tutor2u OCR A2 Business Studies F297 toolkit – VGL June 2016
By number of hits, the largest share of users on the VGL website
are simply making a quick check of when the bins are due to be
emptied next. Few people are spending much time on ‘contact
us’ ‘about us’ and ‘why recycling matters’.
That finding doesn’t make those pages unimportant. But what
stands out as the most significant insight is that web users are
finding the website especially helpful as a research tool in a
couple of areas: ‘what is recyclable’ and ‘VGL in the community’.
That might well offer VGL a steer as they work towards
supporting one new major charitable community initiative.
It’s not the job of this toolkit to make specific recommendations
to VGL, but it seems clear that there is an appetite for community
education and outreach exploring the idea of ‘what is
recyclable’?
Ethics and Corporate Social Responsibility at VGL
Why would a firm like VGL be motivated to have an ethical approach to business, and dedicate staff time and resources into acting ethically? It’s probably safe to assume that
the Phoebe is a genuinely ethical businesswoman. Yet there’s a good reason why acting ethically – even going well beyond what the law requires - can help to reduce some
costs, as well as boosting revenue – and thereby contributing to higher levels of profitability and returns. VGL directors will understand this point.
Take the example of a community initiative, as discussed above. Such an initiative may be worthy of support in its own right. But it also opens up business opportunities for
VGL. If client groups were educated around the area of ‘what is recyclable’, outcomes like the ones below may contribute to the firm’s bottom line:
 Households recycle more efficiently, cutting costs at VGL’s processing centres
 Customer groups get a greater awareness of VGL’s activities and business services. We already know that a huge 48% of all the time users spend on the VGL website
is spent looking into activities that the business performs in the community. The firm’s ethical stance helps to differentiate it from rivals and competitors.
 Engagement with the public may even be used to generate market research data that can support the marketing mix in general.
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tutor2u OCR A2 Business Studies F297 toolkit – VGL June 2016
Production, Human Resources and Business Culture at VGL
At A2 level, a great advantage is that you are already expert (!) in the content of the AS F292 unit. The OCR approach to that unit emphasises the strongly interconnected
nature of ‘people’ and production. In addition, the 2016 F297 case study firmly weaves together issues of production, people and the whole ‘culture’ of VGL. There seems
little advantage to finely separating out these issues. In the pages that follow, these three topic areas are discussed as a whole.
For instance, consider the case study statement that “a major metric for VGL is product quality. Indeed, any sub-standard or contaminated product will realise only a fraction
of its potential revenue. Careful pre-sorting can help to improve product quality, but it is the commitment of production line employees that can make the major difference”
(lines 76-78). This consideration invites you to think about the difference between a quality assurance and quality control approach to production. At AS level you perhaps
reflected on this issue, noting that a quality assurance approach means taking proactive steps by the workforce to work towards a target of zero defects. Production
improvements, cost control and waste minimisation needs the attention of managers and staff. VGL’s production manager has acted on the basis of these facts:
 “Despite being a cost, staff training is considered to be essential in ensuring commitment … Currently all shift supervisors are responsible for delivering basic on-thejob training which focuses on the essentials: ‘what to do’, and ‘how to do it’. (VGL’s production manager) insists that unless employees know ‘why’ the task is important
they will be less effective. The ‘why’ is readily explained by reference to VGL’s ‘Four Pillars’, a statement of Phoebe’s business philosophy” (lines 79-85)
 “(VGL’s production manager) and the shift supervisor met with shift A employees to discuss VGL’s Four Pillars. He also collected intra-shift data which measures the
level of contamination (of waste entering the recycling process)” (lines 86-88).
Initial analysis of the data in table 2 reveals some interesting findings worthy
of further investigation. There is a variable pattern of contamination
between the three shifts over an 11 week period. Could these differences in
performance be due to differing levels of performance, management and
training of employees?
It’s hard to spot general overall trends in the data presented. Might time
series analysis (see pages 14-15) be able to offer any insights?
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tutor2u OCR A2 Business Studies F297 toolkit – VGL June 2016
During the first four weeks of the investigation, both shifts A
and B show an upward trend in contamination rates. Shift B
has a higher rate, but are standards slipping with Shift A? By
the end of the first 4 week period, the upward trend in
contamination reaches a point where team A have the
highest rate of underperformance.
Do we learn anything? “The supervisors of the other two
shifts became unhappy when they found out about Michael’s
meeting (with Team A). They argued that contamination is
not always internally controllable, particularly when sorting
household waste” (lines 91-93).
Michael, the production manager, had already decided to
take steps to address the issue. His discussion with Shift A
about the Four Pillars yields some interesting results.
Contrary to expectations, in the period up to the end of week
11, Shift A shows the sharpest deterioration in performance.
Workers on the other two shifts make better progress in
reducing contamination rates.
The results presented offer something of a puzzle. In the two
weeks after the intervention by the production manager,
Shift A show a sharp improvement in performance, but the
effect is temporary. Michael’s discussion clearly had an
effect, but the effect was mixed, at best. You might conclude
that the supervisors are right: staff on the recycling
production line cannot directly control contamination rates.
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tutor2u OCR A2 Business Studies F297 toolkit – VGL June 2016
We are left in little doubt that training and supporting staff is an important part of the standard operating procedure of VGL, so could be said to be embedded in the culture
of the business. “The factory floor is a challenging place to work because it is busy, dirty and noisy. Maintaining concentration amongst operative staff is crucial to reduce
the risk of personal injury or a substandard product ... All staff on the factory floor must wear prescribed safety clothing. Further, all of VGL’s employees have to undergo a
two-day induction course before being allowed to be close to any of the production machinery” (lines 66-71).
It’s hard to draw firm conclusions about the ways in which shift workers (and their supervisors) should handle the issue of contamination. Perhaps it’s best to return to one
certain finding: “indeed, different postcodes exhibit considerable variation in the type and quantity of the waste they produce ... When Michael mentioned this to Phoebe
she wondered how VGL could better communicate with householders and, in particular, what function social media might play in this. She asked VGL’s Marketing Manager,
for analytics of VGL’s website (see Table 3) (lines 93-101)”. This point was addressed on page 25. From a strategic point of view, the problem of contamination on the
production line can also be seen from a perspective of the marketing department.
Linking to the proposed diversification into textile recycling
Consider the strategic marketing proposal discussed on page 24.
“Increasing competition has caused VGL to consider diversification into the textiles recycling market … Initial research by Asad has suggested that textile waste falls into one
of three categories” (lines 102-107):
1. good quality clothing and textiles which can be sold intact. Typically this is exported to emerging economies
2. poor quality textiles which, after shredding, are repurposed. A typical use would be producing thermal insulation material for house building
3. non-commercial recovery which goes to landfill.
A marketing shift of this nature would raise both ‘people’ and production considerations. “Sorting mixed bags of textiles is labour intensive and has a degree of skill associated
with it which is not currently available in the existing workforce. The staff on any textile line would, therefore, require both training and additional pay” (lines 113-115).
Diversification into textile recycling links to all the company’s objectives.
Before thinking through some of the bigger questions this presents, take a moment to consider the production costings on the next page.
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tutor2u OCR A2 Business Studies F297 toolkit – VGL June 2016
“Michael (the production manager) thinks that unless VGL can process about 200 tonnes per week the venture is too small to be worthwhile. The space needed for textile
sorting could be created by reducing the area currently designated for storing bales of recycled materials. If a second-hand baler and vehicle were to be purchased the venture
would have a capital cost of about £80 000. Four sorting staff and a new driver would be needed; therefore, Martin has budgeted £100 000 annually for staff, transport and
machinery maintenance (lines 121-126).
Analysing Table 4 as a ‘decision tree’
Is the production manager correct in his basic assumptions? Table 4 has been analysed taking an approach you
might be familiar with – a decision tree. This approach combines estimated financial returns with the
probability of those returns being realised. Consider a 10% probability of a selling price per tonne of £300.
That can be assigned an estimated money vale (EMV) of £30 (since £300 x 0.1=£30). If the probabilities in Table
4 are reliable, the EMV of the average tonne of recycled textiles is £510. That figure is the sum total of all five
EMVs.
If the purchase price of a tonne of materials is £300, then the final EMV value for a tonne of mixed fabrics is
£210. At 200 tonnes a week, the recycling proposal would contribute £42,000 a week to the company’s fixed
costs.
Does that look like a good deal? Since Martin has budgeted £100,000 annually for staff, transport and machinery maintenance, the recycling proposal looks to be fantastically
lucrative. At 200 tonnes a week, the proposal would achieve payback on the capital cost of the necessary equipment in less than two weeks. The annual cost for staff,
transport and machinery maintenance could be covered in less than three weeks. In summary, it would appear that the proposal would breakeven at far less than the 200
tonnes a week that Martin has suggested as the necessary target figure.
That doesn’t make the recycling proposal a sure fire success. Costs may be higher than expected. The probabilities assigned to selling prices might be too optimistic.
Qualitative factors, such as the uncertainties surrounding hiring, training and retaining the necessary staff would need to be carefully thought through. The loss of storage
space to accommodate the new process represents a business cost that is difficult to account for.
Nonetheless, the recycling proposal looks to be worth serious consideration.
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