CGM makes high quality shoes using job production. The production method makes use of specialisation. CGM operates in a niche market. CGM managers know that all business activity creates external costs, so they always try to act in ways that protect the environment. The Operations Director wants to increase profit. CGM could either buy cheaper raw materials or introduce new technology into the production process. The new technology would cost $30000 and could reduce the number of employees from 30 to 26.

Mark scheme

Marking points from the official mark scheme (Oct/Nov 2017). The mark or mark type is shown in brackets.

1. [1] Increased output OR quicker production OR increased productivity OR higher efficiency
2. [1] lower unit cost OR economies of scale
3. [1] Workers become expert OR more skilled OR focus on what they are good at
4. [1] Improved accuracy OR better quality OR fewer mistakes OR reduced waste
5. [1] Help improve competitiveness
6. [2] Clear understanding: impact paid for by the rest of society [1] as a result of business actions [+1]
7. [2] OR Costs or disadvantages that fall on third parties that is one not directly involved in the production process
8. [1] Some understanding: costs society has to pay
9. [1] Knowledge Create less waste
10. [1] Application by changing way make shoes
11. [1] Knowledge Change materials used OR use sustainable resources
12. [1] Application so reduce external costs
13. [1] Knowledge Use less materials OR less packaging
14. [1] Knowledge Use less energy OR renewable energy
15. [1] Application by buying new technology
16. [1] Knowledge Buy local
17. [1] Application reducing distance travelled for raw materials
18. [1] Knowledge Dispose of waste responsibly
19. [1] Knowledge Recycle any leftover leather
20. [1] Knowledge Raise awareness of environmental issues
21. [1] Knowledge Develop environmentally friendly products
22. [1] Knowledge Use environmentally friendly machinery OR production methods OR examples e.g. fit filters or create less smoke or create less noise
23. [1] Knowledge Reuse
24. [1] Knowledge Meet exact customer demands OR unique
25. [1] Analysis so able to charge higher price
26. [1] Application in a niche market
27. [1] Knowledge Flexible
28. [1] Analysis which can help them remain competitive
29. [1] Application in the shoe market
30. [1] Knowledge More varied work leads to higher motivation
31. [1] Analysis leading to fewer workers leaving OR less absenteeism
32. [1] Knowledge Skilled workers are less likely to make mistakes
33. [1] Knowledge Skilled labour costs more
34. [1] Application as employ 30 employees
35. [1] Analysis which increases labour OR training costs
36. [1] Knowledge Production can take longer
37. [1] Application for a high quality product
38. [1] Analysis which reduces (potential) output
39. [1] Knowledge No economies of scale possible
40. [1] Application when buying raw materials
41. [1] Analysis leading to higher costs
42. [1] Knowledge Costs are higher as it is often labour intensive
43. [1] Knowledge Products are made to order so mistakes can be expensive to correct
44. [1] Knowledge High cost of equipment or retraining
45. [1] Application at $30 000 which business might not be able to afford
46. [2] Analysis (cannot afford)
47. [1] Knowledge Ensure consistent quality
48. [2] Analysis as machines do not need to rest
49. [1] Knowledge Using cheaper raw materials puts quality at risk
50. [1] Application (shoes)
51. [1] Knowledge Increased output OR quicker production OR increased productivity
52. [2] Analysis reducing unit costs so able to increase profit
53. [1] Application (profit)
54. [1] Knowledge Impact on motivation of employees
55. [1] Application as jobs will go from 30 to 26
56. [2] Analysis as work could become less interesting
57. [1] Knowledge workers may struggle to adapt OR resist new training
58. [2] Analysis slowing production OR decreasing productivity
59. [1] Knowledge Risk to reputation
60. [1] Application in this niche market
61. [2] Analysis could lead to fewer sales
62. [1] Knowledge Risk of job insecurity
63. [2] Analysis could lead to other workers leaving as well
64. [1] Knowledge Fewer employees needed
65. [1] Application as 4 less
66. [2] Analysis so lower labour costs