| Date | May 2019 | Marks available | 10 | Reference code | 19M.1.HL.TZ0.4 |
| Level | Higher level | Paper | Paper 1 | Time zone | Time zone 0 |
| Command term | Discuss | Question number | 4 | Adapted from | N/A |
Question
Refer to the Radeki de Dovnic Manufacturing case study (SL/HL paper 1 May 2019).
If RDM builds a new production facility in Europe, an immediate consequence will be an increase in capacity. At current levels of output this would lead to a reduction in capacity utilization. The current output of RDM’s factory is 20 000 units a year, with a productive capacity of 21 000 units a year before the new facility is built. If the new production facility is built, the greater capacity for the whole business will, at current levels of output, result in the capacity utilization falling to 50 % until production at the new facility starts.
Xi, the marketing manager, suggests that this increased capacity provides the opportunity for market development to be achieved by entering the United States (US) market.
The US market has similarities with Europe, with an aging population and low birth rate. Demand for customized healthcare devices is high. However, the healthcare system in the US is very different, with a much greater role for private sector healthcare compared to Europe, where much of the healthcare is state funded. In the US, 18 % of gross domestic product (GDP) is spent on healthcare compared with an average of 11 % in Europe. Advertising spend in the US is very high for the typical healthcare equipment business, which uses TV and the internet to reach individuals, whereas in Europe healthcare equipment businesses typically negotiate with government organizations. Average incomes in the US are higher than in Europe. Competition in the US is very high, although some major healthcare equipment businesses dominate the market. Industrial/ employee relations in the US are generally more decentralized than in Europe, with a lower level of unionization.
To assess the best way to enter the US market, some senior managers may have to move to the US and Xi may need to recruit some new staff in the US with specialized knowledge of US laws and regulations, as well as some additional marketing employees. Xi is aware that industrial/ employee relations are different in the US. Existing staff will have to get used to new ways of working and are concerned about having to work with new staff in the US.
[Source: © International Baccalaureate Organization 2019]
Describe one industrial/employee relations method used by employers.
Using the resource, calculate the current capacity utilization rate at RDM’s factory.
Calculate the increase in capacity at RDM if the company builds a new production facility (show all your working).
Explain two possible reasons for RDM employees’ resistance to change if RDM enters the US market.
Using information from the case study and the resource, discuss the opportunities and threats for RDM of entering the US market.
Markscheme
Types of industrial/employee method used by employers in industrial/employee relations include:
- Collective bargaining/ negotiations: management negotiate with worker representatives /trades unions.
- Threats of redundancies: Such threats can break the will of workers and their representatives, as they consider the effects of permanent loss of position.
- Changes of contract: flexible working, productivity agreements.
- Closure and lockouts: The owners shut down the place of employment so that the workers cannot enter to perform their job. This method is rather extreme.
- Recognising /encouraging unions can help both employees and employers
- Arbitration
Do not allow methods used by employees e.g. creating a union as this is done by employees not employers, strike action. Nor methods used by employers that do not involve direct engagement of workers such as delegation, leadership style, team building etc.
Award [1] for identification of a method and [1] for a description. Candidates do not have to word exactly as above. No application is required but might be helpful. Maximum award: [2].
Capacity utilization rate is × 100 = 95 % (95.2% but allow rounding)
Award [1] for correct answer.
Capacity utilization is now 50 % so 50 % = × 100
so new capacity = 20 000 × =40 000 units
Increase in capacity is 19 000 units
Award [3] for correct answer with working. ‘Units’ not necessary. Working wrong only award [2].
Award [2] for correct answer without workings or wrong working or good attempt (e.g 40,000, or 40,000 units)
Award [1] for an attempt with workings. 95.2 % - 50 % =45.2 % (allowing for rounding) can be awarded [1]
Do not reward formula only.
Reasons for resistance to change could include:
- new ways of working
- Having to work with new staff in the US
(these first two points are simply lifted from the additional material so would have to be developed for the second mark(s)) - Some employees may have to move to US (disruption, culture clashes etc).
- There could be disruption. (no supporting context)
- There would be newly recruited employees in US, maybe on higher salaries which might cause resentment.
- Newly recruited employees may not fit into the culture which may be difficult for existing employees
- Low level of unionization in US which European employees may not like
- Financial reasons – costs of moving etc
Accept any other relevant reason.
Mark as a 2 + 2.
Award [1] for an appropriate reason [1] for application/context. Award a maximum of [2] for each reason. Maximum award overall: [4].
Refer to Paper 1 markbands for May 2016 forward, available under the "Your tests" tab > supplemental materials.
Opportunities:
- Massive market.
- US spending on healthcare much higher.
- Strong demand.
- High incomes in US.
Threats:
- Advertising spend in the US is very high
- Availablity of suitable people to recruit
- Competition very high in US
- Domination of market by big US companies
- US industrial/employee relations and cultures may cause disruption.
OPPORTUNITIES AND THREATS SHOULD BE EXTERNAL TO RDM
If candidate considers all four elements of SWOT only reward for that part of the answer relevant to opportunities and threats.
Accept any other relevant opportunity or threat.
Marks should be allocated according to the paper 1 markbands for May 2016 forward section B.
For an answer with no effective use of context (Theoretical answer) award maximum [3].
For an answer that only looks at strengths and weaknesses (internal factors) award a maximum [3]
Award [4] if opportunities and threats are presented as an undeveloped list.
For an answer that only looks at opportunities or only looks at threats, award up to a maximum of [5]. At top end context has to be good.
Both opportunities and threats considered but descriptively max {6}
Both opportunities and threats considered, good use of evidence, particularly from section B, but no effective conclusion/evaluation award a maximum of [8].
For [10] marks a fully supported conclusion/evaluation with good use of evidence, particularly from Section B.
Examiners report
Few candidates were able to give a clear description of industrial/employee relations methods used by employers. Some who gave trade unions (a valid method) did so from the perspective of the employees rather than employers. Good answers referred to any of the recognized methods including collective bargaining, arbitration, negotiations with unions and more extreme methods such as lock-outs.
Almost every candidate got the correct answer – rounding was allowed.
Some candidates got the correct answer of 19,000. Some candidates got the new capacity of 40,000 but did not subtract the 21,000 to get the increase. Candidates who got the answer wrong were rewarded, where appropriate, if the working showed that they were using a reasonable approach.
Most candidates understood the concept of resistance to change and many candidates related this to the issues involved in entering the US market. Weaker candidates often identified contextual issues (such as employees having to move, different employment conditions in the US, language issues etc.) without linking these into the concept of resistance to change.
There were many answers that included factors that are internal to RDM. SWOT analysis has internal factors included in strengths and weaknesses so are not appropriate to opportunities and threats. Better answers discussed the external factors relating to RDM in terms of those that present opportunities and those that create threats. Very few answers took the final step of attempting to balance the opportunities and threats and even fewer answers justified which of the two outweighed the other.
