Cambridge International AS & A Level

BUSINESS 9609/33
Paper 3 Business Decision-Making May/June 2023

INSERT 1 hour 45 minutes

INFORMATION
*1049249308-I*

● This insert contains the case study.

● You may annotate this insert and use the blank spaces for planning. Do not write your answers on the
insert.

This document has 4 pages. Any blank pages are indicated.

DC (CJ) 315910/1
© UCLES 2023 [Turn over
 2

Local Tours (LT)

LT is based in a large coastal city in country P in Asia. The country is popular with both business
travellers and tourists. LT was started as a private limited company in 2018 by two graduates,
Kanon and Tonia. While studying tourism, they learnt about the rise in the number of independent
travellers of all ages who want customised tours. This, together with the improvement in global
internet connectivity, gave Kanon the idea for a new tour business offering an online marketplace 5
to connect travellers with local tour guides. LT uses only online operations to communicate with
suppliers and customers.

LT’s mission is to ‘connect individuals with their ideal tour’. Tours range from two hours to one
week.

Customers browse LT’s website to choose a knowledgeable local tour guide. They book and pay 10
LT for their tour. Guides are paid 80% of the tour price by LT and make all the local arrangements,
including transport and hotels. LT has received many favourable reviews on travel websites,
which praise the guides’ local knowledge and arrangements. LT has a limited marketing budget,
and all promotion is done through its own website.

Kanon and Tonia would like to expand LT. 15

New tours

Kanon and Tonia have identified six different day tours likely to be of interest to cruise ship
passengers. LT would hire minibuses that have 16 seats. The marketing objective would be to
sell a minimum of 12 seats on each day for each tour.

New Tour Hub 20

LT has contacted a large business that operates seven cruise ships which stop at the port in LT’s
home city. Each cruise ship spends one day a week in the port, and passengers take large group
tours provided by the cruise ship business. The cruise ship business is keen to work with LT, as it
thinks there will be significant demand for small group tours led by experienced local guides. The
cruise ship business will take a commission for each booking. 25

The cruise ship representative thinks their passengers would prefer to make face-to-face
bookings rather than book online. Therefore, Tonia wants to open an office at the local port. She
suggests it would be easy for someone based at the port office to meet cruise ship passengers
and take bookings. Tonia would like to call the new office the LT Tour Hub. This will become LT’s
head office from where it will continue to operate its online business. 30

LT would lease the office building for an initial period of four years. It would need to make major
design changes and set up the internet connection, which will add to the capital cost. LT would
employ two full-time tour advisers to take tour bookings.

© UCLES 2023 9609/33/INSERT/M/J/23

 3

Tonia has carried out research with cruise ship passengers. She has estimated additional net
cash flows, shown in Table 1.1, from tours booked through the Tour Hub. 35

This project will not have a residual value.

Table 1.1 Forecast net cash flows for the Tour Hub

Year 0 (120 000)

Year 1 30 000 40
Year 2 40 000

Year 3 50 000

Year 4 50 000

Human resources

Currently tour guides are self-employed and only receive income after a tour is booked on 45
LT’s website. LT have a large number of guides’ profiles on its website. Many guides take tour
bookings from other travel businesses, especially during busy holiday seasons. This means they
are not always available for LT’s customers. As LT grows, Kanon is planning to offer a small
number of the most popular guides an employment contract with a guaranteed number of tours
per month. 50

Tour price elasticity of demand

LT recently increased the selling price of some of its popular tours. These include a half-day
shopping tour that is popular with business travellers and an evening street food tour that attracts
young independent travellers. Tonia has analysed recent sales data before and after increasing
prices as shown in Table 1.2. 55

Table 1.2 Analysis of recent monthly price and sales data

Original New Sales before Sales after Price elasticity

Tour
price price price increase price increase of demand
Shopping tour $60 $75 250 240 See Question 4(a)
Evening street food
$40 $45 300 200 –2.67 60
tour

© UCLES 2023 9609/33/INSERT/M/J/23

 4

BLANK PAGE

Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.

To avoid the issue of disclosure of answer-related information to candidates, all copyright acknowledgements are reproduced online in the Cambridge
Assessment International Education Copyright Acknowledgements Booklet. This is produced for each series of examinations and is freely available to download
at www.cambridgeinternational.org after the live examination series.

Cambridge Assessment International Education is part of Cambridge Assessment. Cambridge Assessment is the brand name of the University of Cambridge
Local Examinations Syndicate (UCLES), which is a department of the University of Cambridge.

© UCLES 2023 9609/33/INSERT/M/J/23