion of revenue
7. [1] Total Revenue 2023 $10 million forecast to increase by 10% = $10 million + $1 million = $11 million
8. [1] Product C = 15% proportion of revenue = $11 million/100 × 15 = $1.65 million
9. [2] Formula OR Identifies correct figures AND Calculates increase in total revenue – $11m To award two marks, there must be • Two ✓ and a X OR • One ✓ , one ✓ and one OFR
10. [1] One of the following: Formula OR Identifies correct figures OR Calculates increase in total revenue – $11m To award one mark, there must be: • One ✓ and two X
11. [1] Knowledge of one relevant point is used to answer the question.
12. [2] Developed application of one relevant point to a business context.
13. Indicative content A01 Knowledge and understanding Knowledge of a benefit of using a budget [K], including: • coordinates activities • translate objectives into strategy • translate strategy into tactics • provide a record of organisational activities • can improve communication • improve resource allocation • improve efficiency • provides a tool for corrective action • compare different areas of the business AO2 Application Explanation of a benefit of using budgets [APP] including: • coordinates activities; between functional areas of the business • translate objectives into strategy; to make sure the objective is met • translate strategy into tactics; to make the strategy is implemented • provide a record of organisational activities; for later comparison
14. Context applied to a benefit to CCL of using a budget [APP] including: • two products at maturity • two products with low market share • niche market product has lowest contribution to total revenue • market forecast of 25% growth Accept all valid responses.
15. [2] Knowledge of two relevant points is used to answer the question. (max 1 mark if no knowledge of advantage or disadvantage)
16. [2] Application of two relevant points to a business context. (max 1 mark for each)
17. [4] Developed analysis that identifies connections between causes, impacts and/or consequences of two points.
18. A01 Knowledge and understanding Knowledge of the Boston matrix [K] (max 1 mark if no knowledge of advantage or disadvantage), including: • a method of analysing the product portfolio of a business in terms of market share and market growth Knowledge of an advantage of Boston matrix analysis [K] (max 1 mark – annotate on left) including: • to analyse the breadth/specialisation of a business's product portfolio • to enable business to move ? to stars • to ensure business to move stars to cash cows Knowledge of a disadvantage of the Boston matrix analysis [K] (max 1 mark- annotate on right), including: • withdrawal of dogs from the market unlikely to increase revenue • to move ? to stars will need more spending on marketing • to move stars to cash cows will also require more spending/increased costs • sudden changes in demand may not be accounted for • does not consider contribution to total revenue/profit • does not consider other factors affecting products • data can be inaccurate
19. AO2 Application Context applied to an advantage [APP] (max 1 mark) and disadvantage [APP] (max 1 mark) of Boston matrix analysis, including: • products a and d cash cows • products b and c question marks • no stars • limited portfolio of products • forecast market growth of 25% over the next 5 years • cash cows account for 55% of total revenue
20. AO3 Analysis Limited analysis [AN] – candidate shows one link in the chain of analysis. Developed analysis [DEV] – candidate shows two or more links in the chain of analysis or a two-sided analysis. • product development essential for competition and survival • can inform investment decisions • simple framework to use • only considers market share and market growth so won't be a complete analysis as to why products growing/declining • help eliminate poorly performing products, saving money in the long run • helps businesses understand current and future situations • identify new opportunities to ensure future growth/success • need to consider extension strategies for products • although a product might contribute most to revenue what product will replace this if it declines?
21. [2] Developed knowledge of relevant key term(s) and/or factor(s) is used to answer the question.
22. [1] Limited knowledge of relevant key term(s) and/or factor(s) is used to answer the question.
23. [2] Developed application of relevant point(s) to the business context.
24. [1] Limited application of relevant point(s) to the business context.
25. [2] Developed analysis that identifies connections between causes, impacts and/or consequences.
26. [1] Limited analysis that identifies connections between causes, impacts and/or consequences.
27. [5-6] Developed evaluation in context. • A developed judgement/conclusion is made in the business context. • Developed evaluative comments which balance some key arguments in the business context.
28. [3-4] Developed evaluation. • A developed judgement/conclusion is made. • Developed evaluative comments which balance some key arguments.
29. [1-2] Limited evaluation. • A judgement/conclusion is made with limited supporting comment/evidence. • An attempt is made to balance the arguments.
30. A01 Knowledge and understanding Knowledge of operations/added value [K] (max 2 marks), including: • added value difference between price and costs • value added by the transformation process • produces outputs for customers • inputs used to create outputs • inputs are land, labour, capital and enterprise • outputs created in the manufacturing process
31. AO2 Application Context applied to CCL [APP] (max 2 marks), including: • coffee a growing market • many (5) processes involved in the transformation process • product differentiation • products in different quadrants in the Boston matrix analysis • same ingredient in differently labelled jars • taste important in coffee consumption • may contribute more to non-branded product
32. AO3 Analysis Limited analysis [AN] – candidate shows one link in the chain of analysis. Developed analysis [DEV] – candidate shows two or more links in the chain of analysis. • helps to build the brand – increasing revenue/sales/profit • can add product features that customers want – attract new customers/increase customer loyalty • ensure quality – goods suitable for purpose • operate efficiently – cost effective • charge a higher price – increasing profits/value added • flexibility and innovation important – especially in a competitive/dynamic environment • protects market share and can increase it
33. A04 Evaluation Limited evaluation [EVAL] unsupported judgement and/or a weak attempt at evaluative comment Developed evaluation [E] supported judgement and/or reasonable evaluative comment Developed evaluation in context [EE] supported judgement in context and/or reasonable evaluative comment in context. A judgement whether operations does contribute to added value. • evaluation of the relative importance of operations as compared to e.g. marketing • elements that the evaluation/judgement might depend upon: – don't know how efficient production is – other factors such as promotion may contribute more to added value – quality of the product important – design of packaging also contributes – convenience to customers important in creating added value – branding and product differentiation may be a greater contribution – difficult to measure contribution of operations Accept all valid responses.