Identify and explain how the following two stakeholder groups might be affected by SA's plans to expand. Shareholders: Local community:

Mark scheme

Marking points from the official mark scheme (May/June 2019). The mark or mark type is shown in brackets.

1. [2] Knowledge [2 × 1] Award one mark for each effect
2. [2] Analysis [2 × 1] Award one mark for a relevant explanation for each effect
3. [4] Application [2 × 2] Award two application marks for each effect
4. [0] Shareholders: Higher dividend if the expansion is successful – may be lower dividend is retailed profit used
5. [0] Shareholders: They might be asked to provide share capital – $15m required
6. [0] Shareholders: Change the market price of shares
7. [0] Shareholders: Increased risk of their investment
8. [0] Local community: Unemployment in the local area might fall/incomes in the local area might rise
9. [0] Local community: More production jobs will be available
10. [0] Local community: May cause environmental costs/damage/negative externalities
11. [0] Indicative response for (a): Shareholders – The cost of expansion is $15m (ap) and they might be asked to provide share capital (k). This could reduce the market price of their shares in the soap company (ap) as it will take time for the new investment to lead to higher profits and possibly higher dividends (an).
12. [0] Possible application marks for (a): Plc set up 20 years ago; produces soap; sold in a mass market; start selling niche market soaps; need a new factory/equipment; will cost $15m; 50 workers.
13. [0] Relevant points for (b) Higher output: More products available to sell – likely to increase revenue
14. [0] Relevant points for (b) Higher output: increased profit as costs may not increase proportionately
15. [0] Relevant points for (b) Higher output: May increase productivity – lower unit/average costs
16. [0] Relevant points for (b) Fewer employees leaving: Happier more satisfied employees less likely to leave for another employer – reduces recruitment costs/less need for training of new employees
17. [0] Relevant points for (b) Higher quality: Fewer mistakes made – lower unit costs – improved gross profit - higher profits
18. [0] Relevant points for (b) Higher quality: Gives a better reputation with regards to the product – may increase price/more customers attracted
19. [0] Knowledge/Analysis/Evaluation – award up to 10 marks using the levels-based mark scheme below.
20. [0] Level 3 Knowledge/Analysis/ Evaluation: At least 2 x Level 2 + 9–10 marks for well justified conclusion of the most important benefit that will lead to higher profit and why it is more important than the other two benefits. 7–8 marks for limited conclusion of the most important benefit.
21. [0] Level 2: 4–6 marks Detailed discussion of each benefit.
22. [0] Level 1: 1–3 marks Outline of each benefit.
23. [0] Level 1 - 1 mark for each L1 statement (max of 3 marks) e.g. Higher output likely to increase sales
24. [0] Level 2 - 1 x L2 explanation can gain 4 marks and a further mark can be awarded for each additional L2 explanation (max 6 marks) e.g. Higher output of soap is likely to lead to higher sales and may even lead to higher revenue. If costs do not increase in the same proportion as the increase in revenue then profit may also increase enabling SA to pay higher dividends. (L2 plus application for recognising that it is a company producing soap).
25. [0] Level 3 - For L3 to be awarded there needs to be at least two L2 marks awarded and then a conclusion which justifies which is the most important benefit.
26. [2] Award up to 2 additional marks for relevant application for (b).
27. [0] Possible application marks for (b): Produces soap; sold in a mass market; niche market soaps; new factory and equipment that will cost $15m; employs 100 production workers in the current factory; employ 50 workers in the new factory; luxury soap.