Ali has just been appointed as Managing Director of Anypart, a large manufacturing business. He told Anypart's Board of Directors: ‘Behaving ethically will always lead to lower profits. I want our employees to work longer hours, have fewer holidays and become more productive. This will reduce costs of each unit of output and will benefit all our stakeholders'. Not all of the directors agreed with him.

Mark scheme

Marking points from the official mark scheme (Oct/Nov 2014). The mark or mark type is shown in brackets.

1. [2] Clear understanding [2]: e.g. senior management of the business [1] responsible for strategic decisions [+1].
2. [1] Some understanding [1] e.g. identifies one feature of a board of directors (e.g. elected by shareholders) OR managers in charge of company
3. For 2 marks must have both idea of being in charge AND responsible for strategic / key decisions.
4. [2] Application [2 × 1] award 1 mark per stakeholder group
5. Points might include: owners OR shareholders, government, suppliers, community, customers, bank/lenders
6. Do not accept types of employees e.g. managers.
7. [2] Knowledge [2 × 1] - award 1 mark for each advantage
8. [2] Analysis [2 × 1] - award 1 mark for each relevant explanation
9. Points might include:
10. Increase efficiency [k] so less wastage of resources / better able to meet customer orders [an]
11. Increase profit margin /profit [k] higher dividends for shareholders [an]
12. Remain competitive / lower prices [k] to keep /attract customers [an]
13. Less cash outflow [k].
14. [2] Knowledge [2 × 1] - award 1 mark for each way identified
15. [2] Application [2 × 1] – award 1 mark if relevant reference made to a manufacturing business
16. [2] Analysis [2 × 1] - award 1 mark for each relevant explanation (i.e. focus on how the method identified generates the improvement in productivity)
17. Points might include:
18. Increase in capital intensity OR automation OR introduce new technology [k] as machines don't have to take breaks/can work longer periods[app] so able to produce more in same amount of time [an]
19. Improve quality control / assurance [k] to reduce level of waste [an]
20. Changes in working practices/Improve layout of machines [k] so less wasted time moving between different areas [an]
21. Improve inventory (stock control)/introduce JIT [k] so materials are available when needed [app]
22. Train workers [k] so understand what they are doing better [an] so use less materials [app]
23. Improve motivation (once only) [k] such as offer more holidays [app] so workers have incentive to work harder [an]
24. Use of payment methods (once only) e.g. Bonuses/Piece rates [k] as workers try to produce more parts/products [app] to earn more money [an]
25. Cell production/kaizen [k] as it allows employees to discuss/solve problems affecting production [app].
26. Accept introduce lean production [1] if no specific examples are given.
27. Do not accept division of labour as this is already a large manufacturing business.
28. [2] Knowledge [2 × 1] award 1 mark for each issue identified
29. [2] Analysis [2] – award up to 2 marks for relevant development of point(s)
30. [2] Evaluation [2] – justified decision made as to whether behaving ethically will always lead to lower profits
31. Points might include:
32. Ethical could increase costs [k] leading to higher prices [an]
33. Some customers want ethical goods [k] so might be willing to pay more [an]
34. Enhance reputation [k] could help them attract potential customers [an]
35. Some workers and investors might only want to work with / for an ethical business [k] so easier to attract / retain workers or raise capital [an]
36. Shareholders want higher profits [k] so they get a better return on their investment [an]
37. Unethical treatment of workers could lead to higher labour turnover [k] could increase costs [an] such as recruitment leading to lower profits [an].
38. Do not accept answers such as motivation on its own, unless clearly linked to idea of ethical behaviour.
39. Developed answer:
40. Being ethical incurs costs [k] paying a fair price to suppliers will increase variable costs [an] so profit could fall in short term [eval]. However customers might be prepared to pay more for ethical products, which could lead to higher revenue [an] which will more than make up for the additional costs involved [eval].