Define the term social marketing.

Using Table 1 calculate the current ratio for SF for 2020 (show all your working).

Using Table 1 suggest one reason why SF may have a liquidity problem.

Explain two factors that may influence the motivation of employees at SF.

Recommend whether MM should take over SF.

PLEASE NOTE: This content is not included in the syllabus for 2024 exams onward. Related parts of this multi-part question may be used. 

Social marketing is the use of commercial marketing tools and techniques (such as market research; defining objectives and targets; creating and promoting brands; preparing strategies and plans; setting actions and budgets etc.) in order to influence individuals’ behaviour, to improve their well-being and/or that of society as a whole. Unlike commercial marketing, the aim is not to encourage purchase, but to raise awareness and lead to change.

Award [1] for a basic definition that conveys partial knowledge and understanding.

Award [2] for a full definition that conveys knowledge and understanding similar to the answer above (students are not expected to word their definition exactly as above).

$$\begin{gathered} \mathrm{Current} \mathrm{ratio}=\frac{\mathrm{current} \mathrm{assets} }{\mathrm{current} \mathrm{liabilities} } \\ = \frac{4+10+16}{25}=\frac{30}{25}=1.2 \end{gathered}$$

This can also be expressed as “1.2 : 1”.

Award [2] for correct answer, showing the working.

Award [1] for or a correct answer with units or a percentage sign, or an incomplete answer (such as 6/5) or if the candidate calculated the current ratio for 2019 (answer: 1.33).

Do not reward formula only.

Liquidity is a measure of how quickly current assets (stock, debtors, cash) can be converted into cash (cash being already liquid anyway). A liquidity problem means that the company may struggle to pay off its short-term debt obligations.

In the case of SF, possible reasons include:

• Current assets are decreasing faster than current liabilities, reducing the current ratio from 1,33 (in 2019) to 1,2 (in 2020), which is further away from the ideal of 1.5.
• Direct cash has decreased more than the ‘less liquid’ current assets (stock and debtors) – in fact, the value of stock has doubled from 2019 to 2020. A film studio should not keep so much stock anyway.
• The acid test ratio has decreased from 1,26 (in 2019) to 1,04 (in 2020); an acid test ratio of less than 1:1 could mean that the business is not in sound financial health; it may unable to pay its short-term debts.

Accept any other reasonable reason.
Use OFR.
Credit candidates who calculated the acid test ratio.

Award [1] for a basic answer that conveys some understanding of a reason why SF may have a liquidity problem. The answer may be short or descriptive, showing some partial knowledge of what current assets/liabilities/ratio are, and/or what liquidity means.

Award [2] for an answer that conveys knowledge and understanding of a valid reason why SF may have a liquidity problem. The answer shows both theoretical understanding and application to SF.

Factors could include:

• Time pressures – does not allow SF employees to work at a comfortable speed, which may create stress and does not enable them to be creative, which is paradoxical as they work in the creative industries;
• No overtime: no reward for extra work, in a context of low pay scales (only managers are financially rewarded with bonuses: absence of financial rewards for SF employees).
• Autocratic leadership style – may not suit some employees, especially in the creative industries.

The answer must be explicitly about SF, not about MM, even if some aspects could be relevant for both.

Accept any other relevant factor.

Mark as a 2 + 2.

Award [1] for an appropriate factor in context and for an explanation, which may include a theoretical reference (for example: to Pink or Herzberg). Award a maximum of [2] for each factor. Maximum award overall: [4].

Refer to Paper 1 markbands for May 2016 forward, available under the "Your tests" tab > supplemental materials.

Arguments for:

• Will reduce production costs (Aarvan), which may make MM more competitive
• The owner wants to sell, so price might be good
• SF has a good reputation
• Comfortable with social marketing, which may match MM’s ethics
• Used to meeting customer demands and deadlines
• Fits well with MM strategy to focus on its growth in India/Asia

Arguments against:

• Several cultural differences between MM and SF, for example SF managers receive financial rewards such as bonuses, and SF has an autocratic management style
• Not enough experience with short films
• Limited experience of promotional films
• Has always worked for Indian customers: may lack international awareness
• How may SF employees react to the take-over?

Accept any other relevant discussion.

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 a maximum of [3].

For an answer that only looks at one side, award a maximum of [5].

Both sides of argument considered but descriptively, award a maximum of [6].

Both sides considered, good use of evidence, particularly from section B, but no effective conclusion/evaluation award a maximum of [8].

Few candidates were able to define ‘social marketing’ correctly: many thought it was about the use of social media, or about ensuring that the marketing messages reach a very high number of people. The answers were polarised: candidates who knew the meaning usually scored 2 marks; the ones who did not, scored zero marks. One mark was awarded when the answer was correct but not sufficiently developed, for example only writing that “social marketing is the use of commercial marketing to help make a change in society”: this is correct, but not enough – and candidates had enough time to develop their answers.

Although the formula to calculate the current ratio was given to candidates (current assets divided by current liabilities), a high number of candidates did not answer correctly; the main reason seems to be the fact that they did not know that current assets = stocks + cash + debtors. Others added units, such as $ or %, which showed a lack of understanding of what a ratio is. It was disappointing to realise that many DP candidates do not have that basic knowledge about finance.

The topic of liquidity was not well understood either, so again it was disappointing to realise that many DP candidates do not have that basic knowledge about finance. Examiners had a mark scheme inviting them to accept many possible reasons why SF may have a liquidity problem, however when basic knowledge of the notion of liquidity was absent, it was not possible to award any marks. More positively, there were also some excellent answers, for example some candidates calculated the acid ratio and commented on this, or compared 2019 or 2020, or questioned the importance of stocks for a film studio.

Generally, this question was answered quite well, with the question asking candidates to explain two factors that may influence the motivation of SF employees. The stimulus material included many ideas that could be used as a starting point, for example the facts “that SF ’s managers are autocratic and that many of its employees lack the freedom to be creative”. Some candidates were able to interpret this in context (about the fact that SF is a film studio, so a business where creativity is essential) or to add some theoretical knowledge (typically using Maslow’s or Pink’s theories). Weaker answers were only descriptive, or only quoted extracts from the case study.

The final, evaluative question was quite well answered, for two main reasons: (1) most candidates understood the topic, about takeover/acquisition, (2) most answers were balanced and well structured, with both advantages and disadvantages. The best answers were long, detailed and well developed, presenting a range of quantitative and qualitative arguments and counterarguments, well applied to the scenario of MM and SF, using subject terminology. Weaker answers were either too short, or one-sided.