Question
Refer to the Accord case study (SL/HL paper 1 Nov 2019).
Problems are continuing with Enrich drinks. Aran is becoming increasingly frustrated with the lack of growth of sales. He always wants to succeed and is driven by the need to get tasks completed. The Enrich part of his life is not a success. He blames the workforce. The workforce does not share his vision. Employees are mainly part-time workers and parents who value jobs that enable them to fit work around school hours. As Aran has become more autocratic in his leadership style, labour turnover has increased. Last month, from a workforce of twelve, one retired and two left for what they called “better jobs”.
There are also increasing problems with the quality of Enrich drinks, as batches of Enrich are rejected by the quality control department. Elsie, the manager of the production department, blamed suppliers, saying that Aran had damaged business relations with them due to his impatience. Elsie also blamed Aran for poor stock management. She has proposed total quality management (TQM) as a solution to these problems.
Detox
Accord decided to start the production and marketing of Detox, the green tea drink that helps athletes to relax. Detox proved to be very successful. Encouraged by the success and boosted cash inflow, Kayla is considering producing a range of snack bars based on Enrich and Detox flavours and recipes. Accord would use the Enrich brand name for the snack bars. The market for healthy snack bars is very competitive and dominated by a few large companies who spend large amounts of money on advertising. The market is growing rapidly – some market researchers estimate by 34 % per annum. There are many examples of small businesses entering the market successfully on a small scale. Kayla estimates that the proposal would involve an investment of $100 000, with forecast net returns of $80 000 for four years. Aran thinks that the money could be better spent on marketing Enrich drinks.
Accord have not yet made a decision about producing a range of snack bars.
Kayla is certain that there is a market for the snack bar products. The snack bars would complement Accord’s product portfolio. The investment required, according to Kayla’s estimate (see Section B), is acceptable and she is certain that it is the right time for the business to grow. Her information on the market (see Appendix 1) is very positive. In contrast, she believes that it is too difficult to grow in the beverage market because of competition, so she would prefer to switch from drinks to snack bars. She likes owning the business and has very clear objectives for the future.
Aran is becoming increasingly frustrated. His idea of targeting a mass market for Enrich and Detox has been rejected by Kayla and other managers at Accord. His efforts to introduce total quality management (TQM) failed because employees resisted the change. He is interested in performance and not relaxation, so he does not like Detox as an idea for a product.
Aran has been approached by Star Food (SF), a multinational company (MNC) that produces a range of food products including soft drinks. SF are interested in the Enrich brand name and Accord’s contracts with sports centres. SF have offered to buy Accord for $5 million. This is approximately five years of earnings for Accord. Kayla and Aran would keep the Detox part of the business. Aran would be happy to accept the offer, particularly given the risk that Accord may not survive (Table 1). Aran likes the certainty that the sale would bring. He would accept a small payment from Kayla to sell his share of the Detox business to her.
Table 1: Survival rates of small businesses (based on a survey of local businesses)
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.
▶️Answer/Explanation
Ans:
Refer to Paper 1 markbands for May 2016 forward, available under the “Your tests” tab > supplemental materials.
Making and selling snack bars:
Forces for the change to snack bars:
Kayla is certain there is a market
Fits in with existing product portfolio
Payback and ARR are OK
Business is in a good position to grow
The Mintel report is very positive
Snack bars are better than drinks because of competition.
Forces restraining the change:
Aran thinks it better to target the mass drinks market
There are still quality issues to overcome first
Detox does not fit in with his ideas for the product/market.
Selling Accord to SF:
Forces for the selling SF:
Offer is for 5 years’ worth of earnings
Detox remains
Aran is frustrated with the current business and would accept the offer
There are threats to Accord’s survival
Certainty
Kayla would buy Detox, which she likes.
Forces restraining the change:
It would end the partnership
Would Aran later regret it?
Do not penalize candidates who do not consider the “do nothing” option.
Marks should be allocated according to the paper 1 markbands for May 2016 forward section C
Criterion A: Is about the choice of theories/tools made by the candidate to try and solve the problem. Possible theories, planning tools and techniques include: FFA, Investment appraisal, SWOT, Risk (candidates need not refer to Ansoff but it might be useful), takeovers, product portfolios, market data, ownership and control issues, eg partnership, market research the importance of assumptions.
In this instance, as compared with previous sessions, the emphasis is likely to be on choosing relevant theories and ideas and not so much on business tools.
No understanding of FFA max [3]. FFA could be presents as a table or a discussion of driving/restraining forces
For [4]: FFA plus at least one other tool, technique or theory understood and developed well with some relevance to the additional stimulus material.
For [2]: some understanding of at least two tools, techniques or theories, but not developed.
Criterion B: Is about the use of the stimulus, tools, techniques, theories in solving the problem. Application will be judged by the use of the stimulus material, in particular the extra material, especially Table 1, Appendix 1.
For [4]: relevant tools, techniques and theories are applied well to the case study (including OFR) context and additional stimulus material, the application is convincing and relevant.
If only one option considered max [3].
Limited use of Table 1 or Appendix 1 max [3].
For [2]: some limited context/application but not developed. Use of tools limits candidate’s ability to make reasoned arguments.
Criterion C: Is about the process of making a decision and the strength of the recommendation. Options discussed in balanced way, conclusions drawn as to whether they work. Remember, “do nothing” can be a recommendation.
It is always worth reflecting on the piece of work as a whole (the entirety of the answer) when deciding on the mark for this criterion.
There can be some flexibility about the chose option: Option A, Option B, both options, neither option.
For [4]: There needs to be a comparison between the two options using Section C and other material and a recommendation (Option 1, option 2 or do nothing) made and supported.
For [2]: Only one option considered or some limited arguments but not justified. No comparison, limited analysis, but candidate arrives/draws a reasoned conclusion.
Criterion D: Structure. This criterion assesses the extent to which the student organizes his or her ideas with clarity, and presents a structured piece of writing comprised of:
an introductory paragraph
logical structure
a concluding paragraph
fit-for-purpose paragraphs. This means: not too long, focused on distinct issues, sequenced well, guides the reader.
Beware of under-rewarding weak scripts that, nonetheless, have some or all of the elements. The candidate will lose marks in the other criteria so they should not be doubly penalized.
For [4]: all four elements present, clearly organized and there is clarity in the student’s answer.
For [2]: No logical structure, but other elements present or logical structure with other elements missing.
Criterion E: Is about the extent to which stakeholders (both groups and individuals)
are considered.
Individuals: Aran and Kayla (these hold different views so can be considered as different individuals).
Groups: Managers, employees, customers, communities, governments, stakeholders at SF.
For [4]: two or more individuals and groups are considered in a balanced way.
For [2]: one group or individual considered appropriately, or several individuals or groups considered superficially.
[1] could be awarded if there is mention of stakeholders but with little development.
[3] could be awarded if there is a range of stakeholders but little balance.