TDC is a multinational carbonated drinks manufacturer with limited liability. TDC had budgeted that its annual revenue would be $400m for the year ended 2023. In 2023, TDC commissioned some primary market research to analyse its product portfolio using the Boston Matrix (see Table 2.1). [Figure 2.1 - Boston Matrix: Market share % (High, Low), Market growth % (High, Low), with VKola (High, High), VTropical (High, Low), VLemon (Low, High), VOrange (Low, Low)]. The Board of Directors has set two objectives for TDC to achieve by the end of 2025: • to increase TDC's profit margin by reducing the cost of raw materials • to increase TDC's market share of the business to consumer (B2C) market for carbonated drinks. As part of its business plan to achieve these objectives, TDC is now merging with one of its main competitors, Harvest Liquids (HL). Table 2.2 shows some data about TDC and HL. Table 2.2: Data about TDC and HL in 2023 | | TDC | HL | |---|---|---| | Revenue | $340m | $280m | | Profit for the year | $23.8m | $14m | | Targeted market segment | Teenagers and young adults | Restaurants, events and hotels | | Type of market | Consumer market (B2C) | Industrial market (B2B) |

Mark scheme

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

1. [1] (a)(i) Indicative content: Stages include: Development/research/testing/initial design.
2. [1] (a)(i) Indicative content: Stages include: Introduction/launch.
3. [1] (a)(i) Indicative content: Stages include: Growth.
4. [1] (a)(i) Indicative content: Stages include: Maturity/saturation.
5. [1] (a)(i) Indicative content: Stages include: Decline. Accept only the answers above. If more than one answer is given, only mark the first, reading from top left to bottom right.
6. [1] (a)(ii) A01 Knowledge and understanding: Knowledge of limited liability (max 1 mark), including: Limited liability is a legal status where a person's financial commitment/responsibility is restricted to a fixed sum.
7. [1] (a)(ii) A01 Knowledge and understanding: Knowledge of limited liability (max 1 mark), including: Only a set amount of money invested is at risk.
8. [1] (a)(ii) A01 Knowledge and understanding: Knowledge of limited liability (max 1 mark), including: Personal assets are not at risk.
9. [1] (a)(ii) A01 Knowledge and understanding: Knowledge of limited liability (max 1 mark), including: Only business assets are at risk.
10. [1] (a)(ii) AO2 Application: Explanation of limited liability (max 1 mark), including: Protects shareholders/investors.
11. [1] (a)(ii) AO2 Application: Explanation of limited liability (max 1 mark), including: Creates a separate legal identity (for a business).
12. [1] (a)(ii) AO2 Application: Explanation of limited liability (max 1 mark), including: Most commonly limited to the value of a person's investment.
13. [1] (a)(ii) AO2 Application: Explanation of limited liability (max 1 mark), including: Can be linked to debt.
14. [1] (a)(ii) AO2 Application: Explanation of limited liability (max 1 mark), including: Also applies to legal actions (i.e. suing a business).
15. [1] (a)(ii) Context applied to limited liability (max 1 mark), including: An example of a type of business that has limited liability, including: Private limited company (allow Ltd).
16. [1] (a)(ii) Context applied to limited liability (max 1 mark), including: An example of a type of business that has limited liability, including: Public limited company (allow PLC, Inc. or Corp).
17. [1] (a)(ii) Context applied to limited liability (max 1 mark), including: An example of a type of business that has limited liability, including: Limited liability partnership.
18. [1] (a)(ii) Context applied to limited liability (max 1 mark), including: An example of a type of business that has limited liability, including: Incorporated business. Accept all valid responses.
19. [1] (b)(i) Variance = actual revenue – budgeted revenue (1)
20. [1] (b)(i) Calculation: $400m - $340m = $60m (1)
21. [1] (b)(i) Answer: Adverse (1). Answer = $60m adverse (3). $60m (award 2 marks – without adverse). Working, $ and millions (m) do not matter. Do not accept a minus sign (-) as adverse.
22. [1] (b)(ii) A01 Knowledge of a benefit of budgeting (max 1 mark), including: Coordinates activities.
23. [1] (b)(ii) A01 Knowledge of a benefit of budgeting (max 1 mark), including: To control finances/spending.
24. [1] (b)(ii) A01 Knowledge of a benefit of budgeting (max 1 mark), including: To assist with planning.
25. [1] (b)(ii) A01 Knowledge of a benefit of budgeting (max 1 mark), including: To monitor performance.
26. [1] (b)(ii) A01 Knowledge of a benefit of budgeting (max 1 mark), including: Translate objectives into strategy.
27. [1] (b)(ii) A01 Knowledge of a benefit of budgeting (max 1 mark), including: Translate strategy into tactics.
28. [1] (b)(ii) A01 Knowledge of a benefit of budgeting (max 1 mark), including: Provide a record of organisational activities.
29. [1] (b)(ii) A01 Knowledge of a benefit of budgeting (max 1 mark), including: Can improve communication.
30. [1] (b)(ii) A01 Knowledge of a benefit of budgeting (max 1 mark), including: Improve resources allocation.
31. [1] (b)(ii) A01 Knowledge of a benefit of budgeting (max 1 mark), including: Improve efficiency.
32. [1] (b)(ii) A01 Knowledge of a benefit of budgeting (max 1 mark), including: Provides a tool for corrective action.
33. [1] (b)(ii) A01 Knowledge of a benefit of budgeting (max 1 mark), including: Compare different areas of the business.
34. [1] (b)(ii) A01 Knowledge of a benefit of budgeting (max 1 mark), including: To help achieve objectives.
35. [1] (b)(ii) AO2 Explanation of a benefit of using budgets (max 1 mark), including: Coordinates activities; between functional areas of the business.
36. [1] (b)(ii) AO2 Explanation of a benefit of using budgets (max 1 mark), including: To control finances/spending; by allocating appropriate resources to different areas of the business.
37. [1] (b)(ii) AO2 Explanation of a benefit of using budgets (max 1 mark), including: To monitor performance; by doing a variance analysis.
38. [1] (b)(ii) AO2 Explanation of a benefit of using budgets (max 1 mark), including: Translate objectives into strategy; to make sure the objective is met.
39. [1] (b)(ii) AO2 Explanation of a benefit of using budgets (max 1 mark), including: Translate strategy into tactics; to make the strategy is implemented.
40. [1] (b)(ii) AO2 Explanation of a benefit of using budgets (max 1 mark), including: Provide a record of organisational activities; for later comparison.
41. [1] (b)(ii) AO2 Explanation of a benefit of using budgets (max 1 mark), including: Can improve communication/coordination; by giving financial targets.
42. [1] (b)(ii) AO2 Explanation of a benefit of using budgets (max 1 mark), including: Improve resources allocation; by giving a quantitative target.
43. [1] (b)(ii) AO2 Explanation of a benefit of using budgets (max 1 mark), including: Improve efficiency; by allocating finances to different areas of the organisation.
44. [1] (b)(ii) AO2 Explanation of a benefit of using budgets (max 1 mark), including: Provides a tool for corrective action; when actual and budgeted are compared.
45. [1] (b)(ii) AO2 Explanation of a benefit of using budgets (max 1 mark), including: Compare different areas of the business; to improve communication/coordination.
46. [1] (b)(ii) Context applied to a limitation of using budgets for TDC (max 1 mark) including: Use of answer to Q2bi ($60m – OFR).
47. [1] (b)(ii) Context applied to a limitation of using budgets for TDC (max 1 mark) including: Revenue was $360m in 2023 compared with a budget of $400m.
48. [1] (b)(ii) Context applied to a limitation of using budgets for TDC (max 1 mark) including: TDC's objective to reduce the cost of raw materials (by 2025).
49. [1] (b)(ii) Context applied to a limitation of using budgets for TDC (max 1 mark) including: TDC's objective to increase market share by 10% of B2C market (by 2025).
50. [1] (b)(ii) Context applied to a limitation of using budgets for TDC (max 1 mark) including: TDC's product areas – VKola, Vtropical, VOrange and VLemon.
51. [1] (b)(ii) Context applied to a limitation of using budgets for TDC (max 1 mark) including: Use of Table 2.1.
52. [1] (b)(ii) Context applied to a limitation of using budgets for TDC (max 1 mark) including: Possible merger between HL and TDC.
53. [1] (b)(ii) Context applied to a limitation of using budgets for TDC (max 1 mark) including: Use of Table 2.2. Accept all valid responses.
54. [1] (c) A01 Knowledge of uses of Boston Matrix, such as: To analyse the breadth/specialisation of a business's product portfolio.
55. [1] (c) A01 Knowledge of uses of Boston Matrix, such as: To manage/change its product portfolio.
56. [1] (c) A01 Knowledge of uses of Boston Matrix, such as: To Identify best/worst performing product.
57. [1] (c) A01 Knowledge of uses of Boston Matrix, such as: To identify opportunities for growth/investment.
58. [1] (c) A01 Knowledge of uses of Boston Matrix, such as: To identify opportunities for product development/new products.
59. [1] (c) A01 Knowledge of uses of Boston Matrix, such as: To allocate resources/budget effectively (between products).
60. [1] (c) A01 Knowledge of uses of Boston Matrix, such as: To enable business to move ?/problem child to stars.
61. [1] (c) A01 Knowledge of uses of Boston Matrix, such as: To ensure business to move stars to cash cows.
62. [1] (c) A01 Knowledge of uses of Boston Matrix, such as: To enable business to launch new products.
63. [1] (c) A01 Knowledge of uses of Boston Matrix, such as: To enable business to avoid dogs.
64. [1] (c) A01 Knowledge of uses of Boston Matrix, such as: To help a business plan for the future sales/product development/achieve objectives. The Boston Matrix is also referred to as the BCG Matrix.
65. [1] (c) AO2 Context applied to a use of the Boston Matrix (max 2 marks), including: Vkola - Star (high market growth, high market share).
66. [1] (c) AO2 Context applied to a use of the Boston Matrix (max 2 marks), including: VTropical - question mark/problem child (high market growth, low market share).
67. [1] (c) AO2 Context applied to a use of the Boston Matrix (max 2 marks), including: VOrange - Dog (low market growth, low market share).
68. [1] (c) AO2 Context applied to a use of the Boston Matrix (max 2 marks), including: VLemon - Cash Cow (low market growth, high market share).
69. [1] (c) AO2 Context applied to a use of the Boston Matrix (max 2 marks), including: Recent commissioned primary market research into TDC's product portfolio.
70. [1] (c) AO2 Context applied to a use of the Boston Matrix (max 2 marks), including: TDC's objectives: to increase TDC's profit margin by reducing the cost of raw materials.
71. [1] (c) AO2 Context applied to a use of the Boston Matrix (max 2 marks), including: TDC's objectives: to increase TDC's market share of the business to consumer (B2C) market for carbonated drinks.
72. [1] (c) AO2 Context applied to a use of the Boston Matrix (max 2 marks), including: To provide data to HL about the business to facilitate the merger.
73. [1] (c) AO2 Context applied to a use of the Boston Matrix (max 2 marks), including: Use of Table 2.2.
74. [1] (c) AO2 Context applied to a use of the Boston Matrix (max 2 marks), including: TDC is a multinational business.
75. [1] (c) AO3 Analysis of using the Boston Matrix, including: To analyse the breadth/specialisation of a business's product portfolio; only four products within TDC's portfolio, may mean the business will need to increase its product portfolio – to increase sales.
76. [1] (c) AO3 Analysis of using the Boston Matrix, including: To analyse the breadth/specialisation of a business's product portfolio; to identify dogs for withdrawal from the market – unlikely to add to business revenue.
77. [1] (c) AO3 Analysis of using the Boston Matrix, including: To enable business to move? to stars; to focus marketing spend on increasing VTropical's market share (to a star) – to increase revenue to increase profit.
78. [1] (c) AO3 Analysis of using the Boston Matrix, including: To ensure business to move stars to cash cows; to reduce marketing spend on Vkola (to a cash cow) as the market has lower growth – to reduce costs – to increase profitability.
79. [1] (c) AO3 Analysis of using the Boston Matrix, including: To enable business to launch new products – to replace VTropical as it increases its market share – to increase sales – to increase profit.
80. [1] (c) AO3 Analysis of using the Boston Matrix, including: To enable business to avoid dogs; suggest that VOrange may be a dog and TDC should reduce marketing spend (or discontinue the product) – to decrease overall costs of TDC – increase profit. Accept all valid responses.
81. [1] (d) A01 Knowledge of mergers including: A type of business acquisition that describes the consolidation of two or more businesses or the assets of those businesses, including the joining of two firms, acquisition of a firm's assets (including intellectual capital), consolidations, tender offers, purchase of inventory, and management combination.
82. [1] (d) A01 Knowledge of mergers including: Benefits of a merger, including: Shared resources.
83. [1] (d) A01 Knowledge of mergers including: Benefits of a merger, including: May reduce costs.
84. [1] (d) A01 Knowledge of mergers including: Benefits of a merger, including: Avoids duplication of resources.
85. [1] (d) A01 Knowledge of mergers including: Benefits of a merger, including: Speedy way to grow.
86. [1] (d) A01 Knowledge of mergers including: Benefits of a merger, including: Removes competition.
87. [1] (d) A01 Knowledge of business objectives, including: Business objectives are the specific and measurable, achievable, resourced and time-based results that businesses hope to reach. About giving a business a direction. Business strategy enables a business to reach its objectives.
88. [1] (d) AO2 Context applied to TDC and HL merging (max 2 marks), including: Use of Table 2.1, including: Vkola – Star.
89. [1] (d) AO2 Context applied to TDC and HL merging (max 2 marks), including: Use of Table 2.1, including: VTropical – question mark.
90. [1] (d) AO2 Context applied to TDC and HL merging (max 2 marks), including: Use of Table 2.1, including: VOrange – Dog.
91. [1] (d) AO2 Context applied to TDC and HL merging (max 2 marks), including: Use of Table 2.1, including: VLemon – Cash Cow.
92. [1] (d) AO2 Context applied to TDC and HL merging (max 2 marks), including: Recent commissioned primary market research into TDC's product portfolio.
93. [1] (d) AO2 Context applied to TDC and HL merging (max 2 marks), including: TDC's objectives: To increase TDC's profit margin by reducing the cost of raw materials.
94. [1] (d) AO2 Context applied to TDC and HL merging (max 2 marks), including: TDC's objectives: To increase TDC's market share of the business to consumer (B2C) market for soft drinks.
95. [1] (d) AO2 Context applied to TDC and HL merging (max 2 marks), including: Table 2.2 data, including: $340m revenue for TDC and $280m for HL – combined revenue of $620m.
96. [1] (d) AO2 Context applied to TDC and HL merging (max 2 marks), including: Table 2.2 data, including: $23.8m profit (7% profit margin) for TDC and $14m (5% profit margin) for HL – combined $37.8m profit (6.01% combined profit margin- not 12% profit margin).
97. [1] (d) AO2 Context applied to TDC and HL merging (max 2 marks), including: Table 2.2 data, including: Reduces TDC's end of year profit margin (as a percentage) assuming no cost savings.
98. [1] (d) AO2 Context applied to TDC and HL merging (max 2 marks), including: Table 2.2 data, including: Likely to be cost savings by merging production facilities.
99. [1] (d) AO2 Context applied to TDC and HL merging (max 2 marks), including: Table 2.2 data, including: Different target market segments; TDC convenience shops, supermarkets (retail) whereas HL sells to restaurants, events and hotels (commercial).
100. [1] (d) AO2 Context applied to TDC and HL merging (max 2 marks), including: Table 2.2 data, including: TDC B2C whereas HL B2B.
101. [1] (d) AO3 Analysis of the impact of a merger on the objectives of a firm, including: Objective to increase profit margin: Reduce cost of sales – combining production facilities – shared product of soft drinks – increase profitability.
102. [1] (d) AO3 Analysis of the impact of a merger on the objectives of a firm, including: Objective to increase profit margin: Reduce marketing costs – although different target markets, so may not be possible.
103. [1] (d) AO3 Analysis of the impact of a merger on the objectives of a firm, including: Objective to increase profit margin: Reduce overlap of managerial positions – especially middle management – increase profitability.
104. [1] (d) AO3 Analysis of the impact of a merger on the objectives of a firm, including: Objective to increase profit margin: Combination of brand names may further reduce marketing costs – increase profitability.
105. [1] (d) AO3 Analysis of the impact of a merger on the objectives of a firm, including: Objective to increase profit margin: Opens up a new market B2B for TDC – increase sales – increase profit (but not profit margin).
106. [1] (d) AO3 Analysis of the impact of a merger on the objectives of a firm, including: Objective to increase profit margin: However, also likely to increase costs, including the actual costs of the merger – reduce profitability (in the short run).
107. [1] (d) AO3 Analysis of the impact of a merger on the objectives of a firm, including: Objective to increase profit margin: Unlikely to increase profit by % by the end of 2024 – year almost over.
108. [1] (d) AO3 Analysis of the impact of a merger on the objectives of a firm, including: Objective to increase profit margin: Do not have information about the product portfolio of HL – likely to be some overlap which may reduce profitability.
109. [1] (d) AO3 Analysis of the impact of a merger on the objectives of a firm, including: Objective to increase market share: HL is targeting the B2B market – opens new market opportunities for TDC beyond the B2C market.
110. [1] (d) AO3 Analysis of the impact of a merger on the objectives of a firm, including: Objective to increase market share: By focussing on a new target market, TDC is more likely to reduce market share (as market size increases.
111. [1] (d) AO3 Analysis of the impact of a merger on the objectives of a firm, including: Objective to increase market share: Reduces the level of competition within the soft drinks market.
112. [1] (d) AO4 Evaluation: A judgement whether the planned merger with HL will enable TDC to achieve either or both objectives (reduce profit/profit margin and increase market share). Judgement must be linked to objectives and/or TDC's specific objectives).
113. [1] (d) AO4 Evaluation: Evaluation of the likelihood of the merger reaching one of the objectives (over the other).
114. [1] (d) AO4 Evaluation: Elements that the evaluation/judgement might depend upon – external environment, economic conditions, competitive structure of the soft drinks market, timescale of the objectives, strategies already implemented by the Board of Directors, product portfolio of HL etc. Accept all valid responses.