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Date November 2019 Marks available 6 Reference code 19N.2.HL.TZ0.1
Level Higher level Paper Paper 2 Time zone Time zone 0
Command term Construct Question number 1 Adapted from N/A
Question
Sassy
Sassy, a partnership between fashion designers, produces clothes for teenagers. Capacity utilization is very high.
The partners are considering some strategic changes. After conducting research, they presented three options and outlined the
costs and expected revenue. They also predicted that the economy would either improve or stay the same. The probability of the
economy staying the same is 0.3.
The options, costs and expected revenue are given below:
Table 1: Information relating to the three strategic options for change
a. Describe one disadvantage for an organization of operating at high capacity utilization. [2]
b. Construct a fully labelled decision tree and identify the best option for Sassy (show all your working). [6]
c. Explain one limitation for Sassy of using a decision tree as a planning tool. [2]
Markscheme
a. Some of the disadvantages for an organisation of operating at high capacity:
Workers might feel the pressure / tiredness / mistakes / demotivation, which can reduce productivity.
Machinery is more likely to break down, so production may be halted.
Higher maintenance costs, due to constant use.
Inability to respond to a sudden increase in demand, so potential customers may be lost.
Accept any other relevant disadvantage.
Award [1] for a relevant disadvantage with appropriate description up to a maximum of [2].
For [2] marks responses must link the disadvantage to an outcome as in the examples above.
It is not expected that candidates explain the benefits to any stakeholder.
Application to the organization is not required.
Do not credit an example.
b.
Calculations:
EMV 1 = (300 000 × 0.7 + 250 000 × 0.3) − 2 00,000 = $85 000
EMV 2 = $150 000
EMV 3a = (220 000 × 0.7 + 170 000 × 0.3) − 150 000 = $55 000
EMV 3b = (550 000 × 0.7 + 450 000 × 0.3) − (170 000 + 150 000) = $200 000
Best option 3(b) should be followed.
[0]
The decision tree does not reach a standard described below.
[1–2]
The decision tree is not accurately constructed, and / or the calculations of each option are not presented or accurate. However,
there is some evidence of a general understanding of the model.
[3–4]
The principal elements of the decision tree are constructed, but may not be entirely accurate. The calculations of each option are
largely correct. Allow up to three mistakes in calculations and / or presentation for [3].
Allow for either two errors in calculation or two error in presentation [4].
For an accurately constructed decision tree with incorrect calculations, award up to a maximum of [3].
For an accurately constructed decision tree with EMV calculations, but no working [4].
[5-6]
The decision tree is accurately constructed. The calculations of each option are correct and well presented. A key is provided.
Workings are shown. As well as the rejected options [6]. Full marks can be awarded even if the headings of expected
return/forecast revenue and probabilities are not explicitly written.
Deduct [1] if a key is not provided.
Deduct [1] if the best option is not identified either on the diagram OR following the EMV calculations.
N.B. for only correct calculations of all options without a decision tree award a maximum of [2].
Essentially treat the lack of key or rejected options as presentation errors as errors. Hence three presentation/calculation errors =
[3].
Apply candidate own figure rule (OFR) throughout this response.
c. While a general limitation of the decision tree model is the nature of the predicted outcome, here the use of the model is even
more limited as it has been done by the partners who are designers. Due to lack of experience/qualification, they ignored the
possibility that the economy might deteriorate. The predicted financial returns for each option might be inaccurate, especially in
the volatile, everchanging fashion industry. Hence, possible bias and different numerical outcomes.
N.B. Do not accept “worsening economy” if there is no other reference to the stimulus since this is often cited as a generic
limitation.
Accept any other relevant limitation.
Candidates do not have to cover all of the applicable issue above. One is sufficient.
Award [1] for a relevant generic limitation identified or described and [1] for any additional explanation in context.
[2] cannot be awarded for the limitation if the response lacks either explanation and / or application.
For example:
For an identification or a description of the limitation with or without application [1].
For explanation of the limitation with no application [1].
For explanation of the limitation and application [2].
Examiners report
a. [N/A]
b. [N/A]
c. [N/A]
Syllabus sections
Last exams 2023 » Unit 1: Business organization and environment » 1.7 Organizational planning tools (HL only) » The following
planning tools in a given situation: fishbone diagram, decision tree, force field analysis, Gantt chart
16N.1.HL.TZ0.5:
The group are considering two target markets.
Option 1: enter the Asian market
Emma strongly prefers this option. She recently presented IBAT at a medical conference in Asia. Great interest was shown and
some attendees wanted to purchase samples at the conference. However, sales in Asia are not possible, because IBAT has not
yet met regulatory quality standards there.
Falit also prefers this option because significant economies of scale could be gained. He also fears that other businesses will
launch a similar product in Asia. The costs of entering the market would be relatively small for Medimatters. A suitable medical
equipment wholesaler who could market and distribute the product operates in the region.
Ahmed and Didi are concerned. Quality issues with the lens manufacturer in India are worrying and should be resolved. They
would like market research to be conducted to assess the suitability of Asian, as well as European and American, markets.
Option 2: continue to sell in Brazil
Didi favours this option. Always cautious, he thinks that current difficulties should be resolved before further expansion. He
forecasts a reasonable first-year profit – far more than most new businesses. Ahmed likes the fact that he would not have to
take on any additional workload or travel across the world: he is already struggling to manage his responsibilities. Carlo prefers
this option because he wants to avoid the problems of growing too quickly, because many overambitious new businesses fail.
In preparation for the next group meeting, a decision tree showing both options has been produced.
Using the case study and the additional information in this question, recommend whether Medimatters should implement
option 1 or option 2.
You will find it useful to calculate the predicted outcome for option 2 in the decision tree.
Refer to case study: Medimatters
18N.1.HL.TZ0.5:
Refer to the As Fair As case study (SL/HL paper 1 Nov 2018).
Using the case study, resources and appropriate business tools, recommend whether AFA should take over ABC.
18N.1.HL.TZ0.4c:
Refer to the As Fair As case study (SL/HL paper 1 Nov 2018).
Explain the usefulness of a Gantt chart to AFA in planning the implementation of a new process.
18M.1.HL.TZ0.4d:
Refer to Afghan Sun case study SL/HL P1 May and Nov 2018.
Using information from the case study, the resource and appropriate business tools, discuss the value to Su of the force field
analysis in deciding whether to grow through change.
17M.1.HL.TZ0.5:
John felt that the decision about expanding JAC into the international markets of the Pacific Islands did not depend on the
decision about the 3D printing project. However, he decided that they should not enter the markets at the same time, so they
had to choose between starting with Fiji, Samoa or New Zealand. John stressed to Liza that, as with the construction of the
Utopia villas, the choice of a new international market should strongly consider cultural influences and norms. For this reason,
John favoured Fiji and Samoa over New Zealand, arguing that they are more culturally similar to Ratu. However, the final
decision not being made, John asked Liza to do some more research into the idea and into the two markets. The results of her
ideas are summarized in Tables 1, 2 and 3.
Table 1: Liza’s market research results
Liza drew up the following decision tree to help clarify the decision process and try to quantify the issues involved in the
decision.
Using the case study and the additional information above, recommend which of the Pacific Island markets JAC should enter.
Completing the decision tree and using the results could help you in your answer.
19N.1.HL.TZ0.5:
Using the case study and the resources, recommend whether Accord should start making and selling snack bars or whether
Kayla and Aran should sell Accord to SF. A force field analysis of the options could help you in your answer.
First exams 2024 » Business management toolkit » Decision trees
Last exams 2023 » Unit 1: Business organization and environment » 1.7 Organizational planning tools (HL only)
Last exams 2023 » Unit 1: Business organization and environment
First exams 2024 » Business management toolkit
Last exams 2023
First exams 2024
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