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practice & revision kit
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january 2014
practice & revision kit
18.00
operational paper e1
enterprise operations
PAPER E1 &
ENTERPRISE OPERATIONS R
E
V
This Kit is for exams in 2014.
I
In this Kit we: S
Discuss the best strategies for revising and taking your E1 exam
I
Show you how to be well prepared for the 2014 exams
Give you lots of great guidance on tackling questions O
Demonstrate how you can build your own exams N
Provide you with three mock exams
Show you how marks are awarded in the exam, using CIMA marking guides
K
I
T
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BPP Learning Media Ltd
2014
iii
Contents
Page
Passing E1
Revising E1 xi
Passing the E1 exam xii
The exam paper xiv
What the examiner means xix
Exam practice
Mock exam 1
Questions 239
Plan of attack 247
Answers 249
Mock exam 2 (September 2013 resit exam)
Questions 261
Plan of attack 269
Answers 271
Mock exam 3 (November 2013 exam)
Questions 283
Plan of attack 291
Answers 293
Review form
iv Introduction
Question index
The headings in this checklist/index indicate the main topics of questions, but questions often cover several
different topics.
Questions set under the old syllabuss Organisational Management and Information Systems (OMIS) exam are
included because their style and content are similar to those that appear in the Paper E1 exam.
Part D: Marketing
Mock exam 1
Questions 72-75
Topic index
Listed below are the key Paper E1 syllabus topics and the numbers of the questions in this Kit covering those
topics.
If you need to concentrate your practice and revision on certain topics or if you want to attempt all available
questions that refer to a particular subject you will find this index useful.
Selecting questions
We provide signposts to help you plan your revision.
A full question index
A topic index, listing all the questions that cover key topics, so that you can locate the questions that
provide practice on these topics, and see the different ways in which they might be examined
BPP's question plan, highlighting the most important questions
Build your own exams, showing you how you can practise questions in a series of exams
Marking schemes and quotes from examiner comments (where provided for past CIMA exam
questions) are sourced from CIMA post exam guides, which can be found in full at cimaglobal.com.
x Introduction
Revising E1
The E1 exam
This will be a time-pressured exam that combines a variety of different types of question. It is very important that
you do not spend too long on the objective test and shorter written questions at the expense of understanding
and appreciating the issues involved in the longer written questions that make up half the marks on the paper.
Topics to revise
You need to be comfortable with all areas of the syllabus because any question may span a number of syllabus
areas. Question spotting will absolutely not work on this paper. It is better to go into the exam knowing a
reasonable amount about most of the syllabus rather than concentrating on a few topics.
The global business environment
The major economic systems of the world and the emergence of new economies
The role of government in shaping the business environment and market regulation
The importance of corporate governance and corporate social responsibility
Information systems
The role of information systems and how they are implemented and evaluated
Types of information system and their role in enabling change
The importance of protecting information systems and aligning them with business strategy
Operations management
How to manage inventory, production capacity, demand and supply chains
The importance of quality and methods of quality measurement and management
Information systems used in operations management
Marketing
Marketing orientations, the marketing environment and social responsibility issues of marketing
Targeting market segments with an appropriate marketing mix through various marketing methods
Branding and not-for-profit marketing
Managing human capital
Human resource management theories and HR planning
Good human resource practices from recruitment to dismissal
Training, development and the role of appraisals
Question practice
Question practice under timed conditions is essential in order to get used to answering exam questions in limited
time and to practise the different skills involved in answering each type of question.
xii Introduction
Qualities required
A good understanding Questions will often test your grasp of generally accepted management
thinking in the main syllabus areas, there will often be some flexibility
allowed, there may be no single right answer.
Business awareness You will be tested in different questions on your ability to identify and
understand the management implications of the problems you are faced
with.
Evaluation and recommendation You must be able to analyse a situation, generate and evaluate a range
of options and be ready to recommend a reasonable course of action.
Communication skills A challenging aspect of E1 is that you have to adapt to the four types of
question (MCQ, OT, short-answers and scenario questions of unlimited
length).
To answer the short Section A and Section B questions you should
carefully structure your response (use bullets or short sentences) and
only answer the question set.
When answering Section C questions you should remember that
markers assess your overall answer as well as counting points made.
Limited answers that make basic points score poorly, pass answers add
realistic insights, but only strong answers offer clear, purposeful
explanations that earn the big marks. Ensure your answers have enough
depth to score well.
Avoiding weaknesses
You will enhance your chances significantly if you ensure you avoid these mistakes:
Failure to read the question
Lack of application of knowledge to scenario
Failure to pick up scenario details eg size of company, morale of workforce, the business environment
Confusion of scenario details from different questions
Time management spending excessive time on strong areas or too long on areas you struggle with
Poor English, structure and presentation
Poor knowledge of basic concepts and definitions
Exceeding 50 word/one page limits
Repeating the same material in different parts of a question
Brain dumping everything you know about the topic area being tested seeing a familiar word in a
question and going off on a tangent
Discussion questions
Remember that depth of discussion is important. Discussions will often consist of paragraphs containing 2-3
sentences. Each paragraph should have a short header and:
Make a point
Explain the point (you must demonstrate why the point is important)
Illustrate the point (with material or analysis from the scenario, perhaps an example from real-life)
Important!
This exam information page sets out what to expect from your E1 exam in terms of exam format and style,
however it is possible for exam papers to vary slightly over time.
For example:
Section A may include just MCQ or OT questions rather than a mix. None or all questions could be based around
a scenario.
Section B questions may be based around a scenario, or may not.
By practising a range of question styles you will be prepared to take anything which comes up.
November 2013
Section A
1 Ten compulsory multiple choice questions drawn from all areas of the syllabus.
Section B
2 Total Productive Maintenance, information systems and information technology, employee productivity,
quality circles and quality inspection, F.W. Taylor, systems review
Section C
3 Corporate governance, Hofstede and national culture, CIMAs Code of Ethics
4 Customer-led marketing, marketing plans, CRM systems
The November 2013 paper is Mock Exam 3 in this Kit.
Introduction xv
May 2013
Section A
1 Ten compulsory multiple choice questions drawn from all areas of the syllabus.
Section B
2 Supplier relationships, sustainability, Just-In-Time, free trade, installing IT system, risk of overseas
investment
Section C
3 Centralised IS activities, pay structures, flexible employment practices
4 Branding, marketing, HR activities
March 2013
Section A
1 Ten compulsory multiple choice questions drawn from all areas of the syllabus.
Section B
2 System testing, Total Productive Maintenance, Electronic Data Interchange, merit goods, place mix, IT
investment
Section C
3 Lean philosophy, recruitment and selection
4 Economic issues, Corporate Social Responsibility
November 2012
Section A
1 Ten compulsory multiple choice questions drawn from all areas of the syllabus.
Section B
2 Process mapping, forecasting additional staff, online trading, IS/IT and furniture making, variable pricing,
resistance to change.
Section C
3 Taxation policy, social marketing, corporate social responsibility.
4 Role of HR department and managers, lean management, Maslow/Herzberg and modular teams.
xvi Introduction
May 2012
Section A
1 Ten compulsory multiple choice questions drawn from all areas of the syllabus.
Section B
2 Government policy, transformational process, non-marketing orientation, purchasing decisions, Herzberg
and job enrichment, marketing
Section C
3 Decentralisation, outsourcing, marketing principles and practices
4 TQM approach, TQM training, quality costs and revenue
March 2012
Section A
1 Ten compulsory multiple choice questions drawn from all areas of the syllabus.
Section B
2 Global business environment, business ethics and CSR, political risk and FDI, 5-S practice, responding to
demand, sustainability and operations management
Section C
3 Marketing threats and weaknesses, strategic marketing plan, bonus scheme
4 EPoS and operations, overcoming resistance to change, HR issues
November 2011
Section A
1 Ten compulsory multiple choice questions drawn from all areas of the syllabus.
Section B
2 Protectionism, corporate social responsibility, political risk, Cousins strategic supply wheel, inventory
management, workforce flexibility
Section C
3 Strategic marketing plans, marketing models, sustainability
4 Managing dispersed teams, homeworking, role of HR
Introduction xvii
May 2011
Section A
1 Ten compulsory multiple choice questions drawn from all areas of the syllabus.
Section B
2 Outsourcing, assessing information systems, Hofstede, IS/IT controls, globalisation, Reck and Long's
purchasing development model.
Section C
3 ISO 9000, remuneration and reward, features of performance measures.
4 Branding, product and place mix, review of HR activities.
November 2010
Section A
1 Ten compulsory multiple choice questions drawn from all areas of the syllabus.
Section B
2 Outsourcing, emerging economies and multinationals, ICT transformation, lean processes, TQM.
Section C
3 HR practices, planning HR strategy, e-HR.
4 Ethics and CSR, marketing mix and branding, Internet marketing.
May 2010
Section A
1 Ten compulsory multiple choice questions drawn from all areas of the syllabus.
Section B
2 IS outsourcing, IS/IT and HR, promotions and distribution channels, marketing mix, internal recruitment
options, non-financial motivators.
Section C
3 BRIC economies, offshoring, redundancies.
4 Strategic supply chain management, BPR and process maps, code of ethics.
xviii Introduction
Specimen paper
Section A
1 Ten compulsory multiple choice questions drawn from all areas of the syllabus.
Section B
2 HR planning, quality costs, SERVQUAL, Six Sigma, stakeholders, political risk.
Section C
3 Marketing, segmentation, ethical concerns.
4 Information systems and operations, system implementation problems, training.
Introduction xix
Examples in
Learning objective Verbs used Definition the Kit
1 Knowledge
What you are expected List Make a list of 16.5
to know State Express, fully or clearly, the 33.5
details of/facts of
Define Give the exact meaning of
2 Comprehension
What you are expected Describe Communicate the key features of 2(c)
to understand Distinguish Highlight the differences between 32.5
Explain Make clear or intelligible/state
the meaning or purpose of 2(a)
Identify Recognise, establish or select
after consideration 32.7
Illustrate Use an example to describe or
explain something 71(e)
3 Application
How you are expected Apply Put to practical use
to apply your Calculate/compute Ascertain or reckon
knowledge mathematically
Demonstrate Prove the certainty or
exhibit by practical means
Prepare Make or get ready for use
Reconcile Make or prove consistent/
compatible
Solve Find an answer to
Tabulate Arrange in a table
4 Analysis
How you are expected Analyse Examine in detail the structure of
to analyse the detail of Categorise Place into a defined class or
what you have learned division
Compare and contrast Show the similarities and/or
differences between
Construct Build up or complete 61(d)
Discuss Examine in detail by argument 2(e)
Interpret Translate into intelligible or
familiar terms
Prioritise Place in order of priority or
sequence for action
Produce Create or bring into existence
5 Evaluation
How you are expected Advise Counsel, inform or notify
to use your learning to Evaluate Appraise or assess the value of 18(a)
evaluate, make Recommend Propose a course of action
decisions or
recommendations
xx Introduction
Review your notes and the chapter summaries in the Paper E1 Passcards for each section
of the syllabus.
Answer the key questions for that section. These questions have boxes round the question
number in the table below and you should answer them in full. Even if you are short of time
you must attempt these questions if you want to pass the exam. You should complete your
answers without referring to our solutions.
Attempt the other questions in that section. For some questions we have suggested that
you prepare answer plans or do the calculations rather than full solutions. Planning an
answer means that you should spend about 40% of the time allowance for the questions
brainstorming the question and drawing up a list of points to be included in the answer.
Attempt Mock exams 1, 2 and 3 under strict exam conditions.
Introduction xxi
2013 Done
Syllabus Passcards Questions
section chapters in this Kit Comments
The global 1, 2 1 Answer in full.
business These objective test questions are focussed on specific parts
environment of the syllabus and enable you to build up speed in
answering this type of question.
5 Answer in full.
This question, taken from the May 2010 exam, tests your
knowledge of the BRIC economies and offshoring.
4 Identify the main issues in part (a) and the advantages of
using local and expatriate staff in part (c).
6 Answer in full.
This is a tricky question from December 2012 that requires
you to think about government policy, marketing and CSR.
7 Answer in full.
A good general question from the March 2013 exam on
government regulation, economics and CSR.
Information 3, 4 8 Answer in full.
systems These objective test questions are focussed on specific parts
of the syllabus and enable you to build up speed in
answering this type of question.
10 Answer in full.
This question covers many aspects of systems
implementation and the importance of aligning systems
with business strategy.
14 Answer in full.
This question from May 2012 covers decentralisation and
outsourcing an IS function.
11 Produce an answer plan for the three parts, listing each
point that you need to make.
12 Produce an answer plan for each part, listing each point
that you need to make.
13 This question, from March 2012 requires you to think
about some issues concerning the implementation of a new
system and staff resistance to change.
20 Answer in full.
This question from May 2012 covers much of the detail
you need to know on TQM and quality costs.
xxii Introduction
2013 Done
Syllabus Passcards Questions
section chapters in this Kit Comments
18 Answer part (a) in full. Prepare answer plans for (b) and (c).
21 Answer in full.
This question from September 2012 requires you to apply
your knowledge of quality management.
Marketing 8, 9, 10 22 Answer in full.
These objective test questions are focussed on specific parts
of the syllabus and enable you to build up speed in
answering this type of question.
24 Answer in full.
A number of marketing issues are examined in this
question. In particular, the use of the internet, the
marketing mix and ethical issues.
25 Answer in full.
This Specimen paper question includes aspects of the
marketing mix and also tests your knowledge of
segmentation and targeting.
31 Answer in full.
In this question from May 2013 you are faced with a range
of marketing issues in connection with a scenario.
Managing 11, 12 32 Answer in full.
human capital These objective test questions are focussed on specific parts
of the syllabus and enable you to build up speed in
answering this type of question.
34 Answer in full.
A cunning question that warms you up with simple
advantages and disadvantages of questions and then
delivers a tricky final part requiring an explanation of
Maslows theory by reference to the scenario!
Avoid theories such as this at your peril!
35 Produce an answer plan for the three parts, listing each
point that you need to make.
36 Answer in full.
A very full question that examines the detail that you are
expected to know concerning reward schemes and
measures of performance.
Mixed multiple 42 to 57 Answer in full.
choice These questions cover a range of syllabus areas very
questions quickly. You will practise switching your mind between
them, enabling you build up speed in answering this type of
question.
Mixed Section 58 to 71 Answer in full.
B questions As with the mixed multiple choice questions, you will
practise switching your mind between different syllabus
areas. However these questions will also hone your skill in
keeping your answers short and focussed exactly what
you need to cope with time pressure in the actual exam.
Introduction xxiii
Spec May Nov May Sept Nov Mar May Sept Nov Mar May
paper 2010 2010 2011 2011 2011 2012 2012 2012 2012 2013 2013
Section A
1 46 47 48 49 50 51 52 53 54 55 56 57
Section B
2 60 61 62 63 64 65 66 67 68 68 70 71
Section C
3 11 5 26 27 12 29 13 14 21 6 7 31
4 25 19 35 36 28 37 30 20 38 39 40 41
Practice exams
1 2 3 4 5 6
Section A
1 42 43 44 45 46 53
Section B
2 61 63 65 67 69 71
Section C
3 6 12 5 13 7 19
4 21 30 38 26 14 35
Whichever practice exams you use, you must attempt Mock exams 1, 2 and 3 at the end of your revision.
xxiv Introduction
la
1
QUESTIONS
2
Questions 3
1.2 Which two government policies support an emerging nations import-substitution strategy?
A Import tariffs and import quotas
B Import quotas and currency devaluation
C Import tariffs and industry subsidies
D Currency devaluation and industry subsidies (2 marks)
1.4 According to monetarist theory, the primary effect of increasing the money supply is to:
A Increase prices
B Increase reserve requirements
C Increase the volume of exports
D Increase demand for imports (2 marks)
Each of the sub-questions numbered 1.5 to 1.7 below require a brief written response. Each sub-question is
worth 4 marks. The response should be in note form and should not exceed 50 words.
1.5 Explain the differences between economic liberalisation and economic nationalism. (4 marks)
The following scenario is related to sub-questions 1.6 and 1.7.
Emerland is an undeveloped nation. The government wishes to develop the economy and industry but is
concerned that by doing so its markets may become dominated by foreign monopolies.
As an adviser to Emerlands government:
1.6 Explain in general terms how the government may influence Emerlands economy. (4 marks)
1.7 Explain how the government may prevent foreign monopolies taking over Emerlands industries.
(4 marks)
(Total = 20 marks)
If you struggled with the MCQ and OT questions in Q1, go back to your BPP Study Text for Paper E1 and revise
Chapters 1 and 2 before you tackle the longer questions on the Global Business Environment.
4 Questions
4 F food 45 mins
F Food is a listed company that operates a successful chain of fast food restaurants in North America. It is
currently looking to expand its operations into Asia, believing that there is significant growth potential.
F Food plans to use existing expatriate management staff in the new management roles in the Asian operations,
but it will introduce a new management programme for local employees once the operations are established.
F Food currently operates a bonus scheme to senior management and directors, based on achieving a specified
level of profit in the previous quarter. The CEO is a dominant figure and controls all board decision making.
Required
(a) Identify and explain the main organisational (including cultural considerations) and management issues
that F Food must consider as part of its plans to expand into the Asian market. (Note: your answer to part
(a) should not refer to the issue of whether management staff are local or expatriate.) (10 marks)
(b) Following a spate of recent corporate scandals, F Food wishes to improve its corporate governance.
Explain why the CEO and the bonus scheme present a risk to corporate governance. Also explain how an
audit committee and an appropriate remuneration policy can help corporate governance. (10 marks)
(c) Discuss the relative advantages to F Food of using local staff and of using expatriate staff in the new
management roles. (5 marks)
(Total = 25 marks)
INFORMATION SYSTEMS
Questions 8 to 14 cover Information Systems, the subject of Part B of the BPP Study Text for Paper E1.
Each of the sub-questions numbered 8.5 to 8.7 below require a brief written response. Each sub-question is
worth 4 marks. The response should be in note form and should not exceed 50 words.
9.3 Which type of security risk involves overloading an Internet site with traffic?
A Worms
B Trojan horses
C Denial of service attacks
D Hacking (2 marks)
9.4 Which type of information system outsourcing involves third parties managing and distributing services
and solutions to clients over a wide area network?
A Multiple sourcing
B Incremental outsourcing
C Joint venture sourcing
D Application service provision (2 marks)
Each of the sub-questions numbered 9.5 to 9.7 below require a brief written response. Each sub-question is
worth 4 marks. The response should be in note form and should not exceed 50 words.
If you struggled with the MCQ and OT questions in Q8 and Q9, go back to your BPP Study Text for Paper E1
and revise Chapters 3 and 4 before you tackle the longer questions on Information Systems.
Questions 9
Required
(a) Explain how the People and Payroll system could benefit LD2. (10 marks)
(b) Describe the main approaches to quality that are available to LD2. (10 marks)
(c) Briefly describe the likely features of the proposed corporate website if it is to be comparable to the best
in the industry. (5 marks)
(Total = 25 marks)
12 Questions
OPERATIONS MANAGEMENT
Questions 15 to 21 cover Operations Management, the subject of Part C of the BPP Study Text for Paper E1.
15.2 Which of the following measures customer, operational and financial aspects of quality?
A SERVQUAL
B Balanced scorecards
C Value for money audits
D Total quality management (2 marks)
15.4 Optimised production technologies (OPT) is an operations management system which aims to:
A Improve distribution networks
B Improve supply sourcing alternatives
C Integrate operations and quality assurance
D Reduce production bottlenecks (2 marks)
Required
Each of the sub-questions numbered 15.7 and 15.8 below require a brief written response. Each sub-question is
worth 4 marks. The response should be in note form and should not exceed 50 words.
16.3 A manufacturer concerned mainly with developing new product features is known as:
A Production orientated
B Product orientated
C Market orientated
D A learning organisation (2 marks)
16.4 According to Porter's value chain, the final primary activity is referred to as:
A Marketing and sales
B Outbound logistics
C Procurement
D Service (2 marks)
Questions 15
Required
Each of the sub-questions numbered 16.5 to 16.7 below require a brief written response. Each sub-question is
worth 4 marks. The response should be in note form and should not exceed 50 words.
If you struggled with the MCQ and OT questions in Q15 and Q16, go back to your BPP Study Text for Paper E1
and revise Chapters 5, 6 and 7 before you tackle the longer questions on Operations Management.
16 Questions
MARKETING
Questions 22 to 31 cover Marketing, the subject of Part D of the BPP Study Text for Paper E1.
22.2 PESTEL analysis can be used to analyse an organisations environment. What does the P stand for?
A Political
B Prices
C People
D Products (2 marks)
22.4 'Market shakeout' involves the weakest producers exiting a particular market and occurs in a period
between
A Growth through creativity and growth through direction
B Introduction and market growth
C Market growth and market maturity
D Market maturity and decline (2 marks)
Required
Each of the sub-questions numbered 22.5 to 22.7 below require a brief written response. Each sub-question is
worth 4 marks. The response should be in note form and should not exceed 50 words.
22.6 Explain how experiential marketing differs from traditional marketing. (4 marks)
23.2 The use of 'skim pricing' as a marketing technique will result in:
A Non-recovery of promotional costs
B Enticing new customers to buy a product or service
C High prices, normally at an early stage of the product lifecycle
D Low prices so denying competitors opportunities to gain market share (2 marks)
23.3 Which method of market research would be most appropriate to use where the objective is to explore
customers unconscious attitudes and motives for behaviour?
A Focus groups
B Depth interviews
C Questionnaires
D Observation (2 marks)
23.4 Why is the characteristic of a service known as 'perishability' significant in a marketing context?
A Because perishability makes it likely that refrigerated facilities will be required
B Because perishability increases ethical concerns
C Because perishability makes anticipating and responding to levels of demand crucial
D Because perishability means demand fluctuates wildly (2 marks)
Required
Each of the sub-questions numbered 23.5 to 23.7 below require a brief written response. Each sub-question is
worth 4 marks. The response should be in note form and should not exceed 50 words.
23.6 Explain the importance of internal marketing to an organisations external marketing activities. (4 marks)
If you struggled with the MCQ and OT questions in Q22 and Q23, go back to your BPP Study Text for Paper E1
and revise Chapters 8, 9 and 10 before you tackle the longer questions on Marketing.
Questions 21
26 DD (11/10) 45 mins
The DD drinks company was founded over one hundred years ago by a deeply religious family and has been
recognised as being a good employer ever since. The company has a long history of supporting sporting events as
part of its stated commitment to help promote healthy lifestyles. DD has a corporate social responsibility (CSR)
commitment to behave ethically while helping improve the quality of life of society generally. A percentage of
DDs profits are also allocated to a number of local charitable causes every year.
Using secret natural ingredients, DD has grown to become the world's leading manufacturer and distributor of
non-alcoholic drinks. The company has an extremely strong brand and its drinks are sometimes sold alongside
own brand alternatives which it manufactures and packages on behalf of a few large supermarket chains. Own
brand drinks sell more cheaply than DD branded products, are less costly to produce (they avoid expensive
labelling and promotion) but sales remain low. DD spends heavily on displaying some of its ever-expanding
product lines on television, normally before and after popular programmes aimed at children and teenagers. For
the first time this year, DD is also spending an equal amount on online advertising. Following the pattern of its
major rivals, DD has recently sought celebrity endorsements for its products. Focus group research indicated that
the endorsement by a controversial rapper Mr TT would appeal to its target market segment. When this was
announced there was criticism from religious and political groups because of the musics association with
exploitation of females, violence and bad language. One newspaper editorial accused DD of endorsing
immorality. In response, DD decided not to use Mr TT in its campaigns and admitted that it had made an error
of judgement in a press statement.
Questions 23
Now a further problem has arisen. An international health watchdog body has reported that DDs products
contain high levels of sugar and, if drunk excessively by children, they can lead to long term gum and tooth
decay. DD has yet to respond to the report.
Required
(a) Discuss the implications of DDs activities on its ethical stance and CSR position. (10 marks)
(b) Explain the role that the basic marketing mix and branding have in DDs positioning to appeal to its target
market segment. (10 marks)
(c) Discuss the likely benefits of DDs increased use of the internet for marketing purposes. (5 marks)
(Total = 25 marks)
27 99 (5/11) 45 mins
Four years ago, E retired as Financial Director of an airport company to become an ethical entrepreneur. He now
employs ten people producing natural spring water and selling it in both still and sparkling varieties in
individually sized plastic bottles. There has been no staff turnover whatsoever. The company, called 99, uses
'green' electricity and all profits go to a charity that installs pumps to provide clean water to some of the poorest
communities in the world. Thanks to E's business contacts, 99's water is sold in a few garages, on airplane
flights and in airport shops. He has, however, found it impossible to get its water stocked by supermarkets
because they want to charge a standard 'joining fee' for small suppliers, even though they know that 99 exists for
charitable purposes. Despite this, and the fact that competition in the industry is intense, 99 has achieved rapid
growth and significant profits (E receives no salary and the wages of employees are modest). Every time 99 sells
enough bottles to build a new pump, it sends two employees abroad to help with the installation and pictures
are published on the company website.
A recent national survey indicates that customers want products supplied and marketed responsibly and blame
large retailers for not providing more environmentally and socially friendly products. Three quarters of
respondents in the survey say that they 'completely agree' that they would choose a socially and environmentally
responsible product over one that was not, and two thirds say that they would work for an ethical employer even
if it meant being paid less.
Last year E turned down a financially lucrative offer to sell 99 to a leading drinks company, believing that it did
not really share his vision and was merely attempting to buy credibility with the growing number of consumers
with ethical concerns. Now Z, a large food and drinks company has made a similar offer. Z sees the acquisition
of 99 as a way of complementing its product portfolio and furthering its marketing strategy of addressing
consumers concerned about green and ethical issues. Z, which began as a workers' cooperative, makes
charitable donations annually, has carbon labelling on all of its products and has plans to make all packaging
biodegradable or recyclable. Z's distribution also involves the use of low-carbon vehicles. Should the takeover go
through, Z promises to operate at a distance, allowing 99 to run in a similar way and promises to increase the
current level of water pumps financed incrementally every year to double the numbers within the next five years.
Z is also reviewing its HR activities and feels it could learn from aspects of 99's operation which it believes
exhibits best practice and societal trends.
E believes that, by agreeing a deal with Z, there would be a number of benefits for 99 which would include.
financing more clean water pumps
an improved distribution network and environmentally cleaner transport
the opportunity to ensure bottles and packaging become 100% biodegradable or recyclable
expertise to develop the 99 brand still further
an ability to get 99's water onto supermarket shelves
Required
(a) Explain the reasons why a strong brand is so important to companies such as 99. (10 marks)
(b) Describe the key aspects of the product and place mix involved in a deal between Z and 99. (10 marks)
(c) Discuss the positive features of 99's past success which could help inform Z's review of its own HR
activities. (5 marks)
(Total = 25 marks)
24 Questions
Required
(a) Explain how effective brand management can assist iB4e's 'sharpening the focus' initiative. (10 marks)
(b) Describe the advantages and disadvantages of iB4e developing a 'total reward package' approach.
(10 marks)
(c) Explain the value of internal marketing for iB4e. (5 marks)
(Total = 25 marks)
Questions 25
TT Drinks Company was established a hundred years ago and currently employs over 300 people. The company
produces and sells a range of black, green and flavoured teas and fruit infusions. TT's last Director of Marketing
was away from work with illness for most of last year and has now retired. Recently TT appointed a new Director
of Marketing who had previously been working for a rival drinks company.
The new director's analysis of TT's marketing approach is that the company adopts too many 'me too' strategies
by simply copying the actions of its competitors. She believes that TT needs to become more strategic in its
approach with more systematic planning processes. In addition, she notes the increasing cost of using
contractors to dispose of waste from the production process for flavoured teas and fruit infusions. (Her previous
company recycled such waste to make a soil enrichment treatment. This was used by both the company and its
suppliers and still there was too much for their needs.)
The new director has announced a series of initiatives including:
Developing an effective strategic marketing plan in conjunction with key stakeholders. Such a strategy
would need the approval of TT's Executive board.
Using a more strategic approach to product investment utilising models and frameworks such as the
product lifecycle and the Boston Consulting Group (BCG) matrix.
Adopting more sustainable practices which she feels would 'make good business sense'.
Required
(a) Describe the features of TT's new strategic marketing plan which would be necessary for it to be
considered effective. (10 marks)
(b) Explain how the marketing models and frameworks identified by the new director might help TT manage
its product portfolio. (10 marks)
(c) Explain the potential benefits of sustainability to TT. (5 marks)
(Total = 25 marks)
26 Questions
Required
Each of the sub-questions numbered 32.5 to 32.7 below require a brief written response. Each sub-question is
worth 4 marks. The response should be in note form and should not exceed 50 words.
33.4 Charles Handy's vision of a 'shamrock' organisation suggests a workforce that comprises three different
types of worker, namely:
A Strategic, operational and support
B Qualified, trainee and unskilled
C 'White collar', 'blue collar' and e-worker
D Core, contractual and flexible labour (2 marks)
Required
Each of the sub-questions numbered 33.5 to 33.7 below require a brief written response. Each sub-question is
worth 4 marks. The response should be in note form and should not exceed 50 words.
33.5 Briefly state two advantages and two disadvantages of in-house training. (4 marks)
33.6 Briefly explain the four main elements of the human resource cycle. (4 marks)
33.7 Briefly explain three general purposes of appraisal and the overall purpose of appraisal. (4 marks)
(Total = 20 marks)
If you struggled with the MCQ and OT questions in Q32 and Q33, go back to your BPP Study Text for Paper E1
and revise Chapters 11 and 12 before you tackle the longer questions on Managing Human Capital.
Questions 29
Required
(a) Describe the potential benefits of quality standard ISO 9000 certification to 2TW. (10 marks)
(b) Discuss the factors that should be taken into account by the HR department when redesigning the
remuneration and reward package for SBU managers. (10 marks)
(c) Suitable measures of performance for SBU managers will be designed as part of the redesigned
remuneration and rewards package. Describe the desirable features of such measures. (5 marks)
(Total = 25 marks)
37 TB (11/11) 45 mins
TB is a successful international telecommunication company with over 100,000 employees and a headquarters
in its base country's capital city, U. A recent report concluded that TB has been successful because it has seized
the opportunities of globalisation through a series of initiatives including using virtual work teams spread across
continents, cultures and time zones. These initiatives helped to improve staff productivity and maximised TB's
use of technology. Key features of TB's operation include:
Achieving fast communication and saving some travel costs through email, videoconferencing technology
and Voip (voice over internet protocol) combined with webcam equipment;
Working hard to improve communication through its own social networking sites with blogs, wikis,
podcasts, RSS feeds and the use of instant messaging software;
Offering a scheme of flexible working practices and home-working to its headquarters staff (10,000
employees have opted to work from home including accountants, Information Systems (IS) and Human
Resource (HR) staff). Those switching to home working 'give back' 50% of the time they previously spent
commuting in the form of extra working hours. (TB estimates that home-workers get 20% more work
done than those based in the headquarters building and have comparatively lower absence and staff
turnover levels.)
Required
(a) Explain the ways in which managers with responsibility for teams might meet the challenges of teams
being geographically dispersed. (10 marks)
(b) Describe the advantages AND disadvantages of home-working for TB's headquarters staff. (10 marks)
(c) Describe the role that the HR department of TB can play given TB's current working practices. (5 marks)
(Total = 25 marks)
40 MM (3/13) 45 mins
MM is a market leader in the design, supply and support of power and propulsion systems in aerospace, marine,
energy and nuclear industries. There are currently 100 apprentices undertaking their training across MM's many
sites countrywide. The company's recruitment literature explains:
'Our apprentice scheme is seen as a route into the workforce and lays the foundation for an exciting career. We
offer many different types of apprenticeships. Our apprentices gain outstanding technical, personal and
employment skills through classroom training and 'on the job' experience. The facilities and talent that
apprentices encounter are world-class. Apprentices gain qualifications more demanding than those attained in
full-time education.'
MM's Human Resource (HR) function is heavily involved in the scheme:
Provision is made within the HR budget to fund the entire scheme and the HR Director decides annually
how many new apprentices can be employed each year.
A recruitment team from the HR department tours schools with promotional literature explaining the
benefits and talks to interested pupils. The team invites pupils with potential to open days that
periodically run at a number of MM's sites.
At open days HR arranges tours of MM's premises and encourages potential recruits to ask questions and
talk to current apprentices. If candidates are still interested, HR officers conduct interviews and draw up a
short list of potential apprentices.
The HR Director makes formal offers of apprenticeships. Once appointed the new recruits identify the
areas of the business in which they wish to train. Senior Site Managers are informed of these choices and
arrange for workplace mentors to be allocated to the new recruits.
For the last three years there have been fewer potential apprentices attending open days despite a similar
number of invitations being issued. In addition, a growing number of pupils have declined offers of
apprenticeships deciding instead to continue in full-time education.
MM has a new HR Director and during her first month in post she met Senior Site Managers throughout the
company. She was surprised by unfavourable comments about the operation of the apprenticeship scheme. One
manager told her that 'HR would do well to learn from the lean philosophy that operates in all other areas of the
company'. Another explained that although capable apprentices had been placed at his site in the past he 'had to
let them go' when their training was completed because there were no suitable permanent jobs at the site. Other
managers complained that they had no say over the number of apprentices placed at their site and that finding
suitable workplace mentors was sometimes a problem.
Required
(a) Explain how the lean philosophy might help improve the operation of MM's HR department. (10 marks)
(b) Explain how the involvement of MM's Senior Site Managers might overcome shortcomings in current
processes of recruitment and selection of apprentices. (10 marks)
(c) Identify the options available to MM to resolve the current problem of no suitable full-time posts being
available at the site when an apprentice completes his or her training. (5 marks)
(Total = 25 marks)
34 Questions
42.3 The unwritten expectations that the organisation and the individual have of each other is referred to as
A A valence
B Work/life balance
C The psychological contract
D Expectation management (2 marks)
42.6 Direct mailing, branding activities and public relations campaigns are all examples of
A Market process
B Product placement
C Promotion
D Market research (2 marks)
42.7 Economies of scale and manufacturing experience might help a firm to compete successfully by
A Pricing its products more cheaply than its competitors
B Introducing value adding features to its products
C Better understanding buyer behaviour
D Offering a broader product range (2 marks)
36 Questions
42.8 To be of use for marketing research purposes a segmentation variable must define a market segment that
has three characteristics. What are they?
A Measurability, stability, accessibility
B Stability, substantiality, measurability
C Substantiality, measurability, accessibility
D Stability, accessibility, substantiality (2 marks)
42.9 Selling at a low price with the intention of damaging weaker competitors is referred to as
A Price skimming
B Opportunistic pricing
C Penetration pricing
D Predatory pricing (2 marks)
42.10 The product life cycle is depicted on a chart or diagram as a line against the variables of
A Cash flow and market share
B Number of customers and sales value
C Sales volume and time
D Relative market share and market growth rate (2 marks)
(Total = 20 marks)
Questions 37
43.2 The US, Canada and Mexico are the three members of which trade organisation?
A EFTA
B AFTA
C NAFTA
D APEC (2 marks)
43.3 Charging a very low price on one item in order to generate customer loyalty and increased sales of other
items is called:
A Market penetration
B Loss leader pricing
C Product penetration
D Skim pricing (2 marks)
43.6 The TQMEX model is a framework that integrates processes associated with:
A Total quality management and ISO accreditation
B Supply chain management
C Both operations and quality management
D Organisational development (2 marks)
43.7 Approval of documentation, procedures manuals and work instructions is associated with:
A Registration under the standards required for quality certification
B Total quality management (TQM)
C Lean production methods
D Job evaluation (2 marks)
43.9 Activities aimed at attracting a number of suitable candidates interested in joining an organisation are
called:
A Human relationship marketing
B Recruitment
C Selection
D Human capital harvesting (2 marks)
43.10 The expectations that the individual and the organisation have of one another is referred to as:
A A hygiene factor
B A psychological contract
C Dual theory motivation
D A person specification (2 marks)
(Total = 20 marks)
Questions 39
44.2 Intelligence, aptitudes and disposition are often factors identified in:
A A job description
B Appraisal targets
C A person specification
D 360 degree documentation (2 marks)
44.3 The evaluation of candidates for a job using a comprehensive and interrelated series of selection
techniques is known as:
A Psychometric testing
B Developing a balanced scorecard
C Job evaluation
D An assessment centre (2 marks)
44.10 Corrective work, the cost of scrap and materials lost are:
A Examples of internal failure costs
B Examples of external failure costs
C Examples of appraisal costs
D Examples of preventative costs (2 marks)
(Total = 20 marks)
Questions 41
45.2 Which one of the following statements relating to Quality Management is true?
A Internal failure due to poor quality has no effect on delivery time
B Reducing internal failure reduces losses of capacity
C As the quality level of a process increases, appraisal costs will go up due to increased testing effort
D The cheapest way to improve quality is to increase post-production inspection (2 marks)
45.5 Which one of the following is the factor that Taylor believed would be most effective in motivating
workers?
A Remuneration levels
B Job security
C Good working conditions
D Minimal supervision (2 marks)
45.6 Which of the following is sometimes used to refer to the process of 'continuous improvement'?
A Kaizen
B Six Sigma
C Lean principles
D Kanban (2 marks)
45.8 Which one of the following options represents possible supply sourcing strategies?
A Internal, external and combined
B Local, regional, national and international
C On-line, off-line, domestic and overseas
D Single, multiple, parallel and delegated (2 marks)
42 Questions
45.10 Which one of the following statements best represents the principle of 'integrity' as explained in CIMA's
Ethical Guidelines?
A Professional accountants must not tell lies
B Professional accountants must not be party to anything which is deceptive or misleading
C Professional accountants cannot be expected to resign over a matter of principle
D Integrity is almost as important as technical competence (2 marks)
(Total = 20 marks)
Questions 43
46.2 Employers wishing to attract and retain talented employees by bringing together pay and non pay
elements and emphasising a positive organisational culture are said to operate a
A Benefit scoping strategy
B Total reward package
C Talent strategy package
D A consolidated remuneration package (2 marks)
46.3 Which of the following does NOT represent a spoke in Cousins strategic supply wheel?
A Performance measures
B Organisational structure
C Organisational culture
D Cost/benefit analysis (2 marks)
46.5 An operations management programme involving a series of long term continuous development practices
is referred to as
A Queuing theory
B A sustainability programme
C Optimised production technologies improvement
D Stakeholder engagement strategy (2 marks)
47.4 Integrated solutions in product design and control of machinery are based on
A A shared customer focused outlook
B A JIT philosophy
C CAD and CAM technologies
D Decision support systems (2 marks)
47.6 A manufacturer concerned mainly with production efficiencies and reducing unit costs is known as
A Product oriented
B Production oriented
C Operationally strategic
D A learning organisation (2 marks)
47.7 The influence an organisation will normally have over its macro environment will be
A Limited or non existent
B High
C Extremely high
D Continual (2 marks)
47.8 Non-political, not-for-profit, cause-orientated organisations drawn from more than one country are known
as
A Strategic business units
B Non-governmental organisations (NGOs)
C Conglomerates
D Globalised networks (2 marks)
46 Questions
48.3 Political risk analysis is conducted by a company considering international operations and normally
focuses on the
A World economy generally
B Relations between the USA, Japan and Europe
C Political and cultural differences between the home and target country
D Industrialisation of the target country (2 marks)
48.7 Which ONE of the following is not normally associated with outsourced IS solutions?
A Ensuring contract compliance
B Assembly and maintenance of a suitably skilled workforce
C Preparing formal tendering documents
D Invoicing, processing and payment (2 marks)
48.10 Collaborating with its suppliers may bring a company added value because it can
A Strike a harder bargain with its suppliers
B Work with a supplier to improve quality and reduce costs
C Avoid transaction costs
D Introduce price competition amongst suppliers (2 marks)
(Total = 20 marks)
Questions 49
49.3 Attempts by a country to help local producers by restricting international trade is known as
A Factor conditions
B Enterprise management
C Governance
D Protectionism (2 marks)
50.2 The extended marketing mix does NOT include which ONE of the following:
A People
B Processes
C Physical evidence
D Positioning (2 marks)
50.3 According to Hertzberg's dual factor theory of motivation, one set of factors is known as
A Demotivation factors
B Disposition factors
C Self actualisation factors
D Hygiene factors (2 marks)
50.5 Which ONE of the following is NOT associated with quality management?
A 5-S practice
B 180 degree feedback
C Six Sigma methodology
D Five-why process (2 marks)
50.6 Intrinsic satisfaction is said to be derived from which ONE of the following issues:
A Perks of the job
B Job content
C Job rewards
D Group cohesiveness and belongingness (2 marks)
50.8 Motivation theories and reward systems derived from F W Taylor's thinking are by nature best described
as
A Behavioural
B Human relations
C Content
D Scientific (2 marks)
52 Questions
50.10 Which ONE of the following is NOT associated with a government's fiscal policy?
A Levels of taxation
B Level of spending by the government
C Revenue raising
D Interest rates (2 marks)
(Total = 20 marks)
Questions 53
51.2 Hofstede's cultural dimensions do NOT include which ONE of the following:
A Individualism versus collectivism
B Masculinity versus femininity
C Weak versus strong uncertainty avoidance
D Corrective versus perfective approaches (2 marks)
51.5 The use of assessment centres and psychometric tests is normally associated with processes of
A Recruitment.
B Selection.
C Induction.
D Appraisal. (2 marks)
51.7 According to Herzberg's motivation theory, which ONE of the following is the cause of dissatisfaction?
A Demotivators.
B Motivation detractors.
C Hygiene factors.
D Process theories. (2 marks)
51.9 The headings found in a person specification are likely to be based upon
A Rodger's 7 point plan.
B Job enrichment principles.
C Employment best practice guidelines.
D The main tasks within the job role. (2 marks)
52.3 Cattell's 16PF test is normally associated with which ONE of the following?
A IS feasibility studies
B The process of market segmentation
C Auditing existing supply arrangements
D Employee selection (2 marks)
52.4 Supplier relationships in a supply network are categorised in which ONE of the following ways?
A Single, multiple, delegated and parallel
B Primary, secondary and post-purchase
C Phased, pilot and integrated
D One-to-one, several to one, 180 degrees and 360 degrees (2 marks)
52.5 Results and enablers are features of which ONE of the following?
A Servqual
B Total Quality Management (TQM)
C The European Foundation for Quality Management (EFQM) excellence model
D Competitive benchmarking (2 marks)
52.6 The desirable features of a candidate for a job are best contained in which ONE of the following?
A A person specification
B A job description
C A job advertisement
D A verbal briefing at the interview (2 marks)
52.7 Enlargement, enrichment and rotation are terms associated with which ONE of the following?
A Adjustments to an individual's job content and role
B Improvements brought about by competitive benchmarking
C Market and product development strategies
D Customer approval ratings (2 marks)
52.8 Which ONE of the following is NOT associated with Maslow's Hierarchy of Needs?
A Self-actualisation
B Affiliation
C Hygiene
D Safety (2 marks)
56 Questions
52.10 Which ONE of the following is associated with recruitment rather than selection?
A Assessment centres
B Interviews
C Advertising copy
D Psychometric testing (2 marks)
(Total = 20 marks)
Questions 57
53.3 Which ONE of the following is a program that impairs data and software?
A A virus
B Corrective maintenance
C Electronic Data Interchange (EDI)
D Cyber bullying (2 marks)
53.4 Background and circumstances, special attributes and disposition are all factors often identified in which
ONE of the following?
A Service level agreements
B Key performance indicators
C Person specifications
D Job descriptions (2 marks)
53.6 If an employee who is opposing the introduction of a new system is given a key role in its implementation,
this is an example of which ONE of the following?
A Co-optation
B Career planning
C Succession planning
D Networking (2 marks)
53.7 Contrived, volume and realistic are examples of which ONE of the following?
A System testing methods
B Supply relationship categories
C Ways of classifying inventory
D Ways of estimating market potential (2 marks)
53.10 Which ONE of the following is most likely to lead to an organisation accessing a larger market for its
goods or services?
A Electronic Data Interchange (EDI)
B Teleworking
C E-trading
D Penetration marketing (2 marks)
(Total = 20 marks)
Questions 59
54.2 According to Herzberg, pay, status and working conditions are examples of which ONE of the following?
A The preference of Theory Y workers
B Self actualisation
C Motivators
D Hygiene factors (2 marks)
54.4 The system of policies by which an organisation is directed and controlled is known as which ONE of the
following?
A Corporate governance
B Corporate social responsibility
C Corporate infrastructure
D Corporate strategic apex (2 marks)
54.5 In social marketing, goods that society discourages because of their negative social effects are known as
which ONE of the following?
A Demerit goods
B Durable goods
C International embargoes
D Imports (2 marks)
54.6 Organisational costs associated with contracted out activities are known as which ONE of the following?
A Transaction costs
B Offshoring costs
C Transfer costs
D Social costs (2 marks)
54.7 For organisations failing to adopt the marketing philosophy, which ONE of the following is NOT
recognised as an alternative?
A Sales orientation
B Product orientation
C Lean orientation
D Production orientation (2 marks)
54.8 Corporate political activity often involves which ONE of the following?
A Clarifying corporate social responsibility
B Scanning the microenvironment
C Lobbying and political campaign contributions
D Internal marketing (2 marks)
60 Questions
54.10 Which ONE of the following is the most complete measure of national economic growth?
A Inflation levels
B Unemployment levels
C The overall level of the FTSE 100 index
D Gross National Product (2 marks)
(Total = 20 marks)
Questions 61
55.2 The so called BRIC economies do NOT include which ONE of the following?
A Britain
B Russia
C India
D China (2 marks)
55.4 Certified approval of documented work procedures including procedure manuals and work
instructions are associated with which ONE of the following?
A Workforce skills audits
B Appraisal costs
C Total Quality Management (TQM)
D ISO 9000 accreditation (2 marks)
55.5 Which ONE of the following is NOT associated with quality improvement?
A Fishbone diagrams
B Pareto analysis
C Why/why analysis
D Political lobbying (2 marks)
55.7 Which ONE of the following should logically precede market segmentation?
A Market research
B Targeting
C Positioning
D Promotional activity (2 marks)
62 Questions
55.10 Computer to computer transmission of structured data using standardised documentation is known
as
A electronic data interchange (EDI).
B online networking.
C systems compatibility testing.
D a 'cookie'. (2 marks)
(Total = 20 marks)
Questions 63
56.2 Which ONE of the following is NOT normally associated with operations management?
A Supply chain management
B Enterprise Resource Planning systems
C Liberalisation
D Continuous inventory (2 marks)
56.3 An approach that encourages individuals to pass on a marketing message through existing social
networks is known as
A guerrilla marketing.
B viral marketing.
C experiential marketing.
D cause marketing. (2 marks)
56.4 An organisational approach that involves targeting an entire market with a single marketing mix is
known as which ONE of the following?
A Undifferentiated
B Differentiated
C Saturated
D Blanket (2 marks)
56.5 Forecasting production and inventory levels needed to meet estimated customer purchases leads to
which ONE of the following?
A A push based system
B A pull based system
C Cohesive supply chain management
D Scientific management (2 marks)
56.6 A software management system combining all of a globally diverse organisation's sales, marketing
and customer support information is known as
A distributed data processing (DDP).
B customer relationship management (CRM).
C a database management system (DBMS).
D a wide area network (WAN). (2 marks)
56.7 Information that takes the form of a list of debtors and creditors is by nature said to be
A strategic.
B tactical.
C operational.
D executive. (2 marks)
64 Questions
56.8 The building of a prototype model is normally associated with which ONE of the following?
A Process design
B Reverse engineering
C Concept screening
D Positioning (2 marks)
56.9 The process of ensuring employees support an organisation's marketing activities is known as
A performance management marketing.
B social marketing.
C autocratic management.
D internal marketing. (2 marks)
56.10 Which ONE of the following is NOT normally associated with an organisation's pricing mix?
A Payment terms
B Credit policy
C Discounts for bulk purchase
D Commission for a sales team (2 marks)
(Total = 20 marks)
Questions 65
57.3 Transaction costs are associated with which ONE of the following?
A Materials procurement
B Flexible working arrangements
C Outsourcing
D Lobbying (2 marks)
57.4 The aim of total productive maintenance is which ONE of the following?
A Inclusivity and empowerment
B Motivation and teamwork
C Engagement and commitment
D Prevention and continuity (2 marks)
57.8 Which ONE of the following does NOT represent a control in a computer network?
A A firewall
B Data encryption
C Passwords
D A cookie (2 marks)
57.9 Which ONE of the following does NOT represent a spoke in Cousins' supply wheel?
A Cost benefit analysis
B Portfolio of relationships
C Performance measures
D A firm's infrastructure (2 marks)
57.10 SERVQUAL is a technique for the service sector to do which ONE of the following?
A Eliminate waste and unnecessary effort
B Map work and document flows
C Measure quality of life for employees
D Measure the scale of quality in service provision (2 marks)
(Total = 20 marks)
Questions 67
(b) Describe FIVE ways in which emerging economies have benefited as a result of foreign direct investment
in their countries by multinational enterprises. (5 marks)
(c) Certain organisations have been transformed by information and communication technology (ICT). Briefly
explain FIVE significant ICT changes using retail organisations as an example. (5 marks)
(d) Describe FIVE forms of waste within manufacturing organisations that lean process improvement aims to
eliminate. (5 marks)
(e) Lean thinking was first developed with manufacturing organisations in mind. Describe FIVE examples of
ways in which these waste elimination principles might be applied to improve efficiency in service
organisations (such as hospitals and offices). (5 marks)
(f) Describe the key aspects of a programme to implement Total Quality Management (TQM) within a
manufacturing organisation. (5 marks)
(Total = 30 marks)
70 Questions
ANSWERS
74
Answers 75
1.2 A Import tariffs and import quotas support importsubstitution. Currency devaluations and industry
subsidies are used to develop an emerging nations industry as part of a strategy of export-led
industrialisation.
1.3 C The EU is an example of a common market, (it developed out of a customs union the EEC).
Transition economies are former Soviet Union states which are moving away from a communist
system towards that of a free market.
1.4 A According to monetarist theory, increasing the money supply will increase prices.
1.5 Economic nationalism is a nation's view that it should protect its own economy and industries.
Economic liberalisation involves nations moving away from economic nationalism towards working with
others in a group to benefit all member economies and industries.
1.6 Emerlands government can influence a number of factors that may create competitive advantages for the
nation and encourage foreign investment.
The three main areas that Emerlands government can influence are:
The macroeconomic environment
Legal and market regulation
Corporate governance and social responsibility
(a) Porters factor conditions relate to those factors used as inputs in the production of goods and services.
These factors include human resources, physical resources, knowledge, capital and infrastructure.
Porter distinguished between basic and advanced factors.
Basic factors are natural resources, climate, semiskilled and unskilled labour. They are inherent within a
nation, or can be created with minimal investment. They cannot be sustained as a source of national
competitive advantage, since they are widely available. For example, the wages of unskilled workers in
industrial countries are undermined by even lower wages elsewhere.
Advanced factors are associated with a well-developed scientific and technological infrastructure and
include modern digital communications networks, highly educated people (eg computer scientists),
university research laboratories and so on. They are necessary to achieve high order competitive
advantages such as differentiated products and proprietary production technology.
An abundance of factors is not enough. It is the efficiency with which they are deployed that will create a
competitive advantage for a nation.
Porter also stated that generalised factors, such as transport infrastructure are not significant in
establishing competitive advantage as specialised factors. Specialised factors are relevant to a limited
range of industries, such as knowledge bases in particular fields and logistic systems developed for
particular goods or raw materials. Such factors are integral to innovation and very difficult to move to
other countries.
(b) One argument in favour of free trade is that conflict is less likely between countries that trade and
communicate with each other, but this is unlikely to be a crucial factor in deciding to adopt free trade.
Free trade facilitates specialisation by countries in the production of the goods and services they are best
suited to producing. However this could lead to a nation becoming dependent upon a single product.
This is particularly seen to be the case with some oil exporting countries in the Middle East.
Free trade also enables countries to develop and invest in resources leading to more efficient production.
It is argued that it can also create inefficiencies, particularly as a result of increased consumer
expectation, such as long distance transport costs for food products to satisfy demand when the product
is out of season in a particular country.
Free trade should encourage entrepreneurship and economic growth, but this may be limited to areas in
which a competitive advantage exists. It is also argued that free trade can prevent the development of
new industries and that some form of protection may be required for these types of industries.
Free trade encourages all countries to export, but less developed countries will become dependent on
more developed countries for certain products, particularly technologically advanced products.
Some people argue that it leads to better quality goods and a better quality of life although it has also
been argued that free trade undermines local cultures especially with many countries becoming
increasingly Americanised.
(c) The information technology function is outsourced by many organisations, but before making the decision
to outsource or not, the following factors should be considered.
An important issue to consider as part of outsourcing is the potential for competitive advantage. The
lower the potential for competitive advantage, the more suitable an activity is for outsourcing. In some
organisations, information technology, often combined with branding, is a source of comparative
advantage (for example Google, Amazon, Facebook). In other organisations IT is used to help efficiency,
but isnt core to what the organisation does.
Answers 77
(e) Deregulation measures may affect a manufacturing industry in the following ways.
There will be improved incentives for internal/cost efficiency. Greater competition means the most
efficient manufacturers should be the most successful.
Allocative efficiency should also improve. This is because competition keeps prices closer to marginal
cost, and organisations therefore produce closer to the socially optimal output level.
In some industries, liberalisation of regulations could have certain disadvantages. There may be a loss of
economies of scale. If increased competition means that each manufacturer produces less output on a
smaller scale, then the unit costs will be higher.
Deregulation can also lead to lower quality of products. The need to reduce costs may lead
manufacturers to reduce quality or eliminate unprofitable but socially valuable services.
Regulation may be required within an industry in order to protect competition. It may be necessary to
implement a regulatory regime to protect competition where inherent forces have a tendency to eliminate
it. This would typically be in an industry with high barriers to entry which would otherwise be controlled
by a few large suppliers.
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(f) Developing economies face different challenges to corporate social responsibility (CSR) than developed
nations.
Key drivers for CSR in developing economies include:
Culture
Many developing nations already have in their culture a tradition of ethics and community. Often this has
come about through religion. As businesses are part of a nation's culture it is natural for such traditions to
be followed.
Politics
Political reform and the introduction of democracy is common in developing countries as this is often the
spark which drives economic development. Countries undergoing development often follow examples of
good practice, such as CSR, in developed nations.
Socio-economic priorities
Developing countries often face a conflict of priorities. For example, reducing pollution may be desirable to
preserve the environment, but cleaner production methods may be more expensive and hinder economic
progress.
Governance gaps
CSR can be used as a form of governance to 'plug the gaps' that result from poor government services. For
example, organisations can be used to provide healthcare or education where the government cannot
afford to.
Market access
As developed nations have high public pressure for CSR, companies in developing nations must follow the
same principles if they are to sell in the same market.
Multinational companies
Multinational companies strive for consistency across all their international subsidiaries and production
units. Where these are located in developing countries, they will adopt the same policies as those in
developed countries. Countries (or companies) that do not adopt CSR are less likely to receive investment
(or orders) from multinational companies.
3 McBride Gibbon
(a) MGs shareholders clearly want the company to cut costs and increase profits so that they receive a better
return on their investment. This is conflicts with a number of other stakeholder viewpoints.
Customers
Many customers purchase MGs products because they are ethically made and the company is socially
responsible. Cutting costs might result in lower ethical standards and less socially responsible behaviour.
Therefore products may no longer fulfil the needs of the customer and the company might even stop
recalling defective products if it does not have to legally.
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Suppliers
MGs current suppliers are selected because they conform to its ethical requirements. Cutting costs may
mean they have to supply the same product at a lower cost or face losing business to a company with
lower standards.
Banks
Banks are usually in favour of cost cutting measures to increase profitability. However, if this involves
relocating operations to a country which is unstable, this may put the company at significant risk
affecting its ability to repay loans or overdrafts.
Employees
MGs employees currently enjoy excellent working conditions. This is one area which could be
dramatically affected by cost cutting measures. If the business remains in Blueland, employees may have
to put up with poorer working conditions. However, employees may lose their jobs if manufacturing
relocates overseas.
Community
MG supports community based activities. This is another area which could be reduced or stopped
altogether in a cost cutting exercise since it represents expenditure that the company does not have to
make. If the company relocates overseas then existing projects may stop.
(b) Social responsibility in developing nations
The following are drivers of social responsibility in developing nations.
Culture
Many developing nations already have in their culture a tradition of ethics and community. As businesses
are part of a nation's culture it is natural for such traditions to be followed.
Politics
Political reform and the introduction of democracy is common in developing countries as this is often the
spark which drives economic development. Countries undergoing development often look for examples of
good practice in developed nations to make their development a success.
Governance gaps
Social responsibility can be used as a form of governance to 'plug the gaps' that result from poor
government services. For example, organisations can be used to provide healthcare or education where
the government cannot afford to.
Market access
Developing nations must follow the same socially responsible principles if they are to sell in the same
market as developed nations.
Multinational companies
Multinational companies strive for consistency across all their foreign subsidiaries and production units.
Where these are located in developing countries, they will adopt the same policies as those in developed
countries.
(c) Political risk
Political risk is the risk of an organisation incurring losses due to non-market factors within a particular
country. It is also related to financial factors, such as currency controls and the economy, and stability
factors, such as rioting and civil war.
Political risks of Redland
The following are identified political risks of Redland:
Political
The military government recently overthrew a democratically elected parliament. Therefore the country is
still likely to be unstable and subject to future political upheaval. For example, there may be pressure for
the military government to be replaced.
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Economic
Redland has high inflation which means that the cost of raw materials and labour will be rapidly rising.
The fluctuating exchange rate will mean that businesses will not be able to forecast costs and revenues
with any degree of certainty.
Social
There is likely to be a high degree of civil unrest, partly due to the recent change in government and partly
due to the high levels of unemployment. Civil war may be a distinct possibility.
Technological
Redland is an undeveloped country and therefore it may not be technologically advanced enough to
support a multi-national companys manufacturing operations.
(d) Transnational vertical integration
Transnational vertical integration is the process of locating production facilities in countries where
production costs are low and then moving completed goods around the world for sale.
Outsourcing
Outsourcing involves an organisation sub-contracting business activities to third party providers. These
providers can be in the same country as the main business, but increasingly foreign outsource providers
are used.
MG
MG could outsource aspects of its business such as design or manufacture and move parts or completed
products around the world to where they are needed. For example, a toy may be designed in Country A,
its components manufactured in Country B and assembled in Country C.
Offshoring
Offshoring involves an organisation relocating its operations from one country to another. The whole
business does not have to be moved, just the parts which would benefit the most from the conditions in
the new location.
MG
MG could move its manufacturing operations to a country such as Redland where costs are low. The
business would probably keep its design function in Blueland if the technological demands of the design
process are high. Completed products would be sent back to Blueland where they are sold.
(e) Corporate culture
Corporate culture refers to the common set of values that an organisation and its employees embody. It
can be referred to as 'the way things are done around here'.
Cultural constraints on organisations which operate globally
Farmer and Richman identify four categories of constraint:
Educational constraints
The level of literacy and the availability of secondary education, vocational training and higher education
in the countries an organisation operates will affect the quality of employees. Poor educational facilities
will inevitably result in poor management.
Sociological constraints
These are social factors that will affect relations within the organisation. For example, some countries
have a tradition of antagonism between trade unions and management. Therefore in such countries, an
organisation will have to be careful when management deals with trade unions.
Legal and political constraints
Some countries have higher levels of legislation and regulation than others. For example in some countries
it is easier to reduce headcount than others. Such rules restrict how organisations can operate.
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Economic constraints
Countries have different economic variables. For example, some countries have high inflation and some
have favourable exchange rates. Others may have restrictions on the availability of credit. These factors
will affect demand for products within the country and the possibility of an organisation expanding its
operations.
(f) Risk management
If MG relocates its manufacturing operations to Redland it could take the following steps to minimise the
probability and impact of risk.
Abandon or postpone the relocation
MG could postpone the relocation until the political uncertainty is reduced and the country is more stable.
If this is not expected for some time then it may consider abandoning the project altogether.
Corporate political activity
MG could open negotiations with Redland's government in order to gain assurance that the project will be
safe if there is civil unrest. The government may be persuaded to offer large tax breaks or other
investment incentives that would minimise any losses to MG if the company has to cease its operations.
Monitor the environment
If the project goes ahead, the company should continually monitor the political environment to ensure it
can react without delay should it appear that the operation is in danger.
Prepare contingency plans
The company should have detailed contingency plans prepared that it can turn to quickly if the need
arises. As well as steps to safeguard its investment, MG should also source alternative methods of
production (for example outsourcing if necessary) so that any disruption is minimised.
Insurance
MG should ensure that it has suitable political risk insurance in place to provide some financial protection
if operations cease.
4 F Food
(a) Objectives
Initially it will be necessary to examine the objectives of F Food. If they are seeking to expand sales
volume by expanding into Asia, but only looking for a small market share and concentrating on the home
market of North America, the issues are not as important as if they are seeking to operate as a truly global
organisation.
Organisational and local culture
The culture of F Food needs to be assessed so that it does not conflict with local cultures within Asia.
Similar to the way McDonalds operates in parts of Asia, the choice of food may have to be altered in
particular locations to match religious or cultural requirements.
Similarly, by failing to allow for diversity or to understand the local culture, planners based in North
America could make mistakes when drawing up marketing campaigns in Asia.
Ronen and Shenkar identified four key characteristics of national culture, which are all important to
consider when expanding operations overseas.
The four characteristics are: the importance placed on work goals, the role of job satisfaction, the impact
of organisational and managerial factors and the impact of work roles and interpersonal relationships.
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F Food will need to ensure that the roles they offer at least match the characteristics at different
locations. In some locations where job satisfaction is not considered as important, F Food may wish to
ensure their employees do have higher job satisfaction anyway (Corporate Social Responsibility).
Managers need to be flexible enough to adapt to cultural differences and be able to ride what Ronen
and Shenkar referred to as the waves of culture.
Management structure
The management structure of the Asian operations needs to be considered. A variety of factors influence
management methods in an international setting. These factors pull in different directions and it may be
that compromise is necessary.
The geographical distance between North America and Asia will cause some issues.
Central control, based in North America, may be the most appropriate structure as F Foods experience in
international operations is low. Centralisation is seen as promoting efficiency and prevents duplication of
effort between regions. For example, the Asian operations may have to accept supervision of its quality
assurance or financial reporting functions from North America. For this to be successful though,
consideration must be given to time differences and it may be necessary to have staff available in North
America during normal working hours within the Asian locations.
The need for a quick response to local opportunities and threats may mean that there needs to be a
significant measure of decentralisation. National, political and cultural sensitivities may reinforce this
need for a level of local management, but a shortage of local talent may limit the scope.
Another issue could be poor information systems and communications. However, the rapidly falling costs
of telecommunications through the use of Voice over Internet Protocol (VoIP) and the spread of e-mail and
video-conferencing facilities mean this is less likely to be a problem than it would have been in the past.
Holding meetings can also become difficult and expensive when a company expands internationally. Air
travel and hotel costs can be significant if many people are travelling from overseas. Video-conferencing
is an alternative to face-to-face meetings which would give a considerable cost saving.
(b) The bonus scheme and the dominance of the CEO both present corporate governance concerns to F Food.
Bonus scheme
The existing bonus scheme gives an incentive for individuals to manipulate short-term results in order to
achieve a certain level of bonus. To mitigate this risk, there should be a review of results by an
independent body.
A separate risk arising from this bonus scheme is that it encourages short-term thinking. Decisions are
likely to be taken that improve results in the short-term, to earn the bonus, but these decisions may not
be in the long-term interests of F Food. This is an example of goal incongruence. Changing the bonus
scheme to incorporate longer term measures may help to eradicate this.
Dominant CEO
The dominance of a company by one individual is a cause for concern as this has been a feature in
several high profile corporate governance failures. The CEO may be operating in his own interests rather
than those of F Food. The presence of non-executive directors on the board is felt to be an important
safeguard against domination by a single individual due to their independence from the company.
The dominance of the CEO may indicate other issues with the board such as a lack of meetings or a
failure to oversee the activities of F Food. The board should meet regularly in order to be able to
effectively run the company.
Audit committee
Another area where F Food may want to improve is its audit committee. The role of the audit committee
is to oversee the work of the internal audit function and to challenge the external auditors to ensure that
their audit procedures are appropriate and rigorous. It is important that there are enough individuals on
the committee with sufficient technical knowledge or expertise in auditing.
Remuneration policy
Director remuneration should be sufficient to attract, retain and motivate directors of the quality required,
but should not be more than is necessary (as this wastes company resources). A significant proportion of
executive directors remuneration should be linked to individual performance. An appropriate policy
encourages behaviour that benefits the director (proportionately) and improves the long-term health of the
company.
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5 G banking group
Marking scheme
Marks
(b) Offshoring
Offshoring is the relocation of some part of an organisation's activities to another country. Developments
in technology have made offshoring feasible in many situations, such as back office support for banking
operations.
Offshoring has grown significantly in recent years. India is one popular offshoring country, many UK banks
and other companies now have service centres based in India.
Offshoring offers a number of advantages to the G Banking Group.
Lower overall cost. Labour and other costs (eg premises) will be lower in India than in country D.
Able to afford a more qualified workforce. Call centre positions in India are often filled by better qualified
individuals than would be the case in country D.
Investment by host government. Infrastructure (for example communication) in emerging economies has
often been heavily invested in by the host governments, in order to attract inward investment.
Economies of scale / centralised operations. The back office operations will now be able to concentrate
its back office operation in India, where it already employs 3,000 people. Economies of scale are likely to
result. Long-term moves such as this also encourage strategic planning.
Allows specialisation. Offshoring back office operations to India will allow the G Banking group to
concentrate on the more complex side of its banking operations and grow its international business by
allowing other staff to focus on specialised areas of operation. This is necessary in a global economy
where competition is increasing
On the other side of the discussion, managing operations based in another country will involve a number
of challenges for the G Banking Group:
Risks associated with currency exchange rates. As an experienced banking group, this should be
manageable. Exchange rates will always be liable to fluctuate and this may erode some of the cost
savings.
Language barriers and cultural differences. This may not be such a significant hurdle to overcome for G
Group as they already have a large presence in India. There may be some resistance by customers based
in country D, due to perceived problems dealing with call centres based overseas.
Technical challenges. Staff in India will need to be properly trained to ensure that service levels in the
offshored function do not suffer. Some functions may be retained at the call centres in country D, so that
customer service and satisfaction levels remain high.
Exercising control from a distance. Offshoring can lead to a loss of control, particularly over quality.
Dealing with different time zones. This is a challenge that a multinational company should be able to
meet reasonably comfortably, although employees may find themselves inconvenienced occasionally (for
example the timing of telephone conference calls). Globalised business operates 24 hours a day and the
G Group would be no exception to this.
(c) Role of the Human Resources Division
The 500 employees of The G Group that arent redeployed following the offshoring will be dismissed
through reason of redundancy.
The Human Resources Division should have policies governing redundancy and ensure these are
followed.
The HR Divisions role should include setting policies that cover areas such as:
Selection for redundancy the criteria for selection must be clear and must be communicated as clearly
as possible
Pre-redundancy consultation and clear communication of where and when redundancies are to occur to
enable staff to plan their futures
Help with developing a CV and clear guidelines covering time off to attend interviews
Clear guidelines on redundancy payments, with clear communication of packages and negotiation where
appropriate
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Assistance with re-development of skills, re-training to learn new skills for a new career, or re-location of
redundant employees
Careers advice, counselling and post-redundancy support
Redundancy is likely to be an unpleasant experience. The HR Division must ensure affected staff are
handled with care and sensitivity.
HR should also play a part ensuring remaining employees remain motivated, and morale is as high as
can be expected in the circumstances.
6 Changeland
Marking scheme
Marks
(a) Up to 2 marks per valid point referenced to the scenario; 1 point each for brief general
(but relevant) points 10
(b) Up to 2 marks per valid point referenced to the scenario; 1 point each for brief general
(but relevant) points 10
(c) 1 mark each for each point. 5
25
Our answer shows what we consider the most appropriate points to make. Other relevant points that answer
the question would earn marks. However, irrelevant points that do not answer the question would not earn
marks.
Options
When deciding on the proportion of direct versus indirect taxation the Government could chose three
options, mainly direct taxation, mainly indirect taxation and an equal or other split between the two other
options. When deciding the Government should consider a number of factors.
Indirect taxation is generally cheaper for the Government to administer as the cost of collecting and
paying the tax is a burden on business organisations, but it will increase inflation since it increases the
cost of goods and services. It is also generally popular with the public if they feel that they have a choice
of whether to incur it (by deciding whether or not to buy goods subject to the tax). It becomes unpopular
where all goods and services are subject to indirect taxation and it is impossible to avoid.
Direct taxation is generally unpopular with the general population has they see that their income is
reduced. This reduction in income helps to reduce inflation by reducing demand but it is expensive for the
Government to administer and requires considerable laws and regulations to be introduced.
Individual taxation versus corporate taxation policy
The second policy decision is in regard to the proportion of taxation that should be paid by individuals and
business.
Options
The Government could choose to mainly tax individuals, mainly tax business or an equal or other split
between the two other options.
By mainly taxing individuals the Government risks stopping the economy growing as people do not have
enough disposable income to spend on goods and services, this will also reduce company profits and
reduce the level of corporation tax collected.
If levels of corporation tax are too high then the country may become a less attractive place for foreign
companies to set up business and they may relocate their operations to other countries with a more
favourable tax regime. This may have an effect on the products and services available in the country as
well as on growth and unemployment levels.
Mixture of indirect taxation policy
The third policy decision that is required is in regard to the mixture of the different types of indirect
taxation.
Options
The types of indirect taxation that Changelands Government may consider are:
Value added tax
This tax is levied on all goods and services, although the rate on each type of good or service may vary.
For example goods that fulfil basic needs such as food may be taxed at a lower rate than luxury goods
such as cars. As mentioned above, this would be unpopular with the public as they cannot escape it, but
it would provide the Government with a large amount of tax for relatively low cost.
Tax on undesirable goods
The Government could make the goods that it deems undesirable subject to a higher tax than other
goods. This should help deter the population from buying the goods, or at least reduce their consumption
of them. It would therefore help the Government meet its objective of discouraging sales without banning
the products but would be seen by the public as taking away their free choice of consumption.
Import duties
Import duties are taxes placed on goods imported into a country. They are paid by the importer and
effectively passed onto the consumer through a higher price. The Government could apply these duties to
the goods it is trying to discourage people from buying and the effect would be the same as if it taxed the
undesirable good as above. It may be marginally more popular with the general public than such a tax as
it is hidden from them within the general price. As with corporation tax, import duties may encourage or
discourage overseas companies from operating in a country. Before imposing import duties, the
Government should consider the possibility of retaliation by other countries. Changeland may find similar
duties are placed on its exports, which will damage its income from trade.
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7 Cranmoor
Marking scheme
Marks
However, those in favour of regulation cite the need to enforce competition, where the market is not
competitive, and to improve the quality and quantity of goods and services provided, where the industry
does not meet the needs of the customer.
Economic matters
Governments have a macroeconomic policy that usually is based around four objectives. These objectives
are a controlled balance of trade, economic growth, controlled inflation and employment. Cranmoor
currently has a substantial balance of payments deficit and a weakening economy, so these areas are of
prime concern.
Balance of trade
The balance of trade reflects a countrys trading position and concerns the amount that it exports as
against how much it imports. Cranmoors balance of trade deficit indicates that the country is importing
more than it is exporting. It is therefore very important that the Government seeks to reduce this deficit by
increasing exports in relation to imports.
Economic growth
A countrys economic growth refers to the level of demand for goods within the economy and how much
is being produced. Cranmoors weakening economy indicates that demand for goods is falling and the
amount of goods being produced is also falling. This may explain the high amount of imported goods. The
Government should therefore seek to improve growth, perhaps by looking to increase the disposable
income of its citizens (by reducing taxation) or stimulating demand by investing in infrastructure projects.
Inflation
Inflation refers to the rate at which the price of goods and services changes over time. Rising inflation
means the price of goods and services is increasing and this can be a consequence of too much demand
within the economy. Those on fixed incomes, such as those on pensions or state benefits, are the hardest
hit in times of inflation. Cranmoors government should seek to prevent inflation becoming a problem by
managing demand so that prices do not rise to quickly.
Employment
High employment is a key goal of any government. This is because it means the amount it receives from
personal taxation is maximised and the amount that it pays out in state benefits is minimised. It also
means that citizens have more disposable income and therefore can spend more, fuelling economic
growth. Cranmoors government should establish policies that encourage job creation in order to support
its other macroeconomic goals.
(b) Benefits of Corporate Social Responsibility policies
Corporate social responsibility (CSR) refers to the expectation in society that companies are accountable
for the social and ethical effects of their actions. This expectation has grown since the 1970s and
organisations are expected to demonstrate a duty of care to society.
The government of Cranmoor has stated that without good CSR a number of stakeholder groups within its
society may feel isolated and vulnerable. This suggests that Cranmoors businesses are not currently
always acting in the interests of wider society when making business decisions and it may be because
they do not appreciate the possible benefits to them of behaving in a socially responsible manner.
Benefits to an organisation of adhering to good CSR principles
Improved corporate image
The adoption of good CSR policies will demonstrate to customers and potential customers that the
business is forward looking and is proactive in dealing with changes in society. This is especially true
where a business changes its behaviours before it is required to (ie before legislation on that particular
area comes into force). This will create a positive view of the business within the market.
Marketing
An improved corporate image will enable the business to differentiate its products and services from those
of the competition because the brand and its values become a unique selling point. Public relations (PR)
is a key part of the promotion mix and therefore improved public relations that result from the CSR
policies will present the business with an increased range of marketing possibilities.
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Branding
A business may build a brand based on strong ethical and socially responsible values. Such values may
contribute to brand equity and the value of the brand, as well as the long-term success of the company.
This is because the business may be able to gain and retain customers because they share the brands
values and will stick with the organisation in good times and bad.
Efficient operations
Many socially responsible policies, such as improving recycling and reducing waste, will have a secondary
benefit of improving the efficiency of business operations.
Pricing
A strong brand and CSR values may enable the business to charge a premium for its goods and services
above that of its competitors. This is because customers may accept a higher price in return for buying
into the organisations values. Therefore the organisation will have some flexibility in its pricing decisions
with the possibility of increasing its revenues whilst maintaining its customer base.
Profitability
Potentially increased revenues and reduced costs as identified above will together improve the
organisations profitability.
(c) Corporate Social Responsibility and Human Resource policies
Human resource policies concern how an organisation recruits, develops, rewards, motivates and
develops its culture. They are linked to CSR policies since they both concern people. We shall now
consider a number areas where HR and CSR policies overlap.
Recruitment
A strong, socially responsible brand will help the business not only attract and retain customers, but also
staff as well. Employees may be attracted by the organisation, particularly if they share its values and
may decide to work for it rather than other, less socially responsible organisations. The quality of staff
may also rise as a consequence.
Development
Socially responsible businesses see their employees as people rather than just a number. They take an
interest in improving their employees, not only in terms of what is needed in their current career, but also
other areas of personal development.
Reward
In recent times there has been a move to socially responsible rewards and benefits offered to employees.
For example, home working, flexible working, the living wage and support for gym memberships and
childcare.
Culture
Socially responsible businesses often have a culture with a positive outlook, a can-do attitude and
support for philanthropic activities (for example allowing employees time off to undertake voluntary work).
Such a culture will feed into the corporations external image (supporting the business and recruitment of
employees) and the motivation of existing staff.
Motivation
The combination of corporate culture, development and reward discussed above should help motivate
employees. This extra motivation should help improve business productivity, reduce absenteeism and aid
staff retention. These will have cost benefits to the business in the long-run.
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8.2 A An expert system could be described as a database built on knowledge and experience.
8.3 A Corrective maintenance is carried out to correct residual faults. Options B and C are enhancements
(perfective maintenance). D takes account of anticipated changes in the processing environment
(adaptive).
8.6 Virtual teams are interconnected groups of people who may not be present in the same office or
organisation but who:
Share information and tasks
Make joint decisions
Fulfil the collaborative function of a team.
9.2 C Dial-back security requires users to identify themselves before the system dials them back on their
authorised number before allowing access.
9.3 C Denial of service attacks attempt to disable an Internet site by overloading it with traffic.
9.4 D Application Service Providers are third parties who manage and distribute services and solutions to
clients over a wide area network.
9.5 Four roles that the new system may play in Comseek are:
Planning future operations
Recording transactions
Performance measurement (comparing actual results against plans)
To help senior management make decisions
9.6 Enterprise-wide systems are designed to co-ordinate all business functions, resources and information.
Under an enterprise-wide system each business area is provided with a system that fulfils its needs,
however each module shares a common database that is the basis of all the information within the
organisation.
(c) The following roles within S & C are important for the implementation to succeed.
Partners
Their support in terms of visible behaviour and making sufficient resources available is crucial.
Project manager (change agent)
It is their organisation and drive that will keep the project on track and focussed. This will ensure
business performance is not affected by the change. A regular presence is required to ensure this.
If the current manager cannot keep regular attendance they should be replaced.
Steering group
The group should be available to support staff in the weeks immediately prior and subsequent to the
implementation. They also have a key role to play in winning over staff who resist it.
HR department
HR should ensure staff receive suitable training and support during the implementation. Where system
success depends on targets being met a reward system should be put in place. It should also develop
policies to deal with staff who resist the change.
Staff
It is their acceptance of the system that will decide if it is a success. It is important that they
communicate ideas and suggestions as this will help them feel that the system is theirs.
Managers
They have a key role to ensure information regarding the change is communicated in a clear, timely
manner to the staff. This will help minimise any disruption to the business.
(d) User involvement in system implementation is essential to obtain user acceptance. Specific examples of
activities users should be involved in include:
Testing
Developers should ask a group of users to test the system to check that it works as it should and actually
meet their needs.
Training
The implementation phase is usually towards the end of the development. Users should start their
training on the new system so they are prepared for the changeover.
File conversion and transfer
Data within the old system will need to be transferred to the new system. Users should be involved in the
transfer as their knowledge will help ensure data is interpreted correctly.
Quality circles and discussions
Forums that include users should be set up to discuss the overall quality of the system and how it could
be improved.
Championing change
Users who can see the benefits of the new system should become involved in winning over other users
who may resist the change.
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(e) There are three distinct groups within S & C who have different training needs.
Partners
Partners will not be using the system on a day-to-day basis, however, they should have a good basic
understanding of it so they understand how the work they review was assembled. Such training could be
provided by an executive presentation. Some additional, hands-on training may be required covering how
reports and snapshots performance are obtained.
Managers
Managers should receive training to enable them to understand the software involved in areas they are
responsible for. In particular, security features that prevent unauthorised access or loss or damage to
data.
Users
Users need to be trained in the day-to-day features and processes that the system provides. This would
include data-entry and report writing amongst others.
Methods of training can include:
In-house demonstrations
On-line learning
Computer based training using dummy data
(f) A number of methods can be used to evaluate the success or failure of the system.
Cost-benefit review
Following the completion of the project a cost-benefit review can begin. This analyses the actual costs
incurred in developing and implementing the system with the actual benefits the system provides.
Benefits can be difficult to quantify so the firm may have to make use of estimates. This review will help
determine whether the system is a financial success or failure.
Performance reviews
Performance reviews consider whether the system is performing as expected and may cover issues such
as:
System efficiency is the system operating quickly enough, does it slow down when processing
large volumes of data?
Security is the system secure, have there been many breaches?
Error rates does data in the system contain errors? If there are then there may be problems in
data collection and file conversion.
Output does the system produce its output on a timely basis, is it being used as expected, does
it go to the right people?
Post-implementation review
This establishes whether or not the systems objectives and targeted performance criteria have been met.
It compares the systems actual and predicted performance. The contents of this and the other reviews
are used in a formal post-implementation review report to judge the systems success or failure.
98 Answers
11 S1K
Marking scheme
Marks
(a) Two marks for each relevant, explained use of IS/IT at S1K 10
(b) Two marks for each relevant, explained point related to the Chief Executives analysis 10
(c) Up to two marks for each individual/group and training method 5
25
Our answer shows what we consider the most appropriate points to make. Other relevant points that
answer the question would earn marks. However, irrelevant points that do not answer the question would
not earn marks.
(a) Five ways in which either information technology (IT) or information systems (that these days tend to
utilise IT) could be used to improve S1Ks operations are identified below.
Establish a well designed website
SK1 could invest in a website to provide information to customers, enhance the brand, offer online
booking for optical appointments and sell own-brand products. It would be essential that the site was
integrated with back-office systems, to ensure the booking process went smoothly.
The site should include e-commerce and also be a key marketing tool.
Establish a Wide Area Network (WAN)
By linking computers at shops together, a WAN would facilitate improved communication and
collaboration between shops.
The WAN would enable data and information to be shared quickly and effectively, and would also provide
a platform for the implementation of organisation-wide systems.
Implement a new integrated sales, stock and financial system
There are currently a series of shops operating independent computer-based systems and some shops
using manual systems. A common stock and point of sale system, integrated into the proposed new
financial system, would save time analysing and searching for information in shops and enable quicker
and more accurate production of financial information.
Integration between systems is important to reduce the need for keying data, as this is expensive and
likely to introduce data inconsistencies and errors.
Answers 99
(b) The key points from the Chief Executives analysis of potential implementation problems are discussed
below.
No project manager in place
There was a project manager in place who was responsible for the implementation of the new financial
system, but that person has left and not yet been replaced.
The Chief Executive recognises the need to appoint a new project manager as soon as possible. He also
believes the project manager should come from within S1K, rather than appointing an external person.
Appointing from within SK1 would ensure the new project manager was familiar with the organisation
and the processes surrounding the existing finance system.
However, project management requires specific skills - there may not be a suitable individual within SK1
for the role. A specialist project manager appointed from outside SK1 should have the required skills and
experience of similar implementations and may also bring a fresh perspective to the situation.
The proposed software does not fit existing business processes
The Chief Executive recognises that the new software does not fit existing business processes exactly, but
he still believes it to be a good choice. This belief is based on the fact that competitors use the software
and that it is recognised as an industry best practice system.
However, software and systems should facilitate efficient working practices and business processes.
Changing processes to fit a particular type of software could actually introduce inefficiencies. This requires
further investigation. On the other hand, it could be that due to its rapid growth S1K operates in an
inconsistent and inefficient way, so a change in processes could be beneficial.
A possible complication in any review of the choice of software is that S1K may already be committed
contractually to take the proposed software.
The implementation approach to adopt
The Chief Executive states that the previous project manager recommended a phased approach to
implementation and drew up a timetable for implementation under this approach. The Chief Executive
agrees that a phased approach is the best option as it would be the least problematic for S1K.
A phased or modular changeover involves changing part of the system first, for example the receivables
ledger, then changing other parts of the system over in stages. A phased approach could also take the
form of implementing the whole new finance system in a particular location (such as a shop) at a time.
The phased approach is less risky than a direct approach as the area of change or upheaval is restricted.
It allows for problems to be identified and corrected in a relatively restricted environment, before the
system is introduced organisation-wide.
The phased approach is a good option for SK1 both as a risk management technique and to reduce the
impact on staff already under pressure from takeovers and the change of Chief Executive.
100 Answers
(c) The main individuals and groups S1Ks Human Resources Department should target initially for training
are:
The new project manager
Assuming the new project manager comes from within SK1, he or she will require training in project
management skills.
Training should be provided by a specialist and the recipient should be free from the distractions of day-
to-day work. Therefore, this should be held off-site.
S1K senior management
Successful implementation of IT projects requires support from the top of the organisation. SK1 senior
management must understand the role of the new system and be seen to support the project.
Senior managers may require training to fully understand (and then be able to explain to staff) the benefits
the system will bring. This training would probably best be provided in-house, to senior managers as a
group, with the new project manager present. It should be provided by a combination of the software
supplier and the new project manager, ideally with some input from the Chief Executive (given his
background).
Head office finance staff
Head office finance staff will use the new system to consolidate shop results into organisation-wide
financial statements. Depending upon how operations are structured, they may also provide a centralised
accounts function (eg payables and receivables).
Even though this is an off-the-shelf package, the supplier should offer training options (for example a
consultant) either as part of the contract or for an additional fee. As the software is widely used, private
training courses may be available. An external trainer delivering training in-house may be the most
appropriate option, followed up with on-the-job training.
Shop staff
Staff operating in shops will need training to ensure they can process transactions efficiently, maintaining
standards of customer service.
Training should cover operating procedures, data entry requirements, payment processing, system
commands and security aspects (eg passwords).
This would best be achieved through a combination of an initial out of hours face-to-face session, and
then on the-job training through the use of internal system champions who have been trained by the
software vendor in advance of other users. Online help, printed manuals and a telephone helpline should
also be provided.
Answers 101
12 LD2
Marking scheme
Marks
(a) The ways in which the proposed People and Payroll system will benefit LD2 include:
Integration of systems.
The new system will provide one single system that replaces a number of separate systems. A single
system will solve the current problems due to incompatibility of software between different systems, and
remove the need for complex reconciliation of system output.
Cost and quality.
The new system should support a simpler and better quality of operation resulting in lower operating
costs. Separate systems are more costly because they require different input and reconciliation of output.
With an integrated system, data will be input just once, reducing input time, effort and cost.
Fewer errors.
The new system should be designed to reduce the likelihood of undetected input and of input errors.
Calculations should be done within the system, by the software. The payroll and invoicing errors that
currently occur due to faulty data input or calculation should be eliminated.
Capacity for growth.
The LD2 group has grown by acquiring other businesses, a strategy which may continue. The People and
Payroll system should be designed so that it can take on additional processing capacity that may be
required in the future, for example allowing acquired businesses to be transferred to the system.
102 Answers
13 CQ4
Marking scheme
Marks
Consistency
The EPoS system will help bring consistency across all CQ4s stores for example regarding prices and
reporting. This will help head office control the business and help establish a consistent brand image.
Control of staff
It does not appear that CQ4 has a problem with staff stealing goods or cash, but it might become a
problem in the future if staff resist change. However, the EPoS system is an effective deterrent and control
to ensure that it does not happen.
Improved look and feel of stores
The new technology, such as the touchscreen terminals, will give the stores a modern feel rather than the
current old fashioned style.
Customer management
CQ4 could introduce customer loyalty cards which monitor what customers buy and offer them deals or
other incentives to come back to the stores.
(b) Methods of managing change
It is likely that many of CQ4s employees may resist the change that the new technology will bring. This is
because the organisation has a policy of retaining staff when it takes over stores and that staff seem used
to, and happy with, their current working practices.
Kotter and Schlesinger (1979) identified six methods of dealing with resistance to change and CQ4s
managing director may choose to implement some or all of them. However, they are not intended to be
used separately in isolation and a combination of them is likely to be required.
Education and communication
This method is involves educating employees regarding the reasons the change are necessary and
communicating with them. This method is effective where the cause of the resistance is lack of
information about the change.
Participation and involvement
By involving employees in the change, CQ4 may find that they become increasingly committed to it as
they embrace the new technology and see its benefits. Where those affected by the change have the
power to resist it, this method reduces the resistance by taking their views into account.
Facilitation and support
Training and counselling can be used to overcome fear and anxiety that some employees may have about
the change.
Negotiation and agreement
Some employees will resist change as they feel that they will lose out as a consequence of it. In CQ4s
case, it is likely that staffing levels or hours will be cut as the technology introduces operational
efficiencies (for example employees will spend less time producing reports and so on). Compensating
those who lose out may be appropriate in some instances.
Manipulation and co-optation
This method involves the presentation of partial or misleading information to those resisting change or
'buying-off' the main individuals who are at the heart of the resistance. Whilst this method might be
effective in the short-term, it may create long-term problems if employees find out what has gone on.
Explicit and implicit coercion
This involves the use or threat of force to push through the change. It should be used as a very last resort
if parties are operating from fixed positions and are unwilling to move. In CQ4s case this would mean
threatening staff who do not comply with the change.
(c) Human resource issues associated with the EPoS system
CQ4 may face the following HR issues regarding the new policy:
106 Answers
Redundancies
It is almost inevitable that some staff will need to be lost as a consequence of installing the EPoS system.
This is because of the efficiencies created by the system (time saving when producing reports, cashing up
and stock checking and so on).
Hiring new staff
Some staff may decide to leave employment after the change. This might offset the need for
redundancies, but if large numbers of staff leave it may be necessary to spend time and money hiring new
people.
Training
Employees who accept the change and want to move forward will need to receive suitable training on the
new system. This is necessary to ensure they can use they system effectively and for the company to
realise the full benefits of its introduction.
Communications
To help promote the consistent approach to operations that the system will bring with it, employees
should receive appropriate communications from head office regarding the use of the system.
Performance appraisal
As a consequence of the system, the performance of individual stores will be increasing under scrutiny. To
help improve store performance it is likely that an appraisal system for store managers, based on key
performance indicators will be required. Once this has been set up managers can be set monthly targets
to achieve.
14 WV8
Marking scheme
Marks
(a) Decentralisation
Decentralisation means to move services, such as the provision of information systems away from a
single, centralised location, to other geographical areas. This often involves each local office or branch
being responsible for the provision of its own service.
There are a number of advantages to WV8 for decentralising the CIS, these include:
Reduced bureaucracy
Decentralisation will hand over the CIS function to the main users. This will reduce the layers of
management and therefore give local users the responsibility to make decisions locally, free from centrally
imposed rules.
Faster decisions
By giving the main users the power to make decisions locally, the whole organisation will benefit from
faster decision making.
Reduced central costs
Service users have complained that the CIS is expensive to run. Decentralisation will remove this cost
from WV8 as the service will be provided locally. The delegation of decision making away from a central
location will mean that some cost savings can be achieved through job losses in management.
Better service provision
A consequence of the current system having to meet the needs of a number of local areas is that it never
quite meets the exact needs of any of them and users have complained that it is unresponsive to their
needs. Decentralisation will mean that each location can develop a system that is appropriate to it.
Relations with government
By looking to save costs through decentralisation of the system, WV8 will show government that it is
listening to it and being responsive to the cuts which have been made. This should help strengthen the
relationship the organisation has with the government.
Improved morale of staff
Decentralisation will give local staff more responsibility to make decisions. This should be a source of
motivation for them.
Improved recruitment
Under the current arrangement WV8 has had difficulty recruiting staff and it has been suggested that this
is due to unattractive rates of pay. With decisions over running the system to be made locally, pay rates
can be set by each location and there may be scope to improve them and therefore attract better quality
staff.
Job enrichment
With increased responsibility, staff may also find the nature of their job changes with more depth or
scope. This is job enrichment and may improve employee motivate and make the job more attractive to
potential candidates for recruitment.
Improved management
Management in local offices will have to take on new roles from those previously held centrally. This may
include decision making, project management and so on. This will help improve the skills of local
managers and therefore generally improve the standard of management in the organisation.
(b) Total outsourcing
There are a number of implications to WV8 of total outsourcing, these include:
Better cost management
Under an outsourcing arrangement, WV8 will pay a third party a regular fee for the service provision. This
payment should not vary and will therefore help the organisation control its costs.
108 Answers
Contract
The arrangement will be set out in a contract and service level agreement (SLA). Once the contract has
been entered it could be difficult or very expensive to stop the agreement before the end of the term. This
means WV8 should take advice and very carefully consider if all the terms in the deal are suitable before
entering into it.
Quality
WV8 knows the quality of the service that it currently receives from its staff. It should be happy that this
level of quality continues or is improved as a consequence of any outsourcing agreement. Any third party
should respect the organisations culture and the fact that it is a not-for-profit organisation and as such its
ethos may be different to what they are used to.
Effect on existing staff
The outsourcing agreement may result in current staff losing their jobs, even if some are re-employed by
the outsource provider. This may create strong resistance from the staff affected and others in the
organisation.
Loss of knowledge
WV8 currently retains the skills and knowledge of the staff involved in providing the CIS. If the function is
outsourced then these skills and knowledge will be lost from the organisation and this may be difficult to
replace if it decides to bring the service provision back in-house at a later date.
Gaining specialists
The service provider is likely to have staff with greater skills and experience than those WV8 currently
employs. Therefore the organisation may find the overall standard of service improves greatly as a
consequence.
Strategy
WV8s current strategy is to reduce its cost base and manage its operations more efficiently. The use of a
third party to provide the CIS fits with this strategy.
Alternatives
The organisation should consider alternatives to a total outsourcing arrangement. For example it could use
a number of different suppliers and manage them with a smaller team of in-house staff.
Importance of system
WV8 should consider the importance and reliance that it places on the system. If it views it as highly
important, or core, to its operations then it might think it best to retain control of it. However, if it views it
as a subsidiary system, of little importance or it does not place much reliance on it, then it might feel
happy to transfer control of it to a third party.
Risk
With any arrangement there is an element of risk involved. In this case WV8 should consider and plan for
what would happen if the outsource partner goes out of business or decides at the end of the contract
that it does not wish to continue it.
(c) Marketing principles
Despite being a not-for-profit organisation, WV8 can learn a number of lessons from marketing principles
adopted by profit-making businesses.
Set objectives
The organisation should set itself objectives that it needs to meet. The generation of profit wont be an
objective but control of costs and efficient use of government grants might be.
Target marketing
Public sector organisations, such as WV8, have been criticised for having a poor understanding of the
communities they serve. Target marketing involves learning about your customer so that you can serve
them better and this is something that WV8 might consider doing with its stakeholders.
Answers 109
Communication
Once the organisation has developed a good understanding of its stakeholders it should communicate
with them. As a not-for-profit organisation, WV8s funders would be the government and the public who
contribute it through the taxation system. It should look to improve communication with them for
example by promoting its activities.
Public relations
WV8 and organisations like it may have a poor public image and it might be necessary to improve this
image through public relations activities before it can develop relations with its stakeholders.
Appearance and attitude
The organisation should ensure that it promotes a business-like attitude amongst its staff through
internal marketing and ensure that its facilities are, whilst not extravagant, modern and have all the
necessary equipment to do business. This will show visitors and other people that the organisation is just
as capable as a profit-making organisation.
110 Answers
15.2 B The balanced scorecard approach to quality measurement focuses on customer, operational
and financial perspectives.
15.3 A To gain ISO accreditation an organisation is required to submit documentation to show that their
processes meet ISO requirements. The other options are not necessarily required.
15.5 B In this paper, you have studied ABC as an inventory management method that concentrates
effort on the most important items.
15.6 A Kaizen seeks to improve quality by small, incremental steps. It does not seek radical changes
(options B and C) and is not a problem solving technique (option D).
15.7 To obtain the best possible purchase prices bulk buying contracts
To improve quality in the future quality standards can be agreed
To ensure continuity of supply during periods of limited availability
To tie the supplier to the organisation - reducing the supply options of competitors
16.2 B In a demand network, products are developed in response to market signals (demand).
16.3 B A manufacturer who focuses on developing new product features is product orientated.
16.4 D Primary activities are those across the base of the value chain the supporting or secondary
activities being shown above these. The last primary activity is supporting products sold, that is
service, so D is correct.
16.5 Internal failure costs are identified before the item reaches the customer.
Cost of materials scrapped due to poor inventory control
Cost of materials lost during production
Cost of output rejected during inspection
Cost of re-working faulty output
Cost of reviewing product specifications
Losses due to selling faulty output cheaply
Note. Only four examples were required.
16.6 External failure costs are identified after the item reaches the customer.
Delivery of faulty products and replacements
Operating a customer services section
Repair or replacement
Refunds
Significance
Loss of 'quality' reputation
Loss of future custom
Damaged staff morale
Bad PR
16.7 Total Productive Maintenance (TPM) reduces breakdowns and helps ensure production consistency. This
will help Goldseek ensure uniform output and reduce waste. It therefore lowers the cost of quality. TPM
also improves the accuracy of production schedules and therefore facilitates on-time order delivery an
important aspect of customer service quality.
112 Answers
(a) Inventory
A level capacity strategy involves building up an inventory buffer to enable orders to be met from held
inventory when demand exceeds capacity.
A Just In Time (JIT) approach involves producing goods (eg cars) when they are needed eliminating the
need to hold inventory.
The build up of inventory required under a level capacity strategy contradicts the no inventory approach
required under JIT. Therefore, the two approaches are incompatible.
Under JIT, production is driven by immediate demand. The capacity management approach consistent
with JIT is a chase strategy which involves adjusting production levels to match demand. This would
allow nil (or minimal) inventory, as required under JIT.
(b) Demand
Demand management strategies attempt to influence demand to reduce fluctuations to levels above or
below capacity. One of the ways demand may be managed is through marketing. Therefore demand
strategies influence marketing practices.
If demand is below capacity, marketing initiatives such as price incentives and advertising campaigns
may be used to increase demand.
If demand exceeds capacity, it may be decided to reduce some marketing activity (eg advertising) and/or
to promote orders in a future period rather than those requiring delivery in the short term (eg order next
year's new model now).
Marketing may also be used to try and distribute demand evenly throughout the year, for example though
seasonal offers and other incentives to increase demand in less busy periods (eg interest free finance).
(c) Chase vs flexible
Chase strategies involve adjusting activity levels in response to fluctuations in demand. The ability to
significantly change production levels quickly and efficiently (while maintaining quality levels) requires a
high level of organisational flexibility.
The need to react quickly to an ever changing environment has led to organisations adopting flexible
structures such as project based teams and virtual or networked firms.
In many industries, world class manufacturing techniques are used to provide flexibility. Computer Aided
Design, Computer Aided Manufacturing and JIT can all be used to achieve this.
Concepts such as 'economies of scope' are important in this context, as they provide the flexibility
required to change what is being produced in relation to relative changes in demand.
(d) Services vs manufacture
Service organisations differ from manufacturing organisations when considering capacity management in
the following ways.
Production and consumption occur at the same time
Inventories of services can't be built up in quieter times, which makes the balancing of capacity and
demand more difficult.
Answers 113
Greater interaction
The customer plays an active role in the delivery process. Customer service quality is integral to the
customer experience.
Output is different each time
Each customer service interaction is different in some way eg different conversation, attitude etc.
Achieving a consistently high level of output is more challenging.
Generally greater reliance on staff
Service delivery depends on the people delivering the service. The 'mood' of staff on the front line
shouldn't adversely impact upon the customer experience.
Intangible output
This makes measuring the quality level of output more difficult as there is no physical product to inspect.
Obtaining feedback of customer satisfaction is important.
(e) Supply portfolios
An organisation creates a supply portfolio by purchasing raw materials and components from a number of
suppliers rather than just one. The suppliers are chosen for their individual attributes which enable the
buyer to maximise the benefits each offers.
Benefits of supply portfolios
Quality
Suppliers provide products of varying quality. Buyers can use variances in quality to produce premium or
economy ranges of their own products.
Cost
Suppliers charge different prices for their products. Buyers can turn to cheaper suppliers to reduce their
costs of production if necessary.
Supply
Suppliers are of different sizes and produce different levels of output. Buyers can therefore match order
sizes to appropriately sized suppliers. For example, a small supplier that can only produce a few products
a day would be unable to meet the requirements of a large order. However, they would be able to supply
a small order that a larger organisation, which may set minimum order quantities, turns down.
Expertise
Suppliers offer varying levels of expertise and may, for example, be able to advise the buyer which
components would be best for their product. Building relations with a number of suppliers therefore helps
the buyer to make more informed buying decisions.
(f) Assistance from information and communications technology
The following types of information and communications technology could be used by
people/organisations trying to improve demand for cars.
Advertising on websites
The car manufacturer could use pop ups on sites used by their target market eg the Automobile
Association.
Buy now
Individual car dealers may offer a 'buy now' facility on their website. However the value of the transaction
and need to sign contracts/purchase agreements means some face to face contact will still be required.
User registration
The use of user registration on websites could be used to help identify and track potential customers. The
website could also include promotional material and virtual vehicle tours and virtual test drives to
encourage purchase.
114 Answers
Database
A database could be used to manage relationships with potential and existing customers (repeat purchase
is very important particularly with fleet sales).
Mobile phone or M marketing
This may be used to target young, IT literate potential customers (eg if mobile telephone numbers were
collected during website registration). 'Text back now to arrange a test drive of the NEW Series 3' or
similar messages may be appropriate.
Email
This could be used in a similar way to the text message approach described above.
Search engine optimisation
Websites should be configured to produce high rankings on search engines such as Google, for example
for users searching for new car London. Paid-for listings can also be used.
18 YO and MX
19 W company
Marking scheme
Marks
Greater coordination across the global supply network. This will allow W to develop relationships with
suppliers worldwide.
Partnering with other companies in the supply network (organisational integration). Reliability, trust and
collaboration is highly important. W may even consider reducing the number of suppliers it uses, so
deeper relationships can be developed with a select few (perhaps selected using cost-benefit analysis).
Being able to meet demanding customer service and product performance standards. Innovation in
consumer goods is required if products are to remain attractive to consumers.
If necessary, restructuring the organisation to better facilitate closer supplier relationships and control
processes.
W Company could establish a supply chain network. This is an interconnecting group of organisations
which relate to each other through linkages between the different processes and activities involved in
producing products/services.
Organisations now often outsource non-core activities, such as the distribution. W may be able to benefit
from adopting this trend. The benchmarking exercise undertaken by JH may have indicated that Ws
competitors are already doing so, and that W needs to catch up.
Efficiencies can also be attained by applying technology to dealings with suppliers, using electronic data
interchange (EDI) this paperless communication is more efficient in terms of administration, and is
quicker and cheaper than traditional ordering methods.
(b) Process design
Process design involves analysing and seeking to understand the activities or processes that enable an
organisation to function. The aim is to ensure that these activities or processes are designed so as to be
as effective and efficient as possible. Process design can be applied to the development of new processes
or (as with W Company) it can be applied to improve existing processes. Two tools often used in the
context of process design are Business process reengineering (BPR) and process maps.
The use of BPR
Business process reengineering (BPR) is the fundamental rethinking and radical redesign of business
processes to achieve dramatic improvements in performance, such as cost, quality, service and speed.
W could use BPR to redesign its processes with the aim of working more efficiently (and bringing costs
down). W should implement BPR systematically, following these key stages:
Planning - understand what needs to be done to improve performance in line with company goals
and customer needs
Learning - examine existing processes and how they enable the company to currently function
Redesign - if necessary, or eliminate if they cannot be made effective and efficient
Implementation - of new processes
Hammer and Champy identify four themes of BPR that can be applied to W Company.
Process reorientation. The focus should be on resources and tasks - can the way these interact be
redesigned?
Creative use of IT. For example could W Company use CAD and or CAM?
Ambition. Dont be restricted, think widely. For example, could W adapt processes to enable it to
sell direct to consumers?
Challenge and break rules. Old rules may not apply to new processes. For example is a flatter
organisation structure required?
BPR could also play a part to help bring about improvements in supply chain management.
BPR can be a costly process, so the benefits need to outweigh the cost of implementation and the
ongoing cost of operating and working under the new processes.
118 Answers
20 2JN
Marking scheme
Marks
Customer focus
A core value of TQM is that the organisation must meet, and even exceed, the expectations of the
customer. To be able to do this, 2JNs employees need to understand the customers and their needs.
Changes to appraisal and reward systems
Appraisal and reward systems should be aligned with the goals of TQM ie to achieve high quality.
Relationships with suppliers
To achieve high quality output, 2JN needs to be able to rely on high quality inputs from its suppliers. This
will require the forging of closer relationships with suppliers to enable the organisation to rely on the
quality of its raw materials. If possible, suppliers should operate TQM as well.
Team working
Team working is a key competence under TQM. All employees have strengths and weaknesses so it is
important for them to work together for the benefit of the company. 2JN should emphasise the
importance of teams and assist in their development in the workplace.
Internal suppliers and customers
The various departments within 2JN should view themselves as suppliers and customers of other
departments within the organisation. This will lead to the development of quality chains as each part of
the chain improves the quality for the next link (or customer) in the chain.
(b) Training
2JN needs to arrange training when introducing TQM. A number of groups and issues need to be
considered.
Training strategy
As TQM will affect every part of the business it is important that 2JN develops an effective training
strategy to ensure the training meets the needs of the business, all the objectives of TQM are met and all
staff receive the necessary support.
Needs of individuals
TQM will affect employees in different parts of the business differently. Therefore the training provided to
different groups within the organisation will need to be tailored to their specific roles.
Effective learning
There are a number of principles that any effective training programme should be based on. These are:
Participants must be motivated to learn.
An overview of what is to be learnt should be developed before the specifics are worked out.
Participants should be provided with feedback during the training.
Praise or other rewards for progress should be provided.
Training should be practical where possible if new skills are to be learnt.
The learning curve should be appreciated and that some individuals will progress faster or slower
than others.
The training an individual receives should be specific to their role.
Training provider
2JN should give careful thought into who provides its training. It is likely that a provider with experience
of introducing TQM into a manufacturing organisation would be the best choice if they are available.
Location and cost
Consideration should be given to where the training is to take place as this will have a cost implication.
Costs will be reduced if the training is provided at 2JN rather than at a venue that needs to be hired.
However, this cost saving may be offset by the disruption it may cause to on-going operations.
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Evaluation
After the training has been completed its success should be evaluated in terms of whether or not it has
met the objectives set for it. In 2JNs case it will be whether TQM has been successfully introduced and
individuals have a clear understanding of their role. Individuals or teams that are not performing as
expected may need further training and support.
The different groups within 2JN should be considered as follows:
The workforce
The workforce currently has no knowledge of TQM or what it involves. If TQM is introduced without
educating them as to why it is important and reassuring them about what it means for their jobs then this
may cause resistance to the change. Therefore training should begin with presentations and talks to get
the message across. There should be time allowed to answer any questions asked. Once employees
understand the change, then more job specific training can begin.
Supervisors
Supervisors will be responsible for implementing TQM in their teams. Once they have a good grounding in
the philosophy behind TQM it is important that the training they receive supports their role in
implementing it. This is likely to include the development of new skills such as problem solving,
communication and people management.
Senior managers
The senior managers should be the first to be trained as they will be responsible for the general
implementation of TQM in the organisation. For the implementation to be successful they need to
demonstrate commitment and leadership to push the plan forward. This is specialist training which might
be best provided off-site, especially to keep the plans confidential before they are announced to the
workforce and supervisors.
Quality committee
The quality committee will oversee the entire process of introducing TQM into 2JN. Rather than see one
aspect of TQM, they will be involved in all aspects of it and therefore members of the committee need a
thorough grounding in all areas. Due to the volume of training it is likely that it will need to be provided
over a longer period of time than other groups and with a more formal structure of it so the group stays
focussed.
(c) Quality
Quality may affect costs as follows:
By building quality into production, 2JNs costs of production will rise, but this could be off-set by
reduction in costs of rework and scrapping defective goods.
External quality costs will fall as will the cost of any warranty claims.
The costs of quality inspection will fall as all employees are responsible for quality.
Quality may affect revenue as follows:
Revenue may increase as 2JNs reputation for quality improves and its products become more attractive
to new customers.
Sales may be increased by a reduction in prices driven by falling costs.
2JN should find it easier to retain customers once they realise quality is increasing. This should help stop
the decline in profitability.
122 Answers
21 BC4
Marking scheme
Marks
(a) Up to 2 marks per valid point referenced to the scenario; 1 point each for brief general 10
(but relevant) points
(b) Up to 2 marks per valid point referenced to the scenario; 1 point each for brief general 10
(but relevant) points
(c) 1 mark each for each point. 5
25
Our answer shows what we consider the most appropriate points to make. Other relevant points that
answer the question would earn marks. However, irrelevant points that do not answer the question would
not earn marks.
Competitive advantage
BC4 can look to dominate particular market segments. This will not only maximise the profit from each
segment, but also help reduce the market share of its competitors, thereby forcing them out of the
market.
Better customer relations
BC4 may segment the market geographically and switch its focus away from the north where it has
difficulty in fulfilling its obligations. This will help bring its attention to the customers that it can serve
more productively and therefore improve its relationship with them.
(b) Advantages of ISO9000 certification
The following are advantages of ISO9000 certification to BC4.
External verification of quality
Obtaining ISO9000 certification provides external verification that an organisation has achieved the
quality assurance standards set out in ISO9000. If this is achieved, BC4 would have succeeded in
improving its standards of quality management to a high level through standardised practices and would
be able to make this fact known to customers and potential customers. This would enhance BC4s
reputation and may allow it to expand its customer base by targeting those companies who insist on ISO
accreditation for their suppliers.
Improved processes and procedures
BC4 would benefit from a systematic implementation of quality processes and procedures throughout the
organisation. The differences in operating efficiency between factories should be reduced (or eliminated).
Improved quality of goods
Under ISO9000, the focus is on eliminating errors and therefore customers should benefit from
improvements in quality, and the number of goods returned under the extended guarantee arrangement
should fall.
Improved profitability
Fewer returned goods will mean fewer replacements and less re-working of faulty items, so that these
costs should fall and BC4s profitability should improve.
Reputation
BC4s reputation for quality should improve. By publicising its ISO9000 certification, the organisation
should also be able to raise customers expectations about the quality of its products. An improvement in
reputation for quality may stimulate higher sales demand.
Staff morale
ISO9000 may improve employee morale as staff take on more responsibility for quality. It should make
employees more aware of the importance of quality, and may therefore support efforts by management to
continue raising quality standards and improving efficiency.
(c) ISO9000 and quality control
The Production Manager is suggesting that a quality control (QC) system is established rather than
seeking ISO9000 certification.
Traditional quality control systems rely on the detection of faults and errors in production through
inspection and testing. ISO9000 is a quality assurance system, which involves raising the quality of
procedures to a high level so that errors do not occur in the first place.
Despite QC systems being viewed as a little out of date, they may still have some benefits to BC4. These
include:
Lead time
ISO certification can take considerable time to introduce whereas QC inspectors can be hired and trained
relatively quickly. This means BC4 may see the benefits in less time.
124 Answers
22.4 C A shakeout would occur between market growth and market maturity (shaking some of the weaker
'players' out of the market).
22.5 Viral marketing involves the use of pre-existing social networks to spread brand awareness using video
clips and Flash games etc.
Guerrilla marketing is unconventional and involves taking people by surprise and creating a buzz in
unexpected places. Publicity stunts are an example.
22.6 Experiential marketing involves creating an emotional connection between a person and a brand, product
or idea. The person then makes a conscious decision that they want to make a purchase.
This differs from the traditional marketing approach where a product or service is directly sold to the
customer.
22.7 A brand is a name, term, sign, symbol or design intended to identify the product of a seller and to
differentiate it from those of competitors. It is important because it is a key element of marketing and
corporate strategy - it generates revenue and therefore has a financial value.
23.2 C Skim pricing, otherwise known as market skimming, involves setting an initially high price for a
product to take advantage of buyers who are prepared to pay it.
23.3 B The aim of depth interviews is to explore customers unconscious attitudes and motives for
behaviour.
23.4 C Perishability refers to the fact that services cannot be stored for example an appointment at a
hair salon. This makes anticipating and responding to levels of demand crucial.
23.5 An organisations promotion mix consists of the blend of promotional tools that is considered appropriate
for a given marketing campaign. For example, advertising, sponsorship, branding and direct marketing.
However the process is very much an art and a marketer will very often make the choice intuitively.
23.6 Internal marketing involves informing, training and motivating employees to support the organisation's
external marketing activities. It aids employee understanding of how their tasks, and how they perform
them, create and deliver customer value. Therefore, the success or failure of an organisations external
marketing efforts can be influenced by its internal marketing.
23.7 Using the BCG matrix, MNAs products can be classified as:
Jupiter Star
Mars Question mark
Pluto Dog
Neptune Cash cow.
126 Answers
24 V
(a) The traditional marketing mix includes Product, Price, Promotion and Place. Each of these factors play
an important part in the overall offering to customers. V's proposed approach can be understood in this
context.
Product
V's products are good quality, fun products with a strong brand. It is important the cosmetics offered are
consistent with the established reputation of the brand.
Price
Pricing is competitive, but not the cheapest (ie affordable to most). An important decision is whether the
'list price' will include padding to enable agents to offer discounting. Website sales may be offered at a
lower price although this may make party purchases less attractive to customers.
Promotion
V will rely on word of mouth, public relations (such as the radio interview mentioned in the scenario) and
the strength of the brand.
Place
V's distribution strategy is to use one level marketing (the cosmetic associates) and some web sales. This
relies upon the skill of associates and user acceptance of e-commerce. V also needs efficient
transportation options (eg partner a courier business) to ensure order fulfilment.
The 'fifth P', people, is relevant to the distribution strategy explained above. Further 'people issues' are
covered in part (b).
(b) V has built a strong brand. The reputation of V must be protected. Allowing cosmetic associates (who
aren't employees) to use the V name/reputation carries considerable risk of damaging the brand.
The human resource implications of this include:
Agent selection
Ensuring cosmetic associates (ie agents) have the skills and attitude required is essential. Selection
criteria should include a sense of fun, honesty, business awareness and trustworthiness. Formal selection
procedures including an interview and reference checking by V HR staff are an important control.
Training
Training of cosmetic associates must be thorough and comprehensive. It should include how to arrange
parties, how to ensure they provide a fun customer experience, sales techniques and product knowledge.
Specific training will also be required for those dealing with orders/queries submitted via the website or
SMS (text).
Remuneration
Cosmetic agents remuneration must be structured in a way that provides motivation/incentive, but without
resulting in strong-arm sales techniques. Commission may also be linked to pricing for example
associates may be given the flexibility to sell at a lower price by reducing their commission.
Monitoring and control
On-going monitoring and control of associates is important to enable any potential problems to be
identified before too much damage is done. Customer satisfaction surveys/questionnaires could be useful
as could the use of employed 'area supervisors' who visit or speak to associates and customers.
Answers 127
(c) Direct marketing is a concept that involves the producer of a product interacting directly with the end
customer or consumer. The approach can be summed up as 'cutting out the middle-man'.
Channel
This is sometimes referred to as a 'zero level channel', as there are zero levels between supplier and the
end customer.
Internet
The Internet has enabled more businesses to utilise direct marketing. For example, an airline such as
British Airways may sell tickets direct to the public via its own website (selling flights via a general travel
website isn't 'pure' direct marketing as this involves an intermediary even if that intermediary happens to
be based on the web).
Marketing mix
Using direct marketing has implications for the marketing mix for example promotion can target web
users. Order fulfilment (ie actually delivering the product) is key.
(d) Advantages of the Internet as a marketing channel include the following:
Communication is quick allowing rapid response to customer orders/queries
The range of tasks able to be performed eg promotion, display products, e-commerce
Enables quick price and feature comparison for customers
Can lower costs through reduced need for physical outlets
Provides an opportunity for global reach even for very small organisations
Facilitates information collection and developing customer databases for future promotions
Customer convenience as it may be accessed from home or work at any time
(e) V could use Internet in the following ways.
E-commerce
A website with an e-commerce capability would enable orders to be submitted and paid for on-line (using
credit and debit cards). Efficient order fulfilment is vital.
Product information
The website could also be used to provide detailed product information to customers, for example the
ingredients of different cosmetic products (particularly relevant to those with allergies) provide cosmetic
advice and related discussion groups.
Corporate information
General information about V as a group and about V cosmetics could also be communicated in this way
helping to cultivate the idea of a 'fun' organisation.
Promotion
The site could be used for promotion using web banners and could include links to 'partners' sites and a
search facility (eg access to Google from within V's site).
Target marketing
Micro-site capability for specific target audiences or cosmetic needs could be established.
(f) Ethics is concerned with right and wrong acting responsibly and with a sense of fairness. The main
ethical issues associated with Vs proposal are:
Will the cosmetics be tested on animals and if so will associates and customers be informed?
Where and how will the products be produced? Will this involve factories in developing countries
what about employment conditions, worker remuneration, waste disposal?
Are associates treated fairly? What mark-up is V making?
Is it acceptable to target customers through mobile phones? This could be seen as intrusive and
an abuse of personal information.
Is party selling ethical? V should consider the blurring of business and pleasure and the use of
alcohol at the parties. Are people pressured into attending and then made to feel they should 'join
in' and buy?
128 Answers
25 CW
Marking scheme
Marks
(a) Five aspects of marketing that could be helpful to CW are explained below.
Adopt a marketing orientation
Adopting a marketing orientation involves identifying customer needs and then ensuring these needs are
satisfied. CW has a number of different stakeholder groups that could be considered customers. The
needs of donors, volunteers and of people who will benefit from the charitys work must all be identified
and met. By satisfying the needs of these groups, CW is likely to achieve its overall objectives.
Partnering with commercial organisations (cause marketing)
CW could attempt to form a close relationship with a number of businesses. Suitable organisations should
be identified and approached with the aim of co-operating and collaborating on the running of fundraising
events, and perhaps the running of the charity. The business organisation benefits through being seen as
a good corporate citizen (Corporate Social Responsibility).
Branding
CW could use branding to help it stand out from other charities by establishing a distinctive identity that
communicates its core values. A distinctive logo incorporating clean water and/or healthy crops, with a
suitable strapline, would help keep CW in the forefront of peoples minds. As water is such a basic
commodity, CW could emphasise that every donation really does make a difference, giving donors and
volunteers a reason to choose CW over other charities.
Answers 129
SWOT analysis
The general strategic technique of SWOT analysis could be utilised by CW. The SWOT exercise should
reveal internal strengths and external opportunities that marketing activities should focus on. New income
streams may be identified, and ideas generated from considering the actions of competitors.
Work more closely with key individual donors (relationship marketing)
CW could identify donors who donate significant sums and/or donate regularly and seek to develop this
relationship further (investment in CWs IT systems would be required to facilitate this). A group could be
established, for example Friends of CW who are consulted and communicated with, increasing their
involvement with CW - with the ultimate aim of increasing revenue both directly from these individuals
and indirectly from the insights they provide.
(b) The process of market segmentation
Market segmentation recognises that every market consists of groups of potential buyers (or in this case
donors) with different needs and different buying (or donating) behaviour.
The process of market segmentation subdivides the market into distinct groups, each group made of
homogenous members who react in a similar way to marketing activity (to a distinct marketing mix).
Therefore, a different marketing approach (mix) can be devised for each market segment.
The process of segmentation for CW would involve identifying groups of donors who react to marketing
activity in different ways.
The implications of market segmentation for CW
The implications of market segmentation and targeting for CW are firstly that it needs to analyse the total
potential market for charitable support in Statesland and identify specific groups within this, and secondly
that CW needs to decide upon an appropriate marketing mix to target each group.
Factors that CW should consider as criteria for segmentation include:
Individual or organisation
Gender
Age
Occupation and income
Lifestyle
Geographical location
The process of targeting
Targeting would involve CW deciding which market segments to aim its marketing efforts towards. The
process requires measuring and comparing the potential of segments, and considering how CW could
reach each segment.
When selecting which segments should be targeted, questions CW needs to ask include:
Can the segment be measured?
Is the segment big enough?
Is the segment stable?
Do segments respond differently?
Can the segment be reached cost effectively?
The implications of targeting for CW
External sources such as national statistics may help establish levels of charitable giving and provide an
indication to the potential of a segment.
When devising an appropriate marketing mix the traditional 4Ps (product, promotion, place and price)
and the three extra Ps (people, process and physical evidence) should all be considered.
To target specific market segments CWs marketing activities will need to be more sophisticated, rather
than simply using undifferentiated marketing (targeting the whole market with one marketing mix). Its
likely that CW will decide to follow a differentiated (targeting several segments with distinctive mixes
unique to each) approach rather than restricting itself to a single market segment with a single mix
(concentrated approach).
130 Answers
(c) Two types of promotional activity CW may consider using are television advertising and viral marketing.
Television advertising
Television advertising would involve producing an audio-visual commercial and purchasing broadcasting
slots to air this on selected television channels.
Possible ethical concerns of television advertising
Television advertising is expensive and could be seen as inappropriate and wasteful for a charity that
prides itself on low overheads. Donors may resent a proportion of their donation paying for advertising.
Television advertisements often also tend to play on peoples emotions to encourage them to donate,
which some may see as unethical.
Using viral marketing as a promotion tool
Viral marketing involves the use of social networks to further marketing objectives. CW could set up a
page on Facebook and Twitter, with links to a site such as Justgiving that allow donors to donate online.
Video clips could be used to show the good work being done by CW. Individuals should be encouraged to
email links and information to members of their individual network.
Possible ethical concerns of using viral marketing
An online presence on sites such as Facebook could be seen as an attempt to engage with children or
adolescents, which some may see as unethical. Its unlikely that children could donate online as this
would require a debit or credit card, but they could be encouraged to persuade their parents to donate
and to volunteer in shops.
The use of viral marketing and in particular social networking sites could also be seen to trivialise matters
of life and death. It could also result in unwanted email (SPAM) through the use of tell a friend links.
26 DD
Marking scheme
Marks
(a) Some of DDs activities have implications for its ethical stance and CSR position.
Aiming television advertising at children and teenagers could be seen as unethical and irresponsible.
Children do not have the ability to make reasoned judgements. Encouraging children to drink potentially
unhealthy products will be seen as unethical by some, and contradicts DDs commitment to behave
ethically while helping improve the quality of life of society generally. Targeting teenagers is less
controversial, as teenagers understand the concept of advertising and should be able to make an informed
decision.
Whilst supporting sporting events and promoting healthy lifestyles could be seen as ethical, it could also
be seen as unethical. By trying to establish a link between healthy activities and its possibly unhealthy
products, DD could be seen as hypocritical and be accused of misleading the public, particularly children.
The celebrity endorsement of Mr TT has caused concern. Mr TTs association with exploitation of females,
violence and bad language does not fit with DDs ethical, responsible image. However, Mr TT appears to
appeal to teenagers, DDs target segment.
Involvement with Mr TT exposes what seems to be a fundamental mismatch between DDs squeaky clean
ethical and CSR position and the attitudes of a key target market (teenagers). Whether DD should be
overly concerned about the people offended by their association with Mr TT is debatable, as these people
probably dont buy DDs products.
The admission by DD that using Mr TT was a mistake will have positive and negative repercussions. The
back-down may limit damage to DDs ethical, responsible reputation, but to a large extent the damage to
their reputation has been done. By ending its association with Mr TT, DD may have lost credibility with a
key target market, teenagers. This could damage sales, for example teenagers may start an online
campaign in support of Mr TT and start a boycott of DD.
It isnt clear from the scenario how long has elapsed since the health watchdog report stating that DDs
products have high sugar levels and linking them to gum and tooth decay was released. It is essential that
DD responds promptly and honestly to the report. It may be necessary to introduce low sugar products
to better reflect the current expectations of society.
One aspect of DDs activities that should help support its ethical, socially responsible stance is the
donating of a percentage profits to a number of local charitable causes every year. However, if the
products themselves are seen as unhealthy and DD appears to be misleading the public, this will
outweigh the positive public sentiment generated by the donations.
(b) Market positioning involves designing the company's offer and image so that it occupies a distinct and
valued place in the target customer's mind.
DDs main target market appears to be children and teenagers, as most advertising targets this group.
The marketing mix (product, price, promotion, place) and branding play an important role in DDs
positioning to appeal to children and teenagers.
The product includes the drink itself, the packaging and the package of benefits the consumer gets from
the purchase. The taste, ingredients, any health benefits (or adverse effects) and physiological benefits
such as feeling part of a particular social group are relevant. The social aspect is particularly important for
teenagers who generally seek social acceptance and want to be seen as cool or hip.
DDs pricing strategy is typical of that found in the soft drink sector. DDs premium products are branded
as DD offerings. DD produces other, cheaper products that are branded in a different way, for example
supermarket own brands. Price is used to reinforce customer perceptions of quality the implication is
that a DD branded drink must be higher quality as it is more expensive. Teenagers, even those who are
relatively cash poor, are often prepared to pay a premium price to buy-in to the brand culture (if they
identify with it).
Promotion has proved to be problematic for DD. The target market of teenagers identify with personalities
such as Mr TT whose image seems at odds with DDs highly ethical, socially responsible public image. To
retain credibility with a key target market (teenagers), DD may need to consider relaxing its ethical stance
and trusting the public to understand that a relationship between DD and with Mr TT does not mean DD
endorses violence and the exploitation of women. The alternative would be to perhaps target a different
market segment, such as the over 20s. This would probably require product development (perhaps a
sports rehydration drink) and some market repositioning, which carries risk.
132 Answers
Place refers to how the product is distributed and how it reaches its customers. Soft drinks are generally
purchased at supermarkets, other convenience stores and from vending machines. The support of the
large supermarket chains is vital to ensure an effective route to market (supermarket shelf space is highly
sought after). Teenagers are increasingly using supermarkets, particularly the smaller local or metro
stores located in town and city centres.
Branding is important in the drinks industry. Effective branding can result in a drink becoming associated
with a certain attitude and lifestyle. This breeds brand loyalty, and explains why people are often
prepared to pay more for a branded drink than they will for a supermarket own brand product that they
may actually struggle to taste the difference between in a blind tasting. Branding requires extensive,
effective advertising, so is expensive. Effective spending on branding is an investment in future sales.
(c) The likely benefits of DDs increased use of the Internet for marketing purposes include the following.
Increasing online advertising should enable DD to spend less on television advertising
The Internet provides DD with the potential to establish a community and to spread its message using e-
mail and social networking tools such as Facebook (to go viral).
The Internet provides interactivity, speed (instant feedback) and convenience (including access via
mobile devices). Potentially, DD can reach people anywhere, anytime. This is particularly true of
teenagers, who tend to be early adopters of technology such as the mobile web (and fans of web 2.0 with
users interacting and collaborating with each other).
DD can use the Internet to forge relationships with other organisations, both commercial and charitable.
For example, the DD website could host music quizzes with electronic iTunes vouchers as prizes. Links to
charities could also be provided, free of charge, to reinforce DDs ethical, responsible position.
DD could also launch a mobile application (get the DD app). To appeal, this must be credible and offer
something more than just DD marketing material. For example, a deal with a record label could be struck
which allowed limited streaming of music videos through the DD app.
27 99
Marking scheme
Marks
(b) Aspects of product mix and place mix in a deal between Z and 99
There are benefits for both 99 and Z in a deal that has the potential to improve the product mix and place
mix for both of them.
Product mix
E believes that a deal with Z would enable 99 to make use of Zs expertise to develop the 99 brand
further. This may involve adding to 99s product range, expanding its product mix.
A deal with Z may involve further investment in the 99 brand name. The brand is an aspect of product,
and a stronger brand would benefit the product mix for 99.
99 currently sells its products in ordinary plastic bottles, whereas Z has plans to make all packaging
biodegradable or recyclable. This form of packaging would strengthen the concept of 99s products as
environmentally-friendly and so would strengthen its product mix.
Z has carbon labelling for its products. 99 may not have the facilities to do this, and a deal with Z may
therefore enable it to apply carbon labelling to its products for the first time. If so, this may add to the
environmental credentials of its products.
Z may be willing to invest in improvements to operations at 99, so that 99 is able to offer its two
products in a wider variety of forms, such as in larger or smaller-sized bottles, or even with some form of
discrete flavouring. Adding to 99s product range would add to its product mix.
For Z, the acquisition of 99 would complement its product portfolio. This suggests that Z does not yet sell
bottled water. In principle, a large company could develop new products internally, but this would take
time. The acquisition of 99 would enable it to obtain these new products immediately.
Place mix
At the moment 99 sells its products in a few garages, on airplane flights and in airport shops. Its
distribution is therefore limited. 99 is currently unable to get its products stocked in supermarkets. A deal
with Z would enable 99 to sell through supermarkets, which would improve the place mix for 99.
Zs distribution involves the use of low-carbon vehicles. Its likely that a deal with Z would therefore make
distribution more environmentally-friendly for 99s products. This would enable supermarkets to be
supplied in an acceptable way to 99s customers, improving the place mix.
99 could also make use of the entire distribution system of Z, including its warehouses and inventory
management systems as well as its distribution system.
A attraction of a deal for the owner of 99 is that Z has promised to increase the number of water pumps
supplied to poorer communities. This is indirectly related to place mix for 99, because the effect of the
deal would be to increase the distribution of water pumps to communities around the world.
For Z, a deal with 99 would not affect its place mix significantly, except that its distribution systems
would need to handle 99s products.
(c) Positive features of 99s success
99 employs just ten people, and it may therefore be argued that the HR policies at 99 will not be
applicable to a much larger organisation such as Z. However, the same features of the HR policies at 99
that may have helped to improve its operating and financial performance may be of value in a review of
Zs HR activities.
There has been no staff turnover at 99. This may be due to the fact that employees enjoy working for an
ethical employer and being involved with an environmentally sound company. Z may wish to consider
whether its employee retention rate may be improved by involving its employees more in the
environmental or socially beneficial aspects of its activities.
For similar reasons, Z may wish to consider whether potential recruits to the company might be attracted
by a strong sense of ethical working. It is possible that over time, talented individuals will demonstrate
an increasing preference for ethical working, even if salaries are not as high as obtainable elsewhere.
Because 99 employs only ten people, its likely that many employees will be involved in a variety of
activities, such as production, administration, marketing and selling. There may be lessons for Z to learn
from the variety of the work that 99s employees are given, and the responsibility that goes with it. A re-
design of jobs at Z may help to create a more motivated and productive workforce.
Answers 135
The wages of 99s employees are modest. This indicates that employees are motivated by factors other
than (or in addition to) pay. Z may therefore be interested to consider the non-financial elements of
working and the internal rewards of a motivating job.
A notable feature of 99s policies has been to involve employees directly in the installation of water
pumps in poor communities around the world. This helps employees to associate the work that they do,
and the mission and objectives of their employer, with the creation of social and environmental benefits.
This can be personally rewarding. It also enables employees to visit countries in the world that they would
not otherwise visit, thereby giving them a valuable life experience. Z maybe interested in introducing
similar aspects of charity work to other areas of its operations and other employees these activities can
increase employee loyalty and retention.
28 iB4e
Marking scheme
Marks
(a) The CEO of iB4e has stated that sharpening the focus should centre on:
Improved corporate performance
Connecting more closely with customers
Improving marketing practices.
The contribution that effective brand management can make should be considered in relation to these
three issues.
136 Answers
(b) There are several advantages for iB4e in developing a total reward package approach.
Rewards for employees do not consist of pay and nothing else. Pay is important, but a pension scheme,
flexitime arrangements, training opportunities, a subsidised canteen and a company sports club all add to
the value of working for iB4e. The company should promote all these benefits, so that employees and
potential employees are made aware of them.
The company has experienced difficulties in recruiting individuals from outside the organisation, even
though it offers salaries that are comparable to those offered by competitors. Until she took up her
position, the Director of Branding was unaware of all the additional benefits for employees. By making the
total reward package more apparent, the company should be able to improve its success rate in
attracting well-qualified candidates to apply for a job.
A total reward package should also make existing employees more aware of the benefits they are getting
(which they may be able to compare with the rewards offered by other employers). If the total package is
attractive, employees will be more willing to remain with the company, so that staff turnover (which has
been a problem for iB4e) may be reduced.
Answers 137
It is recognised that pay is not the only motivator for employees. By promoting the total rewards available
to employees, and making employees more aware of them, the company may succeed in improving
employee motivation (although firm evidence may be difficult to obtain).
A total rewards package does not ignore the significance of incentives through pay, and incentives for
good performance can be included within the total package.
It has been suggested (by Carrington) that a total reward scheme can be used to make a positive
statement about the culture of the company, and help to create a better sense of unity rather than a
them and us mentality within the organisation. Strong employer branding and a strong sense of
company culture may, as suggested above, result in improved recruitment and employee retention.
Disadvantages
There may also be disadvantages with developing a total reward package approach.
Cost. To offer an attractive total package of rewards, the company may have to commit itself to higher
staff costs and staff welfare costs.
Preference for salary. Some employees may prefer to have a higher salary than a lower salary plus a
range of additional benefits. Some employees may think that management are promoting the total
package as a scheme to keep salaries lower, and as a consequence ask for higher salaries.
Effect. A total reward package approach may not have a huge effect on the recruitment and retention of
staff, as many people tend to focus on salary. The failure to recruit enough people and the loss of
experienced staff may also be due to other factors, such as poor recruitment procedures and
dissatisfaction with management style.
Stagnation. There may be some risk that if employees are satisfied with the total package they are
receiving, they will lose motivation to improve their position in the company. If so, this could encourage
stagnation and loss of initiative and innovation within the company.
Once implemented, a total rewards package approach will be difficult to change. Management need to be
confident that they have an acceptable and sustainable package to offer before they start to promote it.
(c) Internal marketing could have value for iB4e in a number of ways.
Internal marketing could be used to create, develop and maintain an internal service culture and
orientation, which would improve internal communication and support the achievement of iB4Es goals.
The basic premise behind internal marketing is that employee behaviour and attitudes affect the
relationship between employees and the organisations customers. By improving employees ability to
relate well with customers and to demonstrate a customer orientation, internal marketing would improve
customer service and the customers perception of iB4E - and customer loyalty.
Internal marketing in effect means selling the need for customer orientation to employees. iB4e could
use internal communications, employee development and training, empowerment, clear performance
targets and measures and a system of recognition and rewards. Successful internal marketing will ensure
the need for a customer-oriented approach is felt throughout iB4e.
At iB4e, employees without experience of dealing with customers have been put into customer
relationship management roles. Successful internal marketing should improve the standard of customer
relationship management. If so, iB4e will benefit from stronger customer loyalty, more sales and higher
profit.
By marketing a new internal rewards package internally, iB4E should increase the chances of staff
accepting and buying in to the scheme, improving motivation and efficiency.
138 Answers
29 TT Drinks Company
Marking scheme
Marks
(a) To be considered effective, TTs new strategic marketing plan should have the following features.
Clear aim and purpose
TTs new strategic marketing plan should set out how TT wishes to market itself in order to achieve its
corporate goals. It must be clear what the aim of the plan is, this should be stated clearly at the start of
the plan.
Compatibility with corporate strategy
Strategic marketing plans should facilitate the achievement of corporate goals. Therefore TTs new plan
should be driven by, and be compatible with, its overall corporate strategy.
Internal appraisal
TT should conduct a marketing audit (or review of its marketing activities). It should look at its strengths
and weaknesses for example, does it have a strong brand or is the marketing team sufficiently trained.
External appraisal
TT should then focus on its external environment and look for opportunities and threats which it may
exploit or need protecting against. For example are there new markets that it could sell its products to or
does its customers want it to innovate new products rather than continue with its me too approach.
Answers 139
Gap analysis
Following on from internal and external appraisal, TT should conduct a gap analysis to identify markets
which it is not doing as well as it should. This information can be used to help target marketing resources
more effectively.
A clear marketing strategy markets, products and customers
The information generated from the internal and external appraisals, the gap analysis and other sources
should be analysed and a clear marketing strategy developed. This strategy should drive the use of
marketing resources. It should identify target markets and customer needs, plan products to satisfy those
needs and organise marketing resources to match products and customers.
SMART objectives
TTs plan should set specific, measurable, achievable, relevant goals which should be achieved within a
time-frame. This may be, for example, to increase market share or turnover by X% within three years.
Implementation, monitoring and control
Finally, TTs plan should set out how the strategy should be put into action and how progress will be
monitored. If progress does not proceed as planned, TT should take control action to move things back on
track. In some circumstances, for example if the environment changes, it may be necessary to re-plan.
(b) TTs new Director of Marketing has identified two models which are appropriate to managing the
organisations product portfolio. The models are the product lifecycle and the BCG matrix.
Product lifecycle
The product lifecycle helps an organisation understand its products by identifying a number of stages that
products go through from their introduction until they are terminated. The stages are Introduction,
Growth, Maturity and Decline.
The product lifecycle model would help TT manage its portfolio in a number of ways.
Ensure a balance of products at different lifecycle stages
TT should ensure its product portfolio is balanced. For example, if it has products in decline, it needs
newer products that are earlier in the lifecycle coming through to maintain revenue. TT needs to ensure
that as older products are terminated they are replaced with new products coming through.
Investment decisions
By identifying which stage in the lifecycle a product is in a decision can be made as to how best manage
it for maximum profitability, for example whether it is worth investing further resources in. Products in the
introduction stage require significant investment, for example on advertising.
Product termination
The lifecycle model will encourage TT to look more critically at products, and perhaps accept that some
are entering the decline stage and should possibly be removed to make room in the portfolio for more
innovative products with a brighter future.
BCG matrix
The Boston Consulting Group (or BCG) matrix classifies products according to their market share and
growth in the market. A product can be classified as one of four categories, Question Mark, Star, Cash
Cow and Dog.
The BCG model would help TT manage its portfolio in a number of ways.
Ensure a balance of products in different BCG model categories
This model will help TT assess the role of each product within its product range. As with the product
lifecycle, TT should aim to have products in various categories of the BCG matrix to ensure on-going
profitability. For example, products classified as Dogs are in decline and need to be balanced by products
in the other three categories.
140 Answers
Spending decisions
By identifying Star products, TT will then be able to direct funds (for example advertising spend)
appropriately with the aim of ensuring a product remains a Star for as long as possible. At some point, a
Star is likely to become a Cash Cow. Cash Cows typically make substantial contributions to an
organisations profits but are usually further along in the product lifecycle meaning it may be appropriate
to harvest its returns by cutting back on marketing expenditure.
Product development and termination decisions
The matrix will encourage TT to think and make decisions about Question Mark products. These products
may require significant investment or product development to compete with competitor products, so a
decision needs to be made as to whether this investment is justified.
Question mark products may be in an early stage of the product lifecycle, but still not justify significant
investment the BCG matrix helps identify products that may best be withdrawn early in the lifecycle.
(c) According to Goldsmith and Samson (2004), sustainability is a long-term programme involving a series of
sustainable development practices, aimed at improving organisational efficiency, stakeholder support and
marketing edge. Sustainability practices include reducing waste, using less energy and recycling as part of
an organisations operations.
Benefits that the introduction of sustainability might bring to TT include:
Cost saving
By changing its operations to use resources more efficiently, TT should see a cost saving as fewer inputs
are required for the same amount of output and where waste and by-products are re-used by the
company and its suppliers.
Quality improvement
As part of becoming more efficient, new operating practices might be introduced to improve quality. This
is typically seen in organisations which move towards lean operations that reduce waste.
Stakeholder support
Sustainability may prove popular with stakeholders, such as the local community, who stand to benefit
from less pollution. Their support may be important in the future.
Marketing edge
Moving to sustainability is becoming increasingly important as organisations look to promote themselves
as ethical and socially responsible. Products which are produced sustainably are desired by customers
and organisations which adopt sustainable practices will benefit from promoting themselves as green.
30 CXC
Text reference. Chapters 8 and 11.
Top tips. You can base your answer to part (a) around a SWOT analysis (minus the strengths and opportunities
of course!)
Easy marks. Thinking of factors to consider regarding the bonus scheme in part (c).
Examiners comments. This question was generally answered reasonably well with some strong answers to part
(c). With regard to part (b), some candidates did not really discuss the process of strategic marketing planning,
but instead described actions to be taken.
Answers 141
Marking scheme
Marks
Direct selling
CXC has only recently trialled telephone sales and therefore lacks experience in operating this channel.
Continuing to operate this function may pose a threat to the reputation of the organisation as customers
are complaining of poor service.
Online trading
A lack of an online sales presence is a major threat to the reputation of the organisation. Customers are
likely to see competitors offering online sales and may switch to them as it is more convenient to them.
(b) Developing a strategic marketing plan
A strategic marketing plan should look 3 to 5 years in the future, define the organisations product and
marketing activities and match the organisations activities to its competencies. It may be necessary to
clarify CXCs corporate objectives in order to define the marketing strategy.
CXCs working party should develop a new strategic marketing plan as follows:
Set objectives
Objectives drive the rest of the plan and must be specific, measurable, achievable, realistic and time-
bound. For example to increase market share by 5% in 2 years.
Internal appraisal
The working party should look at the strengths and weaknesses of the organisation in terms of its
marketing. A marketing audit and review of marketing activities should be performed.
External appraisal
Opportunities and threats should then be considered. These are usually environmental factors in
connection with customers, products and markets.
Gap analysis
Any gap between the objectives set and what might be realistically achieved should be analysed.
Develop strategy
The working party should develop strategies to fill the gap. This may mean, for example, reallocating
resources, identifying new markets and developing new products as appropriate.
Practical issues
The working party will have to consider a number of other issues that will be affected by the plan. These
issues may include:
The need for staff training and a training budget
Methods of monitoring performance against the plan
Identifying who should be responsible for certain aspects of the plan
Integrating the plan within the overall corporate strategy
Communicating the plan and gaining the support and buy-in of all staff involved
(c) Bonus scheme considerations
CXC should consider the following issues when devising a bonus scheme for its sales associates:
Fairness
Sales associates must feel that the bonuses are fair and achievable. Targets that are unrealistic will not
motivate employees to increase sales.
Cost
The amount of the bonus payment should be in proportion to the amount of sales revenue gained. The
business should increase its returns as a consequence of the scheme.
Pay differentials
Other groups within CXC should be considered as they may be unhappy if the pay differentials change
significantly as a consequence of the scheme. The motivation of staff not on bonus schemes might be
affected.
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Understandable
The scheme should be simple to understand so that sales associates can work out how much they will
benefit if they increase sales. Simplicity is also important to the payroll department responsible for
calculating and paying the bonuses.
Team or individual based bonus
Consideration should be made of whether individuals should receive a bonus based on their own
performance, or whether a bonus paid to all sales associates based on the performance of the whole team
is more appropriate.
31 H345
Marking scheme
Marks
(a) Reasons for the Chief Executive attaching importance to H345s brand
The Chief Executive of H345 attaches a great deal of importance to the companys brand. There could be
a number of reasons for this including the following.
Product differentiation
Branding aids product differentiation, conveying a lot of information very quickly and concisely. This helps
customers readily to identify the goods or services and thereby helps to create customer loyalty to the
brand. It is therefore a means of increasing or maintaining sales.
Marketing
Branding maximises the impact of advertising for product identification and recognition. The more similar
a product (whether an industrial good or consumer good) is to competing goods, the more branding is
necessary to create a separate product identity. This is of great importance to the market that H345
operates in where clothing is fairly homogeneous (a shirt is a shirt wherever it is bought from).
144 Answers
Market segmentation
Branding supports market segmentation. In H345s case the company is seeking to gain back its market
share in the affordable, but quality clothing market. The company should therefore focus its attention by
communicating the brand in this part of the market rather than targeting other, less important segments.
Brand value
A brand is an asset of a company because it has a value. The value is effectively the premium that can be
charged for goods that carry the brand. By focussing on H345s brand, the Chief Executive will be aiming
to improve the value of the brand (perhaps through communicating the brands message to customers and
building brand awareness). This may have a short-term cost implication, but in the long-term it should
increase sales and improve asset value of the business.
Connection with customers
Through improved brand awareness and communication, the Chief Executive will be looking to re-
establish the brands connection with its customers. Satisfied customers who share the values of the
brand may develop an emotional connection with the organisation. This will help secure repeat business
through customer satisfaction and loyalty. A loyal customer base will provide the company with a more
secure revenue base to build its future on.
(b) Five aspects of H345s marketing operations for the Chief Executive to review
There are a number of marketing aspects that the Chief Executive could review. Five examples include:
Marketing orientation
Market analysts have commented that H345 has lost touch with its customers and this is why it has lost
market share. A reason for this could be that the business has become sales oriented, that is just
concerned with generating cash. If the business switches its philosophy to that of a marketing approach,
where it centres its activities on satisfying the needs and wants of its customers, it may be able to win
them back.
Market research
In order to reconnect with its customers and understand their needs, H345 should look at researching its
market and the needs of the customer. A variety of research techniques can be used, such as customer
surveys, focus groups and desk-based research on the Internet or looking at market reports by third
parties. The company needs to truly understand its customer base and should develop a picture of the
age, sex, social group and geographic location of them. This information can be used to segment the
market and target the customer.
Market segmentation and targeting
Using the information from the market research, H345 should firstly segment its market. This means to
sub-divide it into small groups that share similar characteristics, for example males and female, age range
(teens, twenties and over thirties) and style of clothing (modern, traditional). Once the market has been
segmented, the company can select the most profitable segments to concentrate its marketing activities.
This will ensure the maximum results are gain from the investment in marketing.
Marketing mix
H345s marketing mix includes price, place, product and promotion the basic decisions that the
company has to make in regards to its marketing. The particular mix that H345 chooses should be
determined by the needs of the customer and the target market that it has already identified. There are a
number of variables for H345 to consider in regards to its marketing mix for example prices could vary
considerably - but there are limits to what the target market is prepared to pay, especially if the company
continues to market to the affordable market.
Marketing performance against competitors
In recent years, H345 has lost market share to new competitors who have entered the market. This loss
of market share has been caused by the competition meeting customer needs when H345 has failed to
do so. In order to regain market share, the business should review what it and its competitors have done
over the time period to account for the difference. This will provide H345 will valuable information, firstly
to understand its past mistakes (so as not to repeat them), and secondly to understand what the
competition did that was successful (to help it develop future plans).
Answers 145
32.2 D The so-called 'psychological contract' is a notion that is based on the expectations the organisation
and employee have of one another.
32.3 D CIMA's ethical guidelines require members to act responsibly, honour any legal contract of
employment and conform to employment legislation.
32.5 Recruitment involves employing people from outside the organisation. It includes finding applicants,
communicating opportunities and information and generating interest.
Selection is the process of choosing who is offered the job. Selection involves procedures to choose the
successful candidate from those made available through the recruitment process.
32.6 Herzberg identified hygiene factors as factors that don't motivate when present, but cause dissatisfaction
if not present. An example is salary level. The argument is that employees who feel poorly rewarded could
be demotivated, but that monetary reward (on its own) does not provide consistent motivation.
32.7 Potential benefits to DES are increased employee motivation and productivity, increased employee
commitment, ability to attract high performing individuals, reduced absenteeism and reduced staff
turnover.
Potential benefits to the employee include easier balancing of personal and professional priorities and
feeling valued which could lead to increased job satisfaction.
Answers 147
33.2 B The main risk of performance related pay is demotivation. The other problems can either be
overcome or are simply not relevant to PRP.
33.4 D Charles Handy's 'shamrock organisation' consists of a three-leaf structure of core, contractual and
flexible part-time employees.
33.5 Advantages
Tailored to an organisation's specific requirements.
Cost effective when provided by in-house staff.
Disadvantages
Participants may be distracted by on-going work issues.
More likely to cancel due to lack of a cancellation fee.
34 ARi9
35 Middleregion
Marking scheme
Marks
(a) Middleregions HR department should focus on developing a high level HR strategy that can be applied
by managers to meet their needs and employees the needs of employees. The strategy should enable staff
to effectively deliver education, social care and environmental services.
Middleregions HR department should develop policies and practices covering the key areas of HRM.
Devanna identified four key aspects of HR, discussed below.
Effective recruitment and selection practices are important to ensure Middleregion obtains people
with the qualities and skills required. Succession planning is also important.
The appraisal system should enable targets to be set that contribute to the achievement of the
overall strategic objectives of Middleregion. It should also identify skills and performance gaps and
provide information relevant to reward levels.
Effective training and development practices are required to ensure employee skills remain up-to-
date, relevant, and comparable with (or better than) other public and private sector organisations.
The reward system should motivate and ensure valued staff are retained.
152 Answers
A key influence on the HR practices developed would be the structure or hierarchy in place. The trend is
towards flexible, flatter structures, with teams often built around specific initiatives or projects. HR
planning and practices need to take into account the need for flexibility and constant environmental
change or uncertainty.
The HR department should also ensure HR practices are co-ordinated. Devanna points out that the
overall performance of the organisation depends upon each of the four components and how they are co-
ordinated.
The contributions of Middleregions line managers is more likely to be in implementing HR practices
developed by the HR department.
The strategy developed by the HR department should allow some flexibility to line managers, enabling
them to ensure procedures are appropriate for local conditions and to the service being provided.
Another key contribution of line managers is to provide effective leadership. Part of this involves ensuring
individuals are clear about their role and responsibilities. It also involves motivating employees, and
supporting them to ensure they have the resources required to do their job.
If high quality employees are to be retained by Middleregion, it is important they have opportunity for
career progression and development. Line managers play an important part identifying individuals for
progression and providing the opportunities they need.
To help staff retention, line managers could consider the implementation of job enlargement (adding
additional tasks) and job enrichment (increasing responsibility) schemes to help employee motivation and
prevent staleness.
Line managers should also encourage teamwork, this is always important, but even more so in project-
based teams
(b) Middleregion requires a workforce strategy that takes account of a changing environment and is relevant
to local conditions.
The workforce or HR planning process should follow the steps outlined below (based on Mullins).
1 Start with the corporate strategic objectives
The starting point for workforce strategy is the overall objectives of the organisation. It is these
objectives that the organisations people are tasked with delivering.
Middleregions strategic objectives should ensure the efficient and effective delivery of education,
social care and environmental services.
To take into account the changing, volatile environment, strategic objectives should be reassessed
regularly, for example every year (ie shorter planning time frame).
2 Design the organisation structure
Middleregions organisation structure should be designed to enable strategic objectives to be
delivered. To provide flexibility, a relatively flat, project-based structure is likely to be required to
deliver education, social care and environmental services.
There may be potential for some employees to work across different functional areas at different
times. For example a project manager may be equally able to manage an education project as a
social work project (given sufficient specialist expertise within the project team).
3 Develop HR plan
The strategic HR plan includes forecasts of human resource supply and what is required to deliver
organisation objectives (ie the organisations HR demand).
The plan aims to ensure Middleregion has the right number of people, with the right skills, in place
at the right time.
People and / or skill shortages must be identified and a plan to match demand with supply drawn
up. In some areas there may be an over supply of resource, perhaps requiring redundancies or
retraining.
Succession planning, particularly for senior positions should be considered.
Answers 153
(c) The costs Middleregion should take account of when considering moving to e-HR include development
costs, implementation costs and running costs. The cost of the system will depend on the range of HR
tasks moving to e-HR.
Development costs include the costs associated with systems analysts establishing system requirements
and costs associated with software development. It may be possible to purchase an existing system off
the shelf or one in use by another government region. Developing a new system from scratch would be
the most expensive development option.
Implementation costs would include costs of new hardware, costs associated with system changeover
(for example file conversion) and user training costs. Ensuring that existing HR records are transferred
accurately to the new system may require some human checking, which can be expensive. Training may
be able to be provided through online tutorials, which are significantly cheaper than face-to-face sessions.
Running costs include maintenance costs, software-leasing costs, hardware-leasing costs, system
security costs, database administration costs and on-going user support. Effective security is important
when dealing with sensitive data, such as salaries. Users should have access to both online and
telephone support there will be a cost associated with this regardless of whether support is delivered by
in-house staff or outsourced.
It is possible the move to e-HR will result in some redundancies, so there may also be redundancy costs.
For example e-HR systems can effectively monitor sickness absence and accurately monitor and promote
action to support equality and diversity in the workforce. Fewer people will be required to monitor and
record this data.
The costs of moving to e-HR should be balanced against existing HR costs that may be reduced or
eliminated when the new system is introduced. An effective e-HR system can free up HR staff to work on
tasks that support the new workforce strategy.
154 Answers
36 2TW
Marking scheme
Marks
(a) Up to 2 marks per valid point referenced to the scenario; 1 point each for brief general 10
(but relevant) points
(b) Up to 2 marks per valid point referenced to the scenario; 1 point each for brief general 10
(but relevant) points
(c) 1 mark each for each point. Referring clearly to S, M, A, R and T should be sufficient for 5
five marks, especially with references to the scenario)
25
Our answer shows what we consider the most appropriate points to make. Other relevant points that
answer the question would earn marks. However, irrelevant points that do not answer the question would
not earn marks.
2TW would benefit from a systematic implementation of quality processes and procedures throughout
the organisation and throughout all SBUs. The differences in efficiency standards between SBUs should
be reduced (or eliminated).
If high standards of quality and efficiency are achieved in all SBUs, this should lessen the CEOs fear of
loss of control over SBU operations.
The management consultants reported that quality control systems were inadequate. Quality control
systems may rely on the detection of faults and errors in production through inspection and testing.
ISO9000 is a quality assurance system, which involves raising the quality of procedures to a high level
so that errors do not occur in the first place.
Eliminating errors rather than detecting them should help to improve the efficiency and reduce the costs
of quality management. Customers should benefit from improvements in quality, and the number of
returned goods should fall considerably.
Fewer returned goods will mean fewer replacements and less re-working of faulty items, so that the
costs to 2TW should fall and profitability should improve.
The reputation of 2TW for quality should improve. By publicising its ISO9000 certification, 2TW should
also be able to raise customers expectations about the quality of its products. An improvement in
reputation for quality may stimulate higher sales demand (throughout Europe) and a greater willingness
of stockists (such as retailers) around Europe to sell 2TWs products.
Better quality assurance may help to improve employee morale. It should make employees more aware of
the importance of quality, and may therefore support efforts by management to continue raising quality
standards and improving efficiency. Quality assurance should lead to continuous improvement.
(b) Factors to take into account when redesigning a remuneration and rewards package.
When redesigning a remuneration package, consideration must be given to how the overall package
should be divided between basic pay and other types of incentive. There should be a clear idea of the
relative size of basic salary as opposed to other rewards.
The potential size of the remuneration package for each individual SBU manager should also relate to
the size of the SBU and its potential to contribute to the companys profitability. The same package will
not be appropriate for every individual SBU manager.
The significance of other non-financial benefits for SBU managers should also be considered, such as
opportunities for promotion and career development. Non-financial incentives may reduce the need to
offer high levels of remuneration or financial incentive.
2TW needs to consider the levels of remuneration and types of reward scheme offered by rival
companies. Its remuneration scheme needs to compare sufficiently favourably with others to prevent
discontent among SBU managers and the risk of losing talented managers and having difficulty in
recruiting replacements.
Consideration should also be given to the effect that the rewards scheme for SBU managers may have on
other managers and employees in 2TW. The scheme needs to be accepted as fair and reasonable;
otherwise it will stir up discontent and demands from other employees for improvements in their
remuneration.
The total cost of the remuneration scheme and incentives should be within the limits of what it is
appropriate to pay to SBU managers. The costs of the scheme should not be so high that its benefits
come into question.
The current incentive system for SBUs, based on bonuses for achieving sales targets, is inappropriate
given that sales revenue is increasing but profitability falling. Appropriate incentive targets (performance
measures) should relate to aspects of performance that the SBUs are able to control. They should also
relate to aspects of quality (or efficiency) and profitability.
The incentive package needs to be effective, which means that it should be successful in motivating SBU
managers to improve the performance of their units. This is another reason why the selection of
performance measures is extremely important. Incentives should also cover both short term (for example,
annual bonuses) and longer term results (for example, the award of share options).
156 Answers
SBU managers will need to agree their performance targets and their incentive arrangements. To achieve
agreement there must be open and honest discussion and negotiation, so that the SBU managers are
satisfied that the scheme is fair. Senior management should avoid a confrontational approach by trying to
impose the new scheme.
37 TB
Marking scheme
Marks
(a) Up to 2 marks per way of meeting the challenges referenced to the scenario 10
(b) Up to 2 marks per valid point referenced to the scenario 10
(c) Up to 2 marks per valid point referenced to the scenario 5
25
Our answer shows what we consider the most appropriate points to make. Other relevant points that
answer the question would earn marks. However, irrelevant points that do not answer the question would
not earn marks.
(a) There are a number of ways in which managers of teams in companies like TB, that have team members
spread across the world, can meet the challenges this brings.
Use of technology to communicate and to tie the team together
Team members spread around the world often find it difficult to visualise and identify with the wider team
they are part of. TB is already utilising technology to improve communication. It could extend this to the
use of shared resources held on a central server, for example an intranet.
Communication is key to managing any team as it allows information to flow and for relationships to be
built. Geographically dispersed teams are no different it is just the type of communication which is
different (being more often electronic rather than face-to-face).
The team manager must be creative in their use of technology and willingness to use it. They should
identify the types of communication which work best for their team and use them wherever possible.
Consistent induction and training processes
It is important that all team members work in a similar way and all have the same understanding and
knowledge. This can be difficult to achieve with team members based in different locations. A single,
consistent induction and training programme can help ensure a consistent levels of expectation,
knowledge and performance across the whole team.
Clear lines of authority and role responsibility
A persons authority and responsibility is often communicated in part by their personality and in person
interactions with others. With geographically dispersed teams, relying upon electronic communication,
these clues and informal discussions to establish responsibility are often absent.
It is essential therefore that all team members are aware of the team structure, roles and responsibilities
these must be clear and available for all to see. For example, in global organisations, it is essential people
know who is responsible for a particular customer or contract that operates in different regions.
Be aware of possible cultural differences
Employees who live in different locations and cultures may have different personal goals. For example,
some cultures are more work focussed than others, with the achievement of promotion and status a key
motivator.
A manager of a geographically dispersed team should be aware of differences between goals of individuals
within their team and to try to ensure all act in a way that helps achieve the organisations goals. This
may require devoting more time managing and mentoring employees than if they were in one central
location.
Build team spirit
Building a sense of team spirit and cooperation can be more difficult when team members are spread
around the world. Employees who only communicate by email or other electronic means do not share the
spirit of collaboration to the same degree and communications become more pressured in tone and
demands. For example an employee may only hear from another when their work is late or something has
gone wrong.
158 Answers
A manager of a dispersed team should encourage collaboration between employees. This may be
achieved through face-to-face team building events but could also be achieved through giving employees
projects to achieve as a team.
(b) Homeworking involves staff performing their role at home and is made possible by developments in
information technology. There are a number of advantages and disadvantages of this practice for TBs
staff. These include:
Advantages of homeworking
Cost saving
Working at home saves the employee from having to pay expensive commuting costs such as petrol, car
parking and train fares as well as lower value costs such as having suits dry cleaned and eating out at
lunchtime.
Time saving
The elimination of commuting to the workplace also saves the employee valuable time at the start and
end of the day, freeing time up for social pursuits and family time.
Work/life balance
By working at home the employee is better positioned to balance their work and family commitments. For
example they can fit doctors appointments in during the day, collect children from school or perform
voluntary work which would not be possible if they had to commute to their place of work.
Productivity
Employees often find they are more productive if they work from home as they can avoid interruptions
that occur in the office as well as the benefits from being more relaxed in their own home. TB has
estimated that staff who homework are 20% more productive.
Housing choice
Employees who do not commute have greater freedom when choosing a place to live. This means they
can locate themselves in places where they can afford to buy a house or pay rent or that are more
suitable for their family and lifestyle.
Disadvantages of homeworking
Loss of space
The employee needs to create an office space to work in and for any necessary IT equipment. This may
mean the loss of a whole room (often a bedroom) which must be sacrificed in order for them to work at
home.
Increased utility bills
Certain bills, such as gas, electricity and water, may increase as a consequence of the employee being at
home rather than in a traditional workplace.
Loss of social contact
Some employees thrive on the social contact that they receive at work. Colleagues often become friends
and socialise away from work. Such opportunities would be reduced if a workforce works at home.
Use of home as an office
Employees may prefer to separate home life from work life. Bringing their work home means they are not
able to make such a distinction and may find it difficult to switch off after the working day is over.
Becoming distracted
Working away from the eye of a manager or supervisor may create a temptation for the employee to stop
work and, for example, watch TV or play computer games. This may result in them becoming less
productive and the quality of their work may suffer.
(c) There are a number of important roles that TBs HR department can play given its working practices.
These include:
Answers 159
38 T42
Marking scheme
Marks
(a) Up to 2 marks per valid point referenced to the scenario; 1 point each for brief general 10
(but relevant) points
(b) Up to 2 marks per valid point referenced to the scenario; 1 point each for brief general 10
(but relevant) points
(c) 1 mark each for each point. 5
25
Our answer shows what we consider the most appropriate points to make. Other relevant points that
answer the question would earn marks. However, irrelevant points that do not answer the question would
not earn marks.
(a) Offshoring
Offshoring is the relocation of some part of an organisations activities to another country.
The benefits of offshoring to T42 may include:
Reduced staff costs
T42 may be able to reduce its staff costs as a proportion of sales by employing overseas staff at a lower
cost.
Competitive advantage
The fact that several of T42s competitors have already offshored some of their activities may indicate
there is a competitive advantage to be had from it. By not offshoring, T42 may find itself at a competitive
disadvantage.
Knowledge of staff
By offshoring, T42 may lose the knowledge and experience of the staff that it currently employs. If the
offshoring arrangement fails then they might not easily be replaced.
Staff availability
T42 could support its claim that it has technicians available 24 hours a day, 7 days a week by offshoring
to a country in a different time zone. Technicians in that country could cover one shift while technicians in
the home country cover another.
Exchange rates
Variations in the exchange rate between the home country and the offshore country may make budgeting
difficult and expose T42 to exchange rate risk.
Political risk
Future operations in the offshore country may be affected by changes to the government and associated
legislation and regulation.
Language
Communications between the home country and offshore country may be difficult, and problems may
arise, if employees in the locations cannot understand each other.
Training and qualifications
T42 will need to ensure that any staff employed offshore meet its requirements regarding training and
qualifications in order to ensure the standard of service to its customers does not suffer.
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Culture
It is likely that there will be cultural differences between the home country and offshore country, for
example in attitudes, working hours and public holidays. There is a need for employees in both countries
to understand and respect each other.
Impact on existing workforce
Offshoring represents a major change to the structure of the organisation and therefore the effect on
employee motivation, morale and goodwill should be considered and steps should taken to resolve any
industrial relations issues that arise.
(b) Job rotation
Job rotation involves moving employees from one task to another.
The benefits of introducing job rotation amongst T42s technicians include:
Employee motivation
Technicians that are rotated will learn new skills associated with the new jobs that they undertake.
Learning new skills and trying new things should help keep them motivated as they no longer do the
same task every day.
Employee coverage
Job rotation will increase the skill set of technicians and this will enable them to perform a number of
roles if required (such as when other employees are absent or on holiday).
Adaptation to change
Improvements to the flexibility of T42s workforce as a consequence of them being multi-skilled, will help
the organisation adapt to changing market requirements in the future.
Eliminate a strategic weakness
The Chief Executive and Chief Operations Officer have already identified the fact that technicians are
skilled and knowledgeable in a few systems as a strategic weakness. Job rotation should help overcome
this.
Training budget savings
On the job training which is provided as part of job rotation is likely to be cheaper than other forms of
training (such as off-site courses). This should help generate some savings in the training budget which
the Chief Executive has requested.
Develop the company as a learning organisation
T42 already prides itself on having highly trained technicians. Job rotation would be a key policy in
developing it further as a learning organisation.
Acceptance of change
Job rotation will help employees get used to the idea of embracing change and make them more receptive
to supporting management plans for future changes that might be necessary.
Demonstrates management commitment
The fact that management offer job rotation in the first place will demonstrate to employees that the
organisation is committed to them and their future. This may help improve employee loyalty.
Improvements to customer service
Rotated employees not only learn new skills but bring new ideas to the employees that train them. This
sharing of knowledge may help improve the service provided to the customer.
Improved employee collaboration
Rotating employees will bring them into contact with others that they may have had little or no contact
with in the past. New relationships will develop and this may improve how employees relate to each other
in the future.
162 Answers
39 CM8
Marking scheme
Marks
(b) Up to 2 marks per valid point referenced to the scenario; 1 point each for brief general
(but relevant) points 10
(c) Up to 2 marks per valid point referenced to the scenario; 1 point each for brief general
(but relevant) points 5
25
Our answer shows what we consider the most appropriate points to make. Other relevant points that answer
the question would earn marks. However, irrelevant points that do not answer the question would not earn
marks.
(a) CM8
In modern businesses like CM8 the HR department and managers have distinct roles to play as they each
specialise in different aspects of workforce management. The different roles are identified below.
Roles of the HR department
HR departments, such as CM8s, are at a tactical level within an organisation and are responsible for
developing HR policy for the managers to implement within their teams. Examples of roles include:
HR planning
The overall role of any HR department is to develop an appropriate and effective human component for
the organisation based on its corporate strategy. To do this it needs to identify the requirements of the
organisation for staff at all levels and to ensure that they are available when required. This means it is
responsible for recruiting employees and terminating employment contracts so that the right number of
staff are employed at all times.
Training schemes
The HR department should also determine whether the needs of the organisation can be met through the
training and development of staff, for example earmark king employees for future management and
providing them with training to perform the new role.HR is also responsible for the retention of staff and
training and development is an important aspect of this.
Pay structures
A suitable pay structure aids the recruitment and retention of employees and is an important factor in
developing employee motivation. HR departments create organisational pay structures, usually based on
equity or fair differentials between the pay of individuals across departments and at various levels.
Appraisal schemes
The purpose of appraisal is to review individual performance and maximise the future utilisation of the
organisations human resource. To ensure consistent treatment of employees across the business and for
comparability purposes it is important that a single appraisal system is used by all departments in the
organisation and therefore the HR department should be involved in developing such a system to meet
the needs of the organisation.
Working arrangements
HR departments set company policy on how and where employees perform their roles. For example they
may introduce flexitime to allow employees some flexibility in the hours they work. They may also
introduce working at home arrangements for certain employees as appropriate.
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Roles of managers
Managers perform their role at the operational level within an organisation and are responsible for the
day-to-day running of their team and this means that they implement the policies of the HR department.
Common managerial roles include:
Motivating employees
Whilst the HR department is responsible for setting the overall policies that affect the motivation of
employees, it is the manager who implements them on a day-to-day basis. They do this as appropriate in
order to get the best of out their staff. For example, the HR department may allow job rotation and
enrichment as motivational tools, but it is the manager who decides whether they are practical in their
area and whether they are appropriate for the various members of staff who report to them.
Appraisal
The role of managers in appraisal is to implement the system created by the HR department. This means,
for example, that they conduct the appraisal interview, complete the paperwork and provide feedback to
the employee. Information that managers feedback to the HR department will contribute to the HR
departments understanding of employee skills and training needs.
Meeting organisational goals
Within the organisations overall corporate strategy, the manager is responsible for ensuring their team
meets the goals and objectives set for it. This means that they make operational decisions on how best to
run their department, including how best to lead their team in order to get the best out of them.
Discipline
Managers are responsible for dealing with day-to-day disciplinary issues that are relatively minor. For
example speaking to staff about lateness or quality of their work. There are limits to this role and for more
major issues, or where minor issues are continuing they will need to refer to the HR department for advice
and support.
Managing change
Managers have a role to play in organisational change, for example during the implementation of a new
information system or restructuring. They are the main point of contact for employees to voice their
concerns and positive feedback about the change and therefore the manager has an important role to play
in shaping how a change affects their department.
(b) Lean management
Lean management, or lean production is a business philosophy that aims to minimise the waste of
resources (including time) in all activities and involves the identification and elimination of non-value-
adding activities.
Role of modular teams
Teams, such as those employed by CM8, work in small groups or modules on specific products or
components. They are responsible for the output and individuals are generally multi-skilled. They
contribute to learn operations as they allow the following characteristics of lean production to take place.
Continuous workflow
CM8s teams are grouped according to what is being produced. This means that production layout is
based on workflow, a key attribute of lean production as non-value adding movements of people and
equipment are minimised.
Zero inventories
A key feature of lean production is the elimination of inventories. This is because storing raw materials
ties up working capital and storage costs are incurred. Modular teams and continuous workflow contribute
to the reduction of inventories because materials and components flow from suppliers and the production
process as they are required.
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Esteem needs
Esteem needs are for independence, recognition, status and respect from others. Whilst team members
should not work independently from each other, modular teams do allow an individual to earn respect
and status from their fellow team members and for their efforts to be recognised as they become apparent
to the people around them.
Self-actualisation
This is the ultimate aim of fulfilling ones potential and is the only need which, in theory, cannot be
satisfied. One way of looking at this need is that it goes beyond what can be fulfilled through work and
therefore CM8s modular teams do not contribute to it. However, another way of looking at things is that
being a member of the team enables an individual to achieve something that they would not be able to
alone (ie to produce a completed product). In that sense the teams could be viewed as contributing to
self-actualisation.
Herzbergs thinking and modular teams
Herzbergs two-factor content theory states that an individuals motivation is affected by factors which
create satisfaction if present and dissatisfaction if not present.
Hygiene factors
These factors prevent or minimise dissatisfaction when present but they do not motivate, or give an
employee satisfaction themselves. Examples of hygiene factors are company policy, salary, quality of
supervision, interpersonal relationships, working conditions and job security.
CM8s modular teams provide hygiene factors in relation to interpersonal relationships (due to team
bonding), working conditions (uncluttered workplace) and supervision (if the supervisor is effective).
Limitations
The modular teams do not provide hygiene factors relating to company policy, salary and job security.
These are the responsibility of the HR department.
Conclusion
Modular working in CM8 provides several factors required to stop team members from becoming
dissatisfied.
Motivators
These factors create satisfaction and are effective in motivating an employee to superior performance and
effort and give them a sense of self-fulfilment and personal growth. Examples of motivators are
advancement, recognition, responsibility, challenge, achievement and growth. CM8s modular teams
provide staff with a number of these motivators, for example:
Recognition
Working closely with other team members allows individuals to demonstrate good performance. The
teams are small enough to allow people to stand out and receive praise.
Responsibility
The team is accountable for its output and therefore individuals share in this collective responsibility.
Challenge and achievement
Modular teams require members to be active in problem solving. This provides them with challenges on a
day-to-day basis and successfully meeting these challenge creates a sense of achievement.
Limitations
Working in a team does have some limitations as there is no way for team members to advance(except to
leave the team) or to grow (because the members are already multi-skilled and have all the responsibility
they can be given). However, as the teams are semi-autonomous, there is the possibility of members
being given the scope to develop new technical or soft skills.
Conclusion
CM8s modular teams provide many, but not all of the motivators that Herzbergs theory describes.
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40 MM
Marking scheme
Marks
labour should be refocused to ensure it is only used to add-value to production and therefore reduce
overall costs per unit of production.
Performance measurement
Lean principles encourage the use of metrics to monitor performance (such as using productivity ratios).
By analysing the performance of various parts of their department, the manager can concentrate their
time on improving those areas which are the least efficient. The HR department could assist department
managers with training in the use of metrics.
Flexibility
In a lean system it is important for a workforce to be flexible in order to manage activity in times of high
or low demand. In terms of the apprenticeship scheme, it may be appropriate to offer an apprentice
experience in various business areas rather than just one. The HR department could also encourage the
cross-training of employees between departments.
Working environment
Safe, clean, uncluttered working areas are a key feature of the lean philosophy. The HR department could
develop a policy on workplace safety and encourage tidiness and organisation within departments.
(b) Overcoming shortcomings in the recruitment and selection of apprentices
The following shortcomings of the apprentice scheme are identified and addressed below.
Ineffective process
Due to falling attendances at open days over the last three years it is clear that the recruitment process is
ineffective. It is important that the senior site managers conduct a review of the whole method of
attracting potential apprentices and improving the image of the company. Potential improvements may
include:
Attendance of site managers at promotional events rather than the HR team. They are likely to have more
knowledge of the day-to-day aspects of the job and therefore in a better position to answer questions.
Have the promotional material redesigned to improve the image of the company and appeal to potential
apprentices.
Consider alternatives to the open day approach. For example it may be better to advertise on the company
website and offer tours of the business to people who show an interest by applying to the company
directly.
Lack of support by department managers
The current system does not appear to have the full support of the senior site managers. This is a major
problem because ultimately their support is needed for it to work. The current recruitment process is
largely decided upon by the HR director with the consequences being felt by the senior site managers. It
would be more effective for the site managers to determine how many apprentices they need (determined
by forecasted production) and to be involved in selecting the apprentices (via interview for example). This
will help the senior site managers feel more part of the process and give it their support.
Losses due to wasted training expenditure
The cost of training an apprentice is likely to be high because they come into the company with little or
no knowledge and leave as a fully trained member of staff. Time, wastage due to the learning process as
well as any formal training are all costs that may be incurred. All these costs are wasted when an
apprentice leaves.
Losses due to wasted recruitment expenditure
The current recruitment process is expensive. Promotional material is prepared, HR resources are used to
tour schools and open days will undoubtedly result in reduced production on the days that they occur.
These costs are wasted if an apprentice that is recruited through the process subsequently leaves.
Loss of capable employees
In addition to wasted recruitment and training costs, a significant loss to the company is simply through it
being deprived of fully trained, capable employees who were attracted to the business and who worked
hard throughout their training. If they were retained at the end of their training, the business would
benefit from their skills, experience and loyalty in the future as well as having a potential source of
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employees that may be suitable to fill senior roles in the future. Additionally, employees who know that
they are going to be with the company following their apprenticeship are more likely to speak well of the
business to potential recruits at open days.
(c) Role of the Human Resources Division
In order to address the problem of apprentices graduating without suitable full-time posts being available,
MM needs to improve the whole process of recruiting and training them. Suggestions for improvements
include:
Improve the HR planning process
The number of apprentices recruited should be driven by forecasted future demand for their skills rather
than a figure decided upon by the HR director. The companys HR plan can be used to provide this
information and it should be relatively simple to estimate the companys requirements by considering
current staffing levels, future plans and expected staff turnover. This will help prevent over-recruitment
occurring.
An allowance could be made to retain graduating apprentices on the companys payroll for a period of
time following the end of their training to cover a period where there might not be a vacancy. In the
meantime the member of staff can gain further experience with the company.
Introduce flexibility into the training
Apprentices should receive training and experience across a wide range of roles within the organisation.
Not only does a flexible worker benefit the business generally, but it will be easier to place apprentices
when they graduate because they could fill a range of vacancies.
Use the whole organisation as a source of employment
Under the current system, a graduating apprentice will only be offered work, if it exists, at the site that
they received their training. There may be vacancies at other sites that they could fulfil as well though, so
the whole organisation should be opened up to graduates as a source of employment.
Alternative solutions
Other solutions could be considered that aim to effectively delay the point in time when the graduating
apprentice is taken on. For example, managers may have a budget to take on temporary or part-time staff
that could be used to employ a graduate until a full-time position becomes available. Alternatively they
may be offered a gap year or period of full-time study with the promise of full-time employment when
they return.
41 CR7
Marking scheme
Marks
Pay progression
In additional to a cost of living pay rise, many organisations also offer pay progression to reflect the
motivational needs of the individual and the need of a manager to reward employees as appropriate. Pay
spines are a series of incremental points along the pay scale that employees can be moved along
according to their performance at the discretion of their manager. The HR department should consider
pay spines and other methods of pay progression when developing the new pay structure.
(c) Flexible working practices
CR7s management has already stated that it considers the use of casual, permanent and contractual
workers to be a model for its future operations. This model is known as Handys Shamrock Organisation.
Under this model an organisation consists of permanent, core workers who possess key skills and have a
high status within the organisation, casual workers who have low skills and perform less important tasks,
and a contractual fringe that perform other roles as and when required.
The other types of workforce flexibility that an organisation such as CR7 could use include the following.
Financial flexibility
A range of payment and reward systems may be used to encourage the workforce to perform. For
example, an employee is more likely to be prepared to work overtime if they can see that doing so will
help them achieve a financial incentive such as a bonus.
Functional flexibility
Functional flexibility means ensuring employees are able to switch between tasks and roles as required.
To do so requires multi-skilled teams rather than relying on specialists. Job rotation and training are often
used to help build functional flexibility.
Numerical flexibility
The use of additional people, for example temporary workers, can be used to provide the flexibility to deal
with peaks in production demand. Part time workers can also play a part, providing flexibility to cover
certain parts of the day or night without needing to employ a person full-time.
Flexible working arrangements
There are generally two aspects flexibility can be offered on - where people work and when they work.
Flexibility can be provided over when people work, for example through the use of flexitime or offering the
option of a compressed working week. It may be appropriate for some employees to be offered flexibility
over where they work, for example working from home.
.
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42.2 B Herzberg developed the two-factor content theory of motivation. One factor in the theory is
motivators these produce satisfaction in an individual when present.
42.3 C The set of expectations between an organisation and its employees is known as a psychological
contract.
42.6 C Promotion includes all marketing communications which let the public know about an
organisations products and services.
42.7 A Economies of scale and manufacturing experience allow firms to reduce their costs and therefore
compete successfully on price. Economies of scale, such as bulk discounts, mean organisations are
able to purchase raw materials more cheaply. Organisations with extensive manufacturing
experience know the most efficient and cost-effective methods of producing goods.
42.8 C Stability might seem like a desirable feature in its own right, but it is covered by substantiality.
42.9 D Predatory pricing involves setting a low price with the intention of damaging the competition.
42.10 C A product life cycle chart plots sales volume against time.
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43.2 C The US, Canada and Mexico are the three members of the North American Free Trade Agreement
(NAFTA).
43.3 B Loss leaders are products that have a very low price set with the objective of attracting consumers
to buy other products in the range with higher profit margins.
43.4 B Victor Vroom's Expectancy Theory states that valence is the strength of an individual's preference
for a certain outcome.
43.6 C The TQMEX model shows the relationship between quality management and other aspects of
operations management. The answer must therefore mention these two areas, so C is correct.
43.10 B The overall expectations an individual and organisation have of each other form a 'psychological
contract'.
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44.2 C These qualities focus on the person. A job description (option A) explains what is required in a job.
Options B and D are part of an appraisal system.
44.3 D At an assessment centre, candidates are observed and evaluated as they perform a variety of
exercises.
44.5 C In the context of selection techniques, reliability means the achievement of consistent results.
44.6 A Reck and Longs positioning tool is strategic (The strategic positioning Tool).
44.7 B Plan-Do-Check-Act (PDCA) is a cycle that breaks continuous improvement down into four stages.
44.8 B On-line testing and user acceptance occurs after implementation. Logic testing is done before any
software is written.
44.9 C The 5-S model describes operations management practices of structurise, systemise, sanitise and
self-discipline. It does not describe internal analysis or a form of six sigma.
44.10 A Corrective work, the cost of scrap and materials lost are examples of internal failure costs.
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45.2 B Fewer (preferably no) internal failures means less time lost correcting problems and therefore
more time engaged in production. The other options are false; internal failures cause delays in
delivery, improving process quality should reduce the testing required and inspecting finished
goods is expensive as it means re-producing sub-standard production rather than focusing efforts
on producing high quality output first time.
45.3 D The marketing strategy follows the business planning process it does not drive the company
objectives (A) or productive capacity (B). C is incorrect because it fails to consider the
requirements of the consumer.
45.5 A Taylor assumed that workers are rational so would try to obtain the highest remuneration for the
least effort.
45.6 A Kaizen is originally a Buddhist term but was adopted by the Japanese (and now by other nations)
to represent continuous improvement. The other options may involve or imply some elements of
continuous improvement but have different meanings.
45.7 A The usual course of action to reduce inflation is to raise interest rates as this makes borrowing
more expensive and reduces overall demand in the economy.
45.8 D The other options do not refer to recognised, formal supply sourcing strategies.
45.10 B Professional accountants must not be party to anything which is deceptive or misleading. This is
specified in CIMA's Ethical guidelines and goes further than simply 'not telling lies'.
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46.2 B A total reward package brings together pay and non-pay elements and emphasises a positive
organisational culture.
46.4 C Customers participating directly in the delivery process is a feature of the service industry.
46.6 D The four emerging world economies Brazil, Russia, India and China are sometimes referred to as
the BRIC economies.
46.9 D A service level agreement usually includes a definition of the level of service to be supplied.
46.10 B Gross National Product is made up of Gross Domestic Product plus net overseas earnings.
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47.2 A Web 2.0 applications include blogs and social networking sites.
47.3 B Virtual teamworking is made possible by developments in communications and other technology,
enabling people to work together even when they are not physically located in the same place.
47.4 C The practical application of CAD and CAM technologies, rather than any general outlook or
philosophy, are responsible for increased control over design and production using machinery.
47.5 B By linking in to suppliers systems, for example, a lot of paperwork and administration time (and
cost) can be saved by the sharing of order processing and payment information via EDI.
47.6 B A manufacturer with a production orientation concentrates upon production efficiencies and cost
cutting because it believes that this will be enough to sell the product in whatever quantities can
be manufactured.
47.7 A The macro (external) environment exerts an influence over the organisation, rather than the other
way around. It is beyond the organisations control.
47.8 B A non-governmental organisation (NGO) operates independently from any government and
generally pursues some kind of social aim, such as Rotary International.
47.10 B The cognitive paradigm theory explains consumer behaviour as a rational process, from awareness
to eventual purchase.
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48.3 C Political risk analysis focuses on the political and cultural differences between the home and target
country.
48.4 A Efficient regulation of companies exists if the total benefit (of regulation) to the nation exceeds the
total cost.
48.5 C Under the stakeholder view, the people, groups and organisations with an interest in the
organisation are viewed as stakeholders.
48.6 C Matrix operation is not a term associated with systems development or changeover.
48.7 B If the Information Systems function is outsourced, the organisation does not need to assemble and
maintain a suitable IS workforce in-house.
48.8 D A key focus of quality under the Japanese approach is customer satisfaction, which relies on
meeting customer needs and expectations.
48.9 C Process design often benefits from the use of kaizen (continuous improvement).
48.10 B Closer relationships with a supplier can help improve quality and reduce costs.
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49.2 A Servqual involves comparing aspects of the service that customers receive with their expectations
of what they should receive. To do this, there must be feedback from customers.
49.3 D Protectionism is a term that means protecting domestic industry against foreign imports and
competition.
49.4 C Productive maintenance is an approach that is intended to ensure that every machine in a
production process performs its required tasks so that its output is not disrupted. The approach
seeks to eliminate as much non-productive time on machines as possible.
49.5 A In an ABC system, materials are classified as A, B or C according to value, and the method used
for inventory control for each material item depends on its classification.
49.6 A A payroll package is used to process routine payroll transactions, and so is a data processing
system (also called a transaction processing system).
49.7 D A system (or software) development life cycle is the process of creating or altering an information
system within a structured methodology that includes planning the system, the feasibility study,
design, programming, testing, implementation and system maintenance after implementation.
49.8 A Electronic data interchange can be used to link an organisation to its supplier (or suppliers)
through a purchase/sales order system. The ability of their different information systems to
exchange data requires the use of structured data and standard business documents.
49.9 C Corrective system maintenance involves correcting the system when a failure occurs. Perfective
maintenance is changing a system to improve its performance. Adaptive maintenance involves
changing a system to meet the requirements of changes in the environment (for example, changes
in the law).
49.10 A Data integrity is essential in databases, to ensure that the stored data is correct, consistent and
accessible. A centralised database facilitates the elimination of data duplication, allowing data to
be held just once on the system.
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50.2 D The 7Ps in the extended marketing mix are Product, Price, Place, Promotion, People, Processes
and Physical evidence.
50.3 D Herzberg grouped factors that affected motivation into motivator factors and hygiene factors.
50.4 A Porter defined a value chain within an organisation as the primary activities and support activities
within the organisation. He also argued that the value chains of individual organisations are linked
in a value system of suppliers, distributors and customers. The value chain of each organisation is
a part of the total value system.
50.6 B Intrinsic satisfaction is satisfaction that comes from within an individual and satisfaction in the
nature of the job that he or she is doing. Extrinsic satisfaction comes from factors outside the
individual, such as pay, prestige and status, other perks of being a job position and social/group
interaction.
50.7 B Direct marketing involves sending marketing material, such as a marketing e-mail or a brochure
through the post, to targeted individuals.
50.8 D F W Taylor is associated with the scientific school of management thinking. These management
theorists held the view that work problems can be resolved scientifically through experimentation
and the analysis of the results, until an optimum solution is found.
50.9 D Service level agreements (SLAs) are contractual agreements negotiated between an organisation
and another organisation to which it is outsourcing an aspect of its operations. The purpose of the
SLA is to specify the level of service that the external organisation is required to provide.
50.10 D Interest rate may be managed as an aspect of monetary policy. Fiscal policy is concerned with
taxation, government spending and government borrowing.
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51.2 D Corrective versus perfective approaches is not included in Hofstedes Five Cultural Dimensions.
51.5 B Assessment centres and psychometric tests are applied in the selection process. They are used on
candidates before a decision is made on who to employ.
51.7 C According to Herzbergs motivation theory, the absence of hygiene factors is a cause of
dissatisfaction.
51.9 A A person specification defines the personal attributes required of the job holder and are likely to be
based on Alec Rodgers seven point plan.
51.10 A Lean production aims to reduce the amount of resources used in a process and a key
principle of the philosophy is the elimination of waste.
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52.2 B Gross National Product is Gross Domestic adjusted for foreign earnings.
52.3 D Cattells 16PF test is a well known personality test used in employee selection.
52.4 A Sourcing strategies can be to use single, multiple, delegated or parallel suppliers.
52.5 C Results and enablers are features of the European Foundation for Quality Management model.
52.6 A A person specification states the skills and qualities needed of a person to fulfil a particular role.
52.7 A Job enlargement, enrichment and rotation are all methods of improving employee motivation by
introducing changes to an individuals role.
52.8 C Hygiene factors are associated with Herzbergs two factor theory.
52.9 D Internal failure costs are identified before the item or service is transferred to the customer.
Appraisal (or inspection) costs are incurred when checking that the output meets the quality
required. Prevention costs are incurred before the product is made or service delivered, to prevent
substandard work.
52.10 C Assessment centres, interviews and psychometric testing are used in the selection process.
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53.2 A Corporate governance refers to how organisations are directed and controlled.
53.4 C A person specification states the skills and qualities needed of a person to fulfil a particular role.
53.5 A Where an organisation outsources its IS function, it becomes the client and the outsourcing partner
becomes the vendor.
53.6 A Co-optation is a method used to deal with individuals who are resisting change.
53.7 A A contrived test is designed to present the system with unusual events to see how it copes. Volume
tests are used to see how a system deals with large volumes of transactions. Realistic tests involve
the system being used in the way it will be in reality.
53.10 C E-trading (or online trading) opens up the global market for an organisation.
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54.2 D According to Herzberg pay, status and working conditions are all hygiene factors.
54.4 A Corporate governance is the system by which organisations are directed and controlled.
54.7 C Organisations may be marketing oriented, sales oriented, product oriented or production oriented.
Lean orientation is a made up term.
54.8 C Corporate political activity is the involvement of companies in the political process with the aim of
influencing policies towards their preferences. Lobbying and contributing to political campaigns
would therefore form part of such activity.
54.10 D Gross National Product is a measure of the value of all products and services produced by a
nation. It is therefore a measure of growth within an economy. Inflation refers to general increases
in prices, unemployment levels refer to the proportion of the workforce out of work and the FTSE
100 level refers to the market value of the top 100 shares.
186 Answers
55.2 A The BRIC economies are Brazil, Russia, India and China.
55.3 D Database management systems organise stored data. They ensure that data is only held once
(eliminating data duplication) and contain controls to preserve data integrity.
55.4 D To obtain ISO 9000 certification an organisation must have its processes and procedures audited
by an independent registrar.
55.5 D Political lobbying is used by business organisations to influence government policy. It is unrelated
to the issue of quality.
55.7 A Market segments must be identified through market research before they can be targeted, products
positioned and promotional activity commences.
55.8 C Physical evidence is part of the extended marketing mix for services. As services are intangible, a
physical symbol or representation of the service can be provided instead. For example the ticket
provided for a show. This gives the consumer some reassurance concerning the service before it is
provided.
55.9 A Milk, deodorant and coffee are examples of fast moving consumer goods physical products that
are bought often. Durable goods (such as hand-made shoes) are purchased infrequently and are
more expensive than fast moving consumer goods.
55.10 A Electronic data interchange (EDI) involves the transmission of structured data using standardised
documentation between business organisations.
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56.3 B Viral marketing involves the use of pre-existing social networks to spread brand awareness or other
marketing objectives.
56.4 A An undifferentiated policy involves producing a single product and hoping to get as many
customers as possible to buy it segmentation is ignored entirely.
56.5 A With push control, production and inventory levels are forecasted and the focus is on pushing work
through each stage of the process, regardless of whether the next stage is ready to receive it.
56.6 B Customer relationship management systems are software applications which specialise in
providing information concerning an organisation's products, services and customers.
56.7 C Systems at the operational level are used to process transactions and help operational managers
track the organisation's day-to-day operational activities.
56.9 D Internal marketing is about training and motivating employees to support the organisation's
external marketing activities.
56.10 D Aspects of the pricing mix include factors such as any bulk purchase discounts given, credit offered
and methods of payment.
188 Answers
57.2 B Corrective maintenance is carried out when there is a systems failure of some kind, for example a
defect in processing or in an implementation procedure. Its objective is to ensure that systems
remain operational.
57.4 D Total Productive Maintenance aims to reduce loss of effectiveness caused by defects, down-times
and loss of operating speed. Defects are prevented and business continuity is established.
57.5 A The BRIC nations are Brazil, Russia, India and China.
57.6 B Gross National Product (GNP) includes income generated domestically and income earned
overseas.
57.7 D Common activities involved in corporate political activity include lobbying and donating to political
party campaigns.
57.9 D The other parts of the supply wheel are organisation structure, corporate and supply strategy and
skills and competences.
57.10 D SERVQUAL was developed in the 1980s by Zeithaml, Parasuraman and Berry as a method of
measuring quality in service organisations.
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58 Hubbles
Top tips. The question requirement asks for 'a slide outline and brief accompanying notes of two to three
sentences'. A slide outline is in effect a list of headings, usually one or two main headings and a number of sub-
headings. Keep your notes brief this will help your time allocation and keep your answer focussed.
(a)
Notes. Hubbles' emphasis on 'selling' implies that not enough effort has been made to establish what
customers want. If Hubbles produces items that 'strike a cord' with customers, the products should 'sell
themselves'.
Top tips. In Part (b) think of ways in which Hubbles can become customer focussed. You might have thought of
other examples.
(b)
Notes. Adopting a marketing orientation will require Hubbles to change how and why decisions are taken.
The driving force behind Hubbles' products, markets, prices, and communication must be customer
needs. All staff at all levels must see their roles in the context of how Hubbles satisfies or delights
customers.
(c)
Notes. The marketing mix is a framework that enables organisations to structure their thinking in a way
that focuses on the customer. After Hubbles has devised a customer-focussed strategy it will be in a
position to develop an appropriate marketing mix to achieve the strategy. This will require Hubbles to
meet or exceed customer needs and expectations in all areas of the marketing mix.
(d)
Notes. Hubbles must develop a marketing mix that precisely matches the needs of potential customers in
the target market. Research the market for data relating to the age, income, sex and educational level of
target market, preferences for product features and attitudes to competitors' products.
(e)
Notes. HR issues are important in all departments, including purchasing. The purchasing department
plays a crucial role at Hubble in the procurement of materials and finished goods for sale, supplier
selection and relationships, and price negotiation. HR must ensure the purchasing department has people
with the right attitude and skills to perform these tasks.
(f)
Notes. The purchasing function is now recognised as being crucial to organisational success, particularly
in relation to the creation of value and in supply chain management. Purchasing policies that build close
relationships with trusted suppliers should result in higher quality which customers demand. Effective
purchasing policies therefore help meet customer needs which is key to achieving organisational goals.
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59 OK4u
Top tips. Look for opportunities to break the requirements down into smaller parts. For example in part (a) you
could break your answer down into ethical and managerial failings. This will give a structure to your answer and
help you identify points to make under each heading from the scenario.
Top tips. Reasonable suggestions in Part (b) will earn good marks. However, be careful to manage your time and
avoid writing too much.
60 Various topics 1
Marking scheme
Marks
(a) 1 mark for each relevant explained point 5
(b) 1 mark for each relevant explained point 5
(c) 1 mark for each relevant explained point 5
(d) 1 mark for each relevant explained point 5
(e) 1 mark for each relevant explained point 5
(f) 1 mark for each relevant explained point 5
30
Our answer shows what we consider the most appropriate points to make. Other relevant points that
answer the question would earn marks. However, irrelevant points that do not answer the question would
not earn marks.
(a)
Five benefits a collaborative process of Human Resource planning might bring to an organisation are
explained below.
Improved staff motivation and morale
Communicating and collaborating with staff across the organisation demonstrates a willingness to listen,
and shows employees their opinions matter. This should improve staff motivation and morale.
Enable a consistent approach to be taken across the organisation
By collaborating widely, across departmental boundaries, the process should enable an organisation-wide
policy to be developed. This in turn helps provide a sense of unity and a shared organisational culture.
Emphasise the importance of people and their development
The focus on human resources emphasises the value and importance the organisation places on its
people. The process should also help define staff training and development needs required for the
organisation to meet future objectives.
Establish future human resource needs
The human resource planning process aims to ensure the right people (with the right skills) are in place
to enable the organisation to operate efficiently and effectively. The plan may identify a future under or
over supply of people in particular areas, which will need to be dealt with.
Encourages a strategic perspective and agreed priorities
In order to plan effectively for Human Resources, planning in other areas will be required, for example an
overall strategic plan. The overall strategic plan drives the HR strategy and plan. The collaboration
process should result in the establishment of common ground and agreed priorities.
Answers 195
(b)
Internal failure costs result from inadequate quality, where the problem is identified before the transfer of
the item or service from the organisation to the customer. Types or examples include:
The cost of materials scrapped due to inefficiencies in stockholding procedures
The cost of materials and components lost during production or service delivery
The cost of output rejected during the inspection process (scrapped)
The cost of re-working faulty output
The cost of re-inspecting reworked output
The significance of internal failure costs for an organisation with a reputation for quality is that although
these costs are best avoided, they are seen as preferable to external failure costs. Incurring these costs
internally, before the product or service reaches the customer, prevents damaging the organisations
reputation. The organisation should still aim to reduce internal failure costs, perhaps through a quality
assurance program.
(c)
(d)
Five key issues for a manufacturing organisation considering adopting Six Sigma are identified below.
Training
The introduction of Six Sigma will require the training of staff regarding the aims and practical workings of
the programme, including the procedures surrounding the measurement of output.
Establishing the measurement metrics
Six Sigma aims to eliminate defects. To implement Six Sigma, an organisation must decide what
constitutes a defect (from the customers perspective) and be able to measure output to establish the
frequency/rate at which defects occur.
Ensure the expected benefits outweigh costs
As with any initiative, Six Sigma should only be implemented if the benefits (for example reduced
reworking, improved customer satisfaction and retention) outweigh the costs of implementing the program
(for example changes to working practices).
Cultural shift
To be effective, Six Sigma requires a commitment to quality and the elimination of waste and defects
across the whole organisation. A cultural shift may be required before adopting Six Sigma or planned for
as part of the implementation.
Senior management involvement and commitment
Six Sigma represents a philosophy based on the elimination of defects with the ultimate aim of customer
delight. Senior management must set the tone by emphasising the importance of quality and
communicating and demonstrating their commitment to the Six Sigma philosophy.
(e)
The concept that a business with shareholders has responsibilities to a wider group of stakeholders and to
society as a whole is known as Corporate Social Responsibility (CSR). An important aspect of CSR is that
companies behave ethically, in a fair and just way.
Five reasons why a company might act in a socially responsible way when considering a policy decision
are explained below.
Interdependence of business and society
The state of society as a whole impacts upon trading conditions and results. Therefore, it is in a
companys best interest to act in a way that contributes to a sustainable, stable and prosperous society.
Answers 197
The nature and possible effects of five risks relevant when an organisation is considering doing business
in a country that has a government and political system it is unfamiliar with are identified below.
Political instability
Organisations are able to plan and operate more effectively in a stable trading environment. The risk of
instability can make long-term planning difficult, and unforeseen political changes could have adverse
effects, for example favouring local producers.
Unfamiliar with pressure groups and lobbyists
Failing to understand the motivation, methods and influence of political lobbyists could result in conduct
that offends, for example employing an excessively high proportion of ex-pates. The effect of this could be
to create a backlash, for example a boycott.
Unexpected changes to economic policy
There is a risk that the government will pursue unfavourable economic policies, for example increasing
taxation rates. The effect of this would be to make the venture less profitable.
Lack of understanding of political processes
Political processes may differ from those the organisation is used to, and may also change at short notice.
For example an organisation may commit resources to a planning application only to find the government
agencys requirements change.
Totalitarian government
There is the possibility that the current government, or a future government, could implement totalitarian
policies, for example state appropriation of assets. This could result in the loss of the funds invested in the
project.
198 Answers
61 Various topics 2
Marking scheme
Marks
(a) 1 mark for each relevant explained point 5
(b) 1 mark for each relevant explained point 5
(c) 1 mark for each relevant explained point 5
(d) 1 mark for each relevant explained point 5
(e) 1 mark for each relevant explained point 5
(f) 1 mark for each relevant explained point 5
30
Our answer shows what we consider the most appropriate points to make. Other relevant points that
answer the question would earn marks. However, irrelevant points that do not answer the question would
not earn marks.
(a) An organisation that has decided to outsource its IS function needs to address the flowing issues.
Budget
A budget should have been set as part of the decision on whether or not to outsource. Now that the
decision to outsource has been made, the budget should be reflected in the service level agreement and
control should be exercised over expenditure.
Communication with staff
Communication with existing staff is essential to ensure all are aware of what this means for them and
the organisation. Some staff may be offered positions with the organisation the function is outsourced to,
others may be made redundant.
Negotiating with a range of vendors
The vendors who are invited to tender for the contract must be reputable and able to fit with the
organisations culture and operations.
Choosing the appropriate vendor
The service provider and the organisation must establish an effective working relationship. For this reason,
it is vital to make the right choice of outsourcing vendor. Factors such as organisation culture need to be
considered when entering into such a close and critical relationship.
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(c) A manufacturers promotional activity will vary dependent upon the sort of distribution channel that
operates.
One way of classifying distribution channels is as zero level, one level and two level. Promotional activity
for a manufacturer would differ depending upon the type of channel.
A manufacturer operating a zero level channel would sell direct to the final customer. Promotional activity
would focus on the final customer.
Promotional activity aimed at the final customer is sometimes referred to as pull marketing as it
attempts to pull the customer towards the product. Examples include for example empowering customers
to purchase direct using e-commerce or encouraging purchase at a factory shop attached to the
production facility. Often, pull marketing involves heavy expenditure on advertising and consumer
promotion to encourage purchase.
A manufacturer operating a one level channel would sell to retailers who in turn sell to final customers.
The manufacturer may conduct promotions directed at the final customer and also at retailers (to
encourage them to source products from them rather than other manufacturers).
A manufacturer operating a two level channel would sell to a wholesaler, who in turn sells to retailers,
who in turn sells to final customers. The manufacturer may conduct promotions directed at wholesalers
(to encourage them to source products from them rather than other manufacturers) as well as at the final
customer.
200 Answers
One and two level channels are examples of indirect distribution. Promotional activity for indirect
channels should include an element of pull marketing (to stimulate final customer demand) and also
push marketing, which is aimed at intermediaries.
Push marketing attempts to push the product from supplier down the distribution chain. This typically
involves advertising in trade publications, trade promotions, promotional stands at trade conferences and
competitive trade discounting.
(d) A marketing mix for an online company selling branded sportswear is suggested below. It is important
that the elements of the mix are coordinated and consistent, and tailored appropriately for the identified
target market.
Product
The product is a branded sportswear range promising quality and durability. It offers high quality clothing
for dedicated sports people including elite, high profile athletes. The brand values are quality, innovation
and performance.
Price
High prices reflect a premium position in any market, whether the product is sold traditionally or online.
The customers are serious athletes who rely upon the strong brand name and expect high quality, and are
prepared to pay for it. Loyal customers may be able to benefit from discounts.
Place (distribution)
The website is the place of business, which could lead to cost savings that could be passed on to the
customer. Orders can be sent directly to the customer (anywhere in the world, potentially) within 24
hours of placing the order this requires a well stocked warehouse. Use of specialist courier firms will
ensure a high level of service. A scale of delivery charges will need to be developed.
Promotion
The website will need to be innovative, attractive (lots of pictures) and easy to use. Search Engine
Optimisation is important, so the site appears prominently (first page) when a user searches for
sportswear or related terms. Advertising may also be embedded in related sites, such as those promoting
large sporting events or lifestyle-related activities. Stalls could be held at major events (such as the
London Marathon) and sponsorship of events at grass roots level could be considered (eg youth football
competitions). Word of mouth recommendation will also be important.
(e) There are a number of internal options available to an organisation wishing to fill a job vacancy. These
internal options should be cheaper than involving a recruitment agency, but will require more internal
time and effort.
Nevertheless, there is no reason why internal methods cannot be used for recruitment, shortlisting and
selection.
Possibilities include:
Internal advertising using company notice boards, the company intranet, e-mail messages or
newsletters to attract applications from suitable candidates (whether looking for promotion or a
sideways move).
Speaking to employees (utilising the grapevine) to identify suitable internal candidates without
advertising the position. Care should be taken to ensure internal HR policies and relevant
employment legislation are complied with.
Advertising the vacancy using the organisational website. Many company websites have a Jobs at
X area where interested candidates can browse the jobs on offer and even make an application
without the need to apply via a recruitment agency.
Contacting previous applicants whose details have been held (with their permission) with a view
to future vacancies.
Training existing employees to expand their skills making them suitable for a wider range of
positions.
Answers 201
(f) In the context of human resource management, motivation is an employee's desire to perform their role.
Herzberg developed a 'two-factor theory' of motivation. This distinguishes between factors that motivate
(motivators) and other factors that he believed dont actually motivate but can cause dissatisfaction
(hygiene factors). Hertzberg saw salary as a hygiene factor, not a motivator.
An organisation looking to motivate through non-financial means should focus on improving motivating
factors.
Recognition. Outstanding employee performance can be rewarded in a variety of non-financial
ways. The organisation could establish schemes such as employee of the month to recognise
exceptional performance. It is important that such a scheme be properly and fairly managed.
Job redesign. Job redesign aims to improve performance by building more interest, variety,
challenge and collaborative working into jobs, all of which might motivate employees.
Job enlargement and rotation. Job enlargement increases the width of the job by adding extra
tasks. Job rotation allows for a little variety by moving a person from one task to another.
Introducing variety can reduce boredom and increase motivation.
Promotion and/or increased responsibility. Additional responsibility often motivates as it makes
someone feel valued and respected. This could be achieved by adding elements of planning and
control to a role.
Reduce the dissatisfaction caused by hygiene factors. If hygiene factors are currently causing
dissatisfaction (and by implication reducing motivation), the situation could be improved by addressing
issues such as the following.
Social satisfaction. By encouraging social relationships, good working relationships and strong
work teams can be formed. Employees will enjoy coming to work if they feel that they are working
with people they know and get on with.
Regular, meaningful communication. Employees like to feel important enough to be kept informed
about the organisation they work for.
Consistent leadership and management. A responsive and approachable, yet strong and
consistent, management team is more likely to motivate employees than one that is perceived as
distant and out of touch.
Encourage employee pride. The company might seek to enhance its status among current and potential
employees, and the wider community, by seeking out awards such as a listing in rankings such as The
Best 100 Companies to Work For.
62 Various topics 3
Marking scheme
Marks
Spread of expertise
Foreign direct investment often funds ventures that involve both local and expatriate staff. This facilitates
the spread of expertise and good practice that benefits the local economy.
Stimulate the local economy
The domestic economy should benefit from wages earned by employees based in the home country. Much
of this income will be spent locally, benefiting local businesses and encouraging economic growth.
Raise confidence and encourage other foreign investment
By investing in the foreign country the multinational enterprise is demonstrating confidence in the local
country and its business environment. This can encourage further investment by other multinational
enterprises.
(c) Five significant ICT changes for retail organisations are:
Electronic payment
The proportion of retail transactions paid for using cash and cheques has dropped significantly over the
past two decades. Electronic payment is becoming the norm, utilising technology such as chip and pin
and new contactless payment systems.
Online sales (e-commerce)
Even traditional high street retailers now do a significant proportion of their business online. Integration
between the website and physical retail outlets is becoming increasingly important, with in-store pick-up
often offered now for orders placed online (as well as the delivery option).
Customer database analysis and loyalty schemes
Computerised inventory and sales systems enable retailers to capture huge amounts of transaction data.
This has led to improved inventory control and store design (enabling items often purchased together to
be arranged closer together). Customer loyalty cards enable the database to include purchaser-specific
data, facilitating targeted marketing offers.
Self-service checkout terminals
Many retailers (for example supermarkets) have introduced self-service checkouts that utilise barcode
scanning and point of sale payment technology. The technology has made it feasible for untrained
members of the public to process their own transactions.
Price comparison websites
There are now many price comparison sites on the web, including sites covering retailers (for example
supermarkets and electronic products). These sites make it significantly easier for consumers to identify
the best deals. Retailers have responded to this challenge with price matching schemes.
(d) Five forms of waste within manufacturing organisations that lean process improvements aim to eliminate
are:
Inventory holdings
The purchase and holding of unnecessary raw materials, work in process and finished goods is wasteful.
A lean process is characterised by minimal inventory holdings at each stage of the production process (as
in Just In Time).
Unnecessary waiting or idle time
Lean process improvements aim to eliminate delays that add time to the process without adding value.
For example, if employees are required to wait for a previous step in the process to complete, this is
wasteful. It may be possible to redesign the process in a way that eliminates this.
Transport or motion delays
Lean process improvements aim to identify and eliminate actions that do not add value. Part of this
involves ensuring the production layout is efficient and based on work flow, to remove unnecessary
transportation or movement of goods and people.
Defective units
Defective production requires re-work or is written off, so is extremely wasteful. Lean process
improvements would focus on defect prevention (rather than inspection and rework) by building quality
into the process.
204 Answers
Unnecessary or over-processing
Lean techniques aim to identify and eliminate unnecessary steps or procedures (non added value work).
This involves analysing a process and thinking if this wasnt done, would the impact be significant?. The
ultimate test of whether an activity is necessary is the impact removing it would have on the customer.
(e) Five examples of ways in which lean waste elimination principles might be applied to improve efficiency
in service organisations such as hospitals and offices are:
Reduce waiting times
Time spent waiting, whether by customers (patients) or employees, is inefficient. For example, lean
techniques could be applied to improve flexibility in a hospital accident and emergency department to
reduce patient waiting time (the aim being a balance between capacity and demand).
Eliminate non-value adding activities (ensure all who are allocated hospital beds do need them)
If a resource is being consumed by an activity that adds little value, this is inefficient. In the context of a
hospital, lean techniques could focus on identifying patients that are currently allocated a hospital bed,
but whose condition could just as effectively be treated as an out-patient. This would leave more bed
nights available for patients that definitely require on-site care.
Raise standards to reduce complaints
Dealing with complaints consumes resources without adding to output, so is wasteful. Lean waste
elimination principles could be applied to improve hospital processes and raise quality standards. For
example introducing more flexibility in working patterns could reduce staff idle time and patient waiting
time. This would improve patient satisfaction and reduce the number of complaints.
Job redesign
Waste elimination principles could be applied to enable an office worker to work more efficiently. This
could involve giving an employee the authority to take action, within agreed limits, to keep work moving.
For example, the authority to approve transactions that meet certain criteria may be extended to a wider
group of people to reduce the chance of this causing a delay.
Focus on workflow
Office layout could be based on how work flows through the department. Likewise with hospitals, for
example the accident and emergency department could be redesigned to better reflect how patients move
through the system (for example having the initial assessment area immediately next to the patient
reception and registration area).
(f) Five key aspects of a programme to implement Total Quality Management (TQM) within a manufacturing
organisation are:
Senior management commitment
Successful implementation of TQM requires an acceptance that everyone in the organisation is
responsible for improving processes and systems. It is especially important that senior management are
committed to the implementation and that they display this commitment.
Clear implementation strategy
Implementing TQM requires thorough planning and a clear implementation strategy. One of the first steps
should be to explain to staff why TQM is being implemented, the benefits it will bring, why their
commitment is important and how the implementation will be conducted. How the implementation
processes and procedures will be documented is also important.
Establish a TQM steering committee or similar
As with all organisation-wide initiatives, it is important to establish a team that spans the whole
organisation to ensure a co-ordinated approach is taken. This committee or team also provides a focal
point for TQM queries to be fed to, and a mechanism to cascade information to all areas of the
organisation.
Training
Employee participation is an essential element of TQM. Training will be required to ensure employees are
able do whats expected of them. For example, training may be required in process mapping, creative
problem solving techniques and in the operation of quality circles.
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63 Various topics 4
Marking scheme
Marks
(a) A competence is something that an organisation does well. A core competence is something that the
organisation does very well and better than competitors, so that the organisation gains competitive
advantage. Because of the strategic importance of core competences, they should never be outsourced.
The other competences of an organisation are non-core, and these can be categorised into
complementary and residual competences.
Complementary competences are related to core competences but are not themselves core. An
organisation may decide to retain these in-house or they may decide to outsource. However if an
organisation does outsource a complementary competence, it should do so only to a highly trusted
supplier and a strategic relationship would have to be established with them.
Residual competences are competences that are neither core nor complementary. These may be most
suitable for outsourcing. If one supplier is in any way unsatisfactory it should be possible to switch the
outsourced activity to another supplier.
206 Answers
Quinn and Hilmer identified three tests for whether it might be appropriate to outsource an activity.
Competitive advantage test.
If the competence provides an opportunity for the organisation to obtain a competitive advantage, it
should not be outsourced.
Risk of market failure.
This refers to the impact that the activity has on the organisations ability to deliver its products or
services to market. If this impact is low, the activity is safe to outsource.
Potential to reduce risk.
If it is possible to take measures with the supplier to reduce the risks from outsourcing (such as the risks
of failure of the supplier), it is safer to outsource the activity.
(b) Assessment criteria for review of decision-making information system could include:
Benefits provided by the system
A review of the system should consider the benefits that the system provides and the value of these. For
a decision-making system, value should be assessed in terms of how decision-making has been affected
and the effect that these decisions have had on the organisations revenues, costs and profits.
Costs
The costs of the system should be considered and compared with the expected costs of implementing and
operating the system, and also with the benefits obtained.
Timeliness of information
Since the system provides information for decision-making, it is critically important that it should provide
information to management at a time that will help their decision-making process. If information is
delivered too late to affect the decision, it has no value.
Quality of information
The quality of the information that is provided should be assessed. The information should be reliable
(sufficiently complete and accurate for its purpose) and relevant.
Secure
The system should be secure against unauthorised access. It may be possible to review security by
obtaining data about hacking or other incidents of unauthorised access.
Ease of use
An information system should be understandable and easy to use so that users do not have problems with
obtaining the information they require or understanding it in the form that it is output.
(c) Hofstede suggested that the way in which issues relating to organisations and their management are dealt
with in a country depends on its cultural characteristics, which can be assessed in terms of several
dimensions.
Power-distance dimension
This refers to the extent to which society and organisations tolerate an unequal distribution of power. In
organisations with high power-distance, senior management exercise dominance over subordinates. When
power-distance is low, individuals feel more equal and there is a tendency to delegate authority.
Uncertainty avoidance
This refers to the extent to which individuals tolerate ambiguity and uncertainty. When uncertainty
avoidance is high, individuals are reluctant to act. People rely on clear rules. When uncertainty avoidance
is low, individuals are willing to work in conditions of uncertainty and to respond to the unexpected and
unknown.
Masculinity versus feminism
This refers to the extent to which society encourages what are often considered masculine qualities such
as competitiveness and assertiveness, or the extent to which it encourages feminine qualities, such as
attention to others and concern for the quality of life. In countries with a masculine culture, both males
and females tend to be more assertive and competitive.
Answers 207
(d) There are many controls within IS/IT systems. One way of categorising controls is into general controls
and application controls.
General controls
General controls relate to the environment in which IS/IT applications operate.
Examples of general controls include:
Routine backing up of all files and keeping the back-ups in a safe location (possibly a fire-proof safe or
possible taken off site at the end of each day).
Access controls to restrict access to computer networks by means of user identification and passwords.
There may also be physical controls to restrict the access of individuals to rooms containing computer
equipment.
Organisational controls may be applied to reduce the risks of human error and fraud, such as the
segregation of duties.
Disaster recovery plan. Organisations should have a disaster recovery plan, so that in the event of a major
disaster (such as a terrorist attack) computer operations are able to continue, from different locations and
using different equipment.
Application controls
Application controls are controls that are applied to specific computer applications to ensure the
completeness and accuracy of data and its security.
Batch total controls. When data transactions are processed in batches, batch total checks can be applied
to ensure that all the items in the batch have been processed.
Data validation checks. Software checks can be carried out on specific items of data within data records
to ensure that they appear to be valid. Input items that fail data validation checks are either rejected or
reported for investigation.
Identification and authorisation checks. These checks can be carried out for specific application systems
as well as for the computer or network in general.
Software update controls. Controls should be applied to ensure that any changes to the application
software are authorised and implemented according to established procedures, with appropriate tests and
checks, and that the different versions of the software are clearly distinguished from each other.
(e) Five major developments leading to globalisation.
Reduction in trade barriers
Reductions in trade barriers and initiatives that encourage free trade between countries have been
extremely significant. Many countries have committed themselves to the general principle of free trade
and decided to concentrate on what they do best importing what others are able to produce more
efficiently.
Improvements in communications
Improvements in communications have also had an important impact on globalisation. Organisations
across the world are able to communicate with each other instantly. Easy and low-cost- communication
makes it easier for individuals in different countries to do business with each other.
Improvements in transportation
Improvements in transportation have included the building of larger cargo ships, containerisation, larger-
capacity aircraft and better road networks. Better transport links have enabled goods to be shipped from
seller to buyer more quickly, encouraging international trade.
Production efficiency improvements
Production systems have become more efficient. As a result production plants are able to produce in
much larger quantities able to meet demand in a number of countries, encouraging the growth of
international trade and global brands.
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64 Various topics 5
Text references. Chapter 1 for parts (b), (d) and (f); Chapter 4 for part (c); Chapter 5 for part (a) and Chapter 12
for part (e).
Top tips. Parts (d) and (e) specify that five points are required. This makes it clear that the examiner requires
one substantive point per mark. The same principle should be applied to the other questions. One mark will be
awarded to each relevant point that is clearly explained.
Easy marks. Many of the sections in this question require an explanation of the advantages/ benefits or the
disadvantages of something. If you are familiar with the subject matter of the question, (FDI, outsourcing,
succession planning, protectionism) you should be able to think of some advantages or disadvantages.
Examiners comments. The main weakness in this question was part (e), succession planning, where many
candidates gave a vague response relating to HR planning and many candidates did not attempt this part of the
question at all.
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(a) Purchasing is often considered more significant than supply. The significance of purchasing has been
explained by Reck and Long.
Reck and Long describe the evolution of the purchasing function through four stages, from passive to
independent to supportive and finally to integrative.
The term purchasing is associated with the initial passive status of purchasing and the term supply is
associated with a more advanced status.
In its reactive stage, purchasing involved reacting to purchase requests from other departments and
processing the transactions in the most efficient manner possible.
In its integrative stage, supply involves the development and implementation of proactive supply
strategies. An example of a proactive strategy is to regard key suppliers as partners, and an appropriate
strategy is therefore to manage the relationship with the supplier for the mutual benefit of both supplier
and buyer.
Supply is therefore more significant than purchasing because the objectives and strategies for purchasing
are aligned with the overall objectives and strategies for the organisation. It is a strategic activity whereas
purchasing is operational.
As a strategic activity, supply is capable of providing much more value for the organisation over the long
term.
(b) MNEs use two forms of foreign direct investment to establish a business interest in countries of Asia and
Latin America.
1 Acquisition of existing business
An MNE may acquire an existing business through acquisition. The acquired business becomes a
subsidiary of the MNE. Benefits of this form of FDI to the host economy include:
The MNE may provide technological expertise and new investment to the business it has acquired, so that
the country gains from the raising of technological standards and production efficiency. China for
example, has benefited considerably from the technological input from MNEs that have acquired some of
its companies (or acquired partial control).
If the acquired business is struggling to survive, acquisition by an MNE may help it to survive. This would
save jobs in the host country.
If an MNE invests more money in the subsidiary it has acquired, there should be a general increase in
economic activity. The benefits will be felt not only by the employees of the acquired business, but also
by stimulating the surrounding economy.
2 Investment in a greenfield operation
Occasionally an MNE may establish a greenfield operation, which means creating a new business where
nothing existed before. Foreign direct investment often funds ventures of this type that involve both local
and expatriate staff.
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Benefits of this form of FDI are similar to those described above for acquisitions.
In addition, when there is a greenfield investment, the MNE may need to invest in the development of the
infrastructure of the host country, for example by improving roads or railways or improving supplies of
water or electricity.
Low cost
Management may decide that direct changeover will be less costly than any other method of
implementing the new system, and make this choice in order to save money.
Acceptable risk
Usually direct changeover increases risk, but if management take the view that there are unlikely to be
any operational problems with introducing the new system in full immediately, then the risk of direct
change may be acceptable. This could be the case, for example, when the new system will use well-
established off-the-shelf software that has been used successfully in many other organisations.
Operational urgency
Management may consider that there are important operational reasons for introducing the new system in
full at once. For example the new system may be scheduled to coincide with other operational changes,
and all the changes may have to be implemented at the same time.
Non-critical system
The system may not be critical to the efficient functioning of operations. For example it may not be used
extensively at first, so that there would be time to deal with any problems that may arise before going
live.
Operational difficulties
When operations are outsourced to an organisation in another country, there may be operational
difficulties arising from language differences, time zone differences and cultural differences.
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Caroll and Buchholtz argued that there are four main layers, or dimensions to corporate social
responsibility. These include:
Economic responsibilities
An organisation has economic responsibilities to its shareholders (for example, to provide a return on their
investment), employees (to provide a salary and other employment conditions) and customers (to provide
a good product at a fair price). Economic responsibilities form the basis of all other responsibilities.
Legal responsibilities
A countrys laws form the basis of societys moral views and therefore obeying the law is the foundation of
compliance with social responsibility. An example of an organisations legal responsibility is to look after
its employees health and safety whilst they are at work.
Ethical responsibilities
Society often expects an organisation to act in a fair and just way even if the law does not require it to do
so. An example of this is where an organisation pays suppliers in less developed countries a fair price for
their products even if this is more than the normal market price (such as under the Fairtrade scheme).
Philanthropic responsibilities
These are other responsibilities which are desired rather than required of organisations. Examples include
making charitable donations and supporting local communities.
(c) Foreign Direct Investment (FDI) occurs where large (and often multinational) companies invest overseas.
Investments are usually in the form of manufacturing plants which produce the companys products to sell
in the host nation or other countries in the area.
Political risk is the risk to an organisation of incurring losses due to non-market and financial factors. It is
usually related to government policy (for example trade rules, investment incentives, currency controls,
the economy and the tax regime).
Assessing political risk is highly important to organisations that engage in FDI for the following reasons:
Cost: FDI almost always involves a substantial investment by an organisation and should a project fail
due to political risk factors, the cost to the organisation would be extremely high.
Time: FDI projects are usually long-term investments which are not easy to withdraw from. It is important
that an organisation appreciates the political situation before committing itself and becoming locked-in.
Effect on other operations: An FDI investment which becomes affected by political factors may have a
knock-on effect on the organisations other operations. For example, should the political situation mean
that no products can be produced or exported, the short-fall would need to be made up by other operating
units around the world. Even if this is possible, there will be a period where output (and therefore sales)
falls whilst alternative production plans are made.
(d) Cousins Strategic Supply Wheel depicts various aspects of the relationship between an organisation and
its suppliers. Each of the aspects is inter-related to the firms corporate and supply strategy as well as to
each other.
An organisation which has price-based procurement and policies is likely to have opportunistic
relationships with its suppliers as it seeks to achieve short-term cost reductions. It is unlikely to form
close relationships with its suppliers nor create a collaborative, or integrated, supply strategy.
Cousins Strategic Supply Wheel will be of help to an organisation which wishes to move away from
price-based procurement towards a collaborative, or integrated supply strategy. The model identifies
factors the organisation should consider and also ensures these are balanced focusing on one aspect
will be to the detriment of another. For the change to be successful each of the following areas must be
addressed.
Organisation structure: Whether the organisation is centralised or decentralised will affect the closeness
of the supply relationship and how the parties interact.
Performance measures: Measures must be introduced to monitor supplier relationships and control the
procurement strategy.
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Competences: The organisation must have the necessary skills within the workforce to achieve the new
strategy. This may require training.
Cost/benefit: The benefit of the change in strategy must exceed the cost of implementing and operating it.
Relationships: The organisation must be willing to move away from opportunistic relationships towards
collaborative relationships with its suppliers.
(e) It is important for an organisation to manage its inventory carefully for a number of reasons. Firstly,
production may be interrupted if materials run out and this may affect customer satisfaction and
goodwill if orders cannot be fulfilled. Secondly, holding costs for some materials may be high so it is
important to keep inventory at economic levels to minimise these costs. Thirdly, it is important that
inventory is not wasted through spoilage or obsolescence so inventory levels must be appropriate to the
useful life of the goods.
Therefore it is important for an organisation to select an appropriate inventory management system and
the four main types are described below.
Continuous or perpetual inventory system
This system records every receipt and issue of inventory as it occurs so that there is a continuous record
of the balance of each item of inventory. Once inventory falls to a pre-determined level, an order for a
fixed amount is issued to replenish the stores.
Periodic inventory system
This system checks inventory levels at specific time intervals and orders for new inventory may be made
depending on the inventory level which is recorded.
ABC system
This system is based on the Pareto 80/20 rule that suggests 20% of items are likely to account for 80%
of the costs. It is a selective approach which classifies inventory items as expensive (A items), in a
middle-cost range (B items), or inexpensive (C items). A and B items are subjected to careful stores
procedures to minimise costs. C items are not subject to such strict control and can be ordered in large
quantities because the cost savings from control do not justify the administrative cost of managing them.
Just-in-time (JIT) system
This system is based on the idea that goods should not be produced until they are needed. This means
production is triggered when demand for goods is created (such as when a customer places an order).
Inventory is not required until production commences and therefore at its extreme, JIT is known as
stockless production the aim is to keep inventories as close to zero as possible. This system requires
very close relationships with suppliers to ensure inventory can be delivered quickly, reliably and flexibly.
(f) Different types of workforce flexibility an organisation could use include the following.
Financial flexibility
A range of payment and reward systems may be used to encourage the workforce to perform. For
example, an employee is more likely to be prepared to work overtime if they can see that doing so will
help them achieve a financial incentive such as a bonus.
Functional flexibility
Functional flexibility means ensuring employees are able to switch between tasks and roles as required.
To do so requires multi-skilled teams rather than relying on specialists. Job rotation and training are often
used to help build functional flexibility.
Numerical flexibility
The use of additional people, for example temporary workers, can be used to provide the flexibility to deal
with peaks in production demand. Part time workers can also play a part, providing flexibility to cover
certain parts of the day or night without needing to employ a person full-time.
Flexible working arrangements
There are generally two aspects flexibility can be offered on - where people work and when they work.
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Flexibility can be provided over when people work, for example through the use of flexitime or offering the
option of a compressed working week. It may be appropriate for some employees to be offered flexibility
over where they work, for example working from home.
By providing flexible options that help ensure employees are able to juggle work successfully with other
commitments, employers hope their workforce will be less likely to spend time worrying about outside
factors. As a result, the workforce should perform better.
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Expertise
Organisations which lack expertise, for example in IT and communications, can use the skills of
individuals and businesses in other countries which do have the expertise. This is more likely to be
beneficial to organisations in less developed nations that see an opportunity to gain a technological
advantage over their local competitors.
Investment
Organisations that operate globally can seek to raise finance from a wider range of investors for example
banks and stock markets in foreign countries. This may open up sources of finance that were previously
unavailable, or at lower interest rates than those which are available in the home nation.
Tax incentives
Some countries offer organisations tax or other financial incentives to set up operations in their
jurisdiction. If an organisation didnt operate globally then they would not be able to take advantage of
such opportunities.
Businesses have ethical values, based on the norms and standards of behaviour that their leaders believe
will best help them express their identity and achieve their objectives. Some of these ethical values may
be explicit, for example, expressed in a mission statement or in employee training programmes. Others
may be unwritten rules and customs that form part of the organisations' culture: 'the way we do things
around here'.
Examples of corporate social responsibility include organisational policies to recycle materials, use energy
from renewable sources and to keep the happiness and welfare of employees as a core value to the
organisation.
Whilst CSR is based on ethics, it often takes a wider stance, for example an ethical stance may be to
support suppliers in developing nations but a CSR policy might be to ensure the suppliers employees are
paid a fair wage.
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Inputs
Product inputs are in the form of raw materials whereas service inputs are the skills and attributes of
individuals.
Processes
The production of a product usually occurs away from the customer, for example a television is
manufactured at a factory which might be on the other side of the world from a customer. By contrast,
the provision of a service usually involves direct contact between employee and customer.
Production of many goods often involves machinery such as robots or automated processes. Services are
mainly performed by human labour.
Since machines specialise in performing the same task repeatedly, and humans can vary the service they
provide, goods tend to be generic and services more tailored to the needs of the customer.
Outputs
By their nature, services are inseparable from the person performing them whereas as products are
separate from the process that created them.
Service outputs have no physical form. Very often, the customer is given some physical evidence that the
service was provided (for example a travel ticket) but this is separate from the service provided. Goods, by
contrast, are tangible objects.
(c) Production, sales and product orientation
Organisations that do not take a market or marketing orientation may take up a production, sales or
product orientation instead.
Production orientation
Under a production orientation, management believe that success is achieved through producing goods or
services of optimum quality as cost-efficiently as possible. The major task of management is to pursue
improved production and distribution efficiency.
It also assumes that customers will want to buy products that have been produced efficiently.
Perhaps the most well-known example of production orientation was the Model T Ford, one of the earliest
motor cars to be produced for the mass market. Henry Ford famously said that Ford's customers could
have the (mass-produced) Model T in any colour, so long as it was black.
Sales orientation
Under a sales orientation the tendency is to make the product and then actively and perhaps aggressively
sell it. Underlying this philosophy is a belief that a good sales force can sell just about anything to
anybody.
Selling is preoccupied with the seller's need to convert their product into cash. Marketing is concerned
with satisfying the needs of the customer by means of the product and the whole cluster of things
associated with creating, delivering and finally consuming it.
Product orientation
Product orientated organisations focus on product development, for example the introduction of new
product features. This approach is based upon the belief that a more advanced product or one with more
features will be perceived as superior.
(d) Influences on an individual making a purchasing decision
There are many influences on a consumer purchasing decision, these include:
Reference groups
A reference group is an actual or imaginary group that influences an individual's evaluations, aspirations
or behaviour. They influence a buying decision by making the individual aware of a product or brand,
allowing them to compare their attitude with that of the group, encouraging the individual to adopt an
attitude consistent with the group, and then reinforcing and legitimising the individual's decision to
conform.
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Cultural factors
Culture comprises the values, attitudes and beliefs in the pattern of life adopted by people, that help
them integrate and communicate as members of society. Culture comprises cultural artefacts, lifestyles,
and so on. For example, alcohol consumption is part of the culture of many countries in Western Europe,
whereas it is frowned on in Muslim and some other countries.
Family life cycle
Where an individual is in their family life cycle will influence the types of products that they decide to
buy. For example, couples at the early stages of their marriage before having children will have different
needs and consumption patterns from those, say, after their children have left home.
Economic circumstances
An individuals buying decisions are also heavily influenced by their economic circumstances. An
individual's economic circumstances consist of spendable income: its level, stability and time pattern,
Savings and assets, including the percentage that is liquid, borrowing power and attitude toward spending
versus saving.
Attitude
An attitude describes a person's enduring favourable or unfavourable cognitive evaluations, emotional
feelings, and action tendencies toward some object or idea. Attitudes lead people to behave in a fairly
consistent way towards similar objects and therefore whether or not they generally desire them. Attitudes
tend to settle into a consistent pattern to change one attitude may entail major changes to other
attitudes.
(e) Herzbergs two-factor motivation theory
Herzberg identified two groups of work related factors which caused satisfaction and dissatisfaction
respectively. He called these factors motivators and hygiene factors.
Motivators produced satisfaction when present and were capable of motivating the individual. Examples
of motivators include: Advancement, recognition, responsibility, challenge, achievement, growth in role
and autonomy.
Hygiene factors could not give satisfaction or provide motivation when present. Their absence, however,
caused dissatisfaction. Examples of hygiene factors include: Salary, interpersonal relationships, working
conditions, job security and status.
Job enrichment
Job enrichment increases the depth of responsibility by adding elements of planning and control to the
job, therefore increasing its meaning and challenge. The worker achieves greater autonomy and growth in
the role.
Relationship
Herzbergs theory and job enrichment are unrelated. However, job enrichment may be a powerful
motivator because it provides a number of motivators suggested by Herzbergs theory.
(f) Targeting
Before an organisation can target the most lucrative part (or segment) of the market it must identify what
the segment is. To do this requires market research and market segmentation. Once the segment is
identified, the organisation should manipulate the marketing mix so that its offering appeals to the
segment identified.
Market research
Market research is the process of gathering, recording, analysing and reporting data and information
relating to the company's market, customers and competitors.
Primary and secondary data may be used in the research. Primary research being conducting new
research into the market, for example by doing customer surveys or hiring specialist researchers to
analyse the market. Secondary research is conducted on data that has already been collected, for
example by analysing data from websites or reviewing trade journals.
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Competitor analysis
As part of the market research, it is important for the organisation to investigate the competitors that are
already in the market segment. By looking at their strengths and strategies, the organisation will be able
to decide whether or not entering the market is viable.
Market segmentation
Market segmentation may be defined as the subdividing of a market into distinct and increasingly
homogeneous subgroups of customers, where any subgroup can conceivably be selected as a target
market to be met with a distinct marketing mix.
Although the total market consists of widely different groups of consumers, each group consists of people
(or organisations) with common needs and preferences, who perhaps react to 'market stimuli' in much
the same way. Each market segment can become a target market for an organisation, and would require
a unique marketing mix if the organisation is to exploit it successfully. The organisation can then position
its offer to account for the roles of each segment.
Examples of market segments include: Area, age, gender, income, education, class and lifestyle.
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Importance
In some organisations, information and its provision is inherent to operations and management. Therefore
keeping an in-house IS function respects its importance.
Competitive advantage
Organisations with in-house IS functions are more likely to be able to use the systems for competitive
advantage. Also, having dedicated IS staff will help ensure any opportunities for using the systems to gain
competitive advantage should not be missed.
Flexibility
Having an in-house IS team will mean that the organisation will avoid becoming locked-in to
unsatisfactory contracts with third party suppliers. It will help it to respond to change more quickly than if
a third party was involved.
Awareness of costs and benefits
Organisations with in-house IS teams will be more aware of the actual costs and benefits of having an IS
function than those which outsource. Managers need to know the costs and benefits in order to get the
most out of the resources available.
(b) Computer Aided Design (CAD)
Computer Aided Design (CAD) packages are software which allow product design and so on to be quickly
created and amended.
Computer Aided Manufacturing (CAM)
Computer Aided Manufacturing (CAM) packages are software that allow machine tools and related
equipment to be controlled by the computer system.
Benefits of CAD and CAM
CAD and Cam both bring a number of benefits to an organisation. These benefits include:
Reduced labour costs
CAD helps to speed up the design process so that fewer designers are required compared to a manual
design process. CAM may enable the production processes to be automated or have reduced human
input. Both will help reduce an organisations labour costs.
Reduced error rates
Reducing human input in the design and manufacturing process should reduce the instances of human
error and associated costs. This is of course providing the software is operating correctly.
Reduced wastage
The design and manufacturing processes can be made more efficient and raw materials can be used more
effectively, reducing the amount of off-cuts and so on. This reduced waste will help save the organisation
raw material costs.
Meeting specific customer needs
Both Cad and Cam offer an organisation the opportunity to tailor products and production processes to
individual customers. This should help increase customer loyalty and repeat orders.
Improved quality
The design and manufacturing process can be made more simple and procedures can be built-in to help
ensure quality of output.
(c) Materials requirements planning (MRP I)
MRP I is a technique for deciding the volume and timing of materials in manufacturing conditions where
there is dependent demand. The purpose of an MRP I system is to calculate the quantity of materials
required, for each type of material, and determine when they will be required.
There are numerous benefits to an organisation which uses an MRP I system. These include:
Improved operations
MRP I enables manufacturing organisations to determine when to order material, by working back from
when they will be required for production, and allowing the necessary lead time for production or for
purchasing from the external supplier. This should make the whole process more reliable and
straightforward.
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Historically, purchasing was viewed as a clerical function related to the day-to-day purchase of goods.
High importance was placed on price, but this has changed in recent years. Purchasing today, in most
organisations, is viewed as a strategically important function that impacts significantly on organisational
performance. If the focus is on price then a number of disadvantages occur.
Loss of quality of goods supplied
The main disadvantage is that there is no incentive to develop close links between buyers and suppliers.
The reason being is that the relationship is likely to be short with the buyer switching to another supplier
when a cheaper price is on offer. The lack of a relationship will almost certainly result in a loss of quality
of goods supplied as the supplier does not value the buyers business as much.
Less control over supply
It is important for a business to have a degree of control over the supply process to ensure the right
materials are delivered on-time. This may not be possible if there is not a strong relationship between
buyer and supplier.
Less scope for competitive advantage
Porter recognised that management of the supply chain could be a source of competitive advantage. He
referred to the importance of supply chains being responsive and reliable. If the end-user is the focus of
all members of the supply chain then the quality of the end-product will be improved, providing a
competitive advantage over the competition. This is only possible with close relationships between buyer
and supplier, something that is not possible if the focus is on price.
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Flexibility
To respond immediately to customer orders, production must be flexible, and in small batch sizes (often a
batch of one). This flexibility may flow through the whole organisation and this enables the business to
respond quickly to changes in the competitive environment.
Lower costs
As a consequence of high quality production, and with a faster throughput and the elimination of errors,
costs of production will be reduced and costs of holding inventory potentially eliminated.
(d) Trade policies
Free trade encourages the easy movement of goods, services labour and capital between different
countries. It involves an absence of quotas, tariffs, subsidies and discriminatory taxation or other barriers
that may hinder trade and is sometimes referred to as liberalisation or liberal trade policies.
Alternatives to free trade include protectionism, balanced trade and ethical trading policies.
Protectionism aims to restrict trade with one or more other countries to protect home country producers
from overseas suppliers. It is sometimes referred to as economic nationalism and involves the adoption of
one or more barriers to trade such as quotas, tariffs and subsidies mentioned above. The reasons why
such a policy may be adopted include the protection of fledgling domestic industries or as a counter-
action against foreign industries that are considered to be receiving unfair help from their governments.
The objective of balanced trade is to manage the imports and exports between two nations so that neither
runs up a large trade deficit. It may be viewed as being halfway between free trade and protectionism but
the trade barriers are managed by the parties in the spirit of co-operation to both their benefit.
Ethical policies are a recent development and include Fairtrade as an example. Such policies developed
alongside sustainability and corporate social responsibility and have the aim of paying suppliers in
developing nations a fair price for their products.
(e) Testing new systems
To ensure new systems are thoroughly checked when they are installed, four types of test are often used.
Realistic tests
These involve using the system in the way it will be used in reality ie the actual environment, users and
types of data.
Contrived tests
These are designed to present the system with unusual events to ensure these are handled correctly, for
example that invalid data is rejected.
Volume tests
This type of test presents the system with large numbers of transactions to see how the system copes.
Acceptance tests
This type of test is undertaken near the end of the implementation phase and is conducted by users to
ensure that they are happy that the system meets their needs.
(f) Risks of overseas investment
Political risk is the main risk organisations face when investing overseas and is the risk of incurring losses
due to non-market factors. These factors are usually related to government policy, for example trade rules,
investment incentives and the tax regime. It is also related to financial factors such as currency controls
and the economy, and stability factors such as rioting and civil war.
Despite the risk, organisations can and do continue to invest overseas. Some reasons for this include:
Risk and reward
Most businesses are happy to take a degree of risk if there is the strong possibility of a high level of
reward. Therefore if the potential reward from an investment significantly outweighs the potential risk
then an investment is likely to take place.
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Insurance
Insurance policies are available to organisations that offer a degree of protection against political risk.
Although expensive, they may be attractive if they bring the level of risk down so that it is significantly
less than the potential reward.
Confidence
A business seeking to invest may be reassured by the confidence of other parties such as analysts and
other businesses investing in the country that the risk is not as bad as it fears.
Government aid
Many governments offer significant aid in the forms of grants and tax breaks to organisations that invest in
their country. This extra reward for making the investment may be enough to persuade a business that
the investment is worth the risk.
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MOCK EXAMS
236
CIMA
Paper E1 (Operational)
Enterprise Operations
Mock Exam 1
Question Paper
DO NOT OPEN THIS PAPER UNTIL YOU ARE READY TO START UNDER
EXAMINATION CONDITIONS
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238 Mock Exam 1: Questions
Mock Exam 1: Questions 239
SECTION A 20 marks
Question 1
1.1 For firms wishing to build market share in a market new to them, 'penetration pricing' involves pricing
A High enough to convey an impression of quality
B Low enough to challenge buyer loyalties
C Low enough on a few items to attract customers to a wider product range
D To cover fixed costs only (2 marks)
1.2 A system that simulates the problem solving techniques of human experts is known as:
A An expert system
B A knowledge transfer programme.
C A smart system
D A management information system (2 marks)
1.3 Attainments, general intelligence, circumstances and special aptitudes are part of Rogers seven-point
plan for person requirements. What are the remaining points?
A Expectations, attitudes and flexibility
B Experience, past progression and characteristics
C Qualities, responsibility taken and life experience
D Physical make-up, interests and disposition (2 marks)
1.4 Motivation theories that assume that behaviour is caused by, and directed towards, the satisfaction of
personal needs are referred to as:
A 'Carrot and stick' theories
B Content theories
C Process theories
D Satisfaction theories (2 marks)
1.5 Porters value system reflects the value created through the relationship of:
A Suppliers, manufacturers, distribution channels and customers value chains
B Customers and sales staff
C Production and sales departments
D Economy, efficiency and effectiveness in the use of resources (2 marks)
1.6 Inventory management using a method that concentrates effort on the most expensive items is called:
A PDCA
B JIT
C Five S
D ABC (2 marks)
1.8 A company that concentrates on product features it instinctively believes to be 'right' is referred to as:
A A learning organisation
B Production orientated
C Product orientated
D Early stage entrepreneurial (2 marks)
1.9 Teleworkers is a term applied to staff using communication technology and working:
A In an unstructured way
B In the telecommunications industry
C Off-site, for example from home
D In a call centre (2 marks)
SECTION B 30 marks
Answer ALL parts of this question
Question 2
(a) Describe the benefits an information system centred around a database should bring to an organisation.
(5 marks)
(b) Explain the benefits of effective management information systems and executive information systems.
(5 marks)
(c) Explain the issues organisations should consider if switching from business-to-business trading (B2B) to
business-to-consumer trading (B2C). (5 marks)
(d) Explain how the effectiveness of staff training events can be assessed. (5 marks)
(e) Identify the advantages to an organisation of using specialist providers as well as employees in delivering
a training programme. (5 marks)
(f) Describe the ways in which organisations might encourage the development of the use of quality circles.
(5 marks)
(Total = 30 marks)
242 Mock Exam 1: Questions
SECTION C 50 marks
Answer BOTH questions
Question 3
Banking services within the country of Everland are provided exclusively by a few well established banks, all
offering broadly similar 'traditional' banking services. Overall, the industry performance is viewed from within as
satisfactory and historically all banks have maintained stable profits and employment levels. Marketeers would
describe the industry as being classically 'product oriented'. The profile of senior Everland bank officials and
managers is of well qualified professionals, possessing long banking industry experience and considerable
financial skills. Within the combined workforce other business skills (in, for instance, HR or marketing) are
noticeably lacking.
In the external environment, the government will soon pass new legislation that will effectively break the
oligopoly-type position of banks and open the market up to other providers. Senior bank officials, however, are
unconcerned, feeling that banks are in 'reasonable shape' to face any new challenge.
You work for the Everland Banking Advisory Group (EBAG), an independent body, and have been asked to
analyse the banking industry in the country of Utopia to identify lessons that might be learnt. Your investigation
reveals that since the sector opened up to more competition, a much wider range of financial institutions offer
banking services. Despite this, banks in Utopia have all prospered over the past few years. This is thanks to
wide-ranging changes in how they operate, the products and services they offer and their organisational
structures. You identify some significant trends within the banking industry of Utopia, including:
The use of marketing techniques
A clearer focus on customers (who have become increasingly more demanding)
A new generation of bank employees, many with commercial backgrounds
Banks now exhibiting a strong sense of ethical and social responsibilities towards customers.
Required
(a) Identify the main threat to Everland banks and discuss the types of change that they could be making in
order to survive and prosper. (10 marks)
The importance of ethics and social responsibility in all areas of business has attracted increased
attention in recent years.
(b) Discuss (with examples) the main ethical issues relevant organisations operating within the banking
sector. (10 marks)
(c) Explain social responsibility and identify issues relevant organisations operating within the banking sector.
(5 marks)
(Total = 25 marks)
Mock Exam 1: Questions 243
Question 4
QW9 is a large insurance company. The industry conditions are very competitive and QW9 is under constant
pressure to achieve higher standards of customer service and improve profitability for shareholders.
You have recently taken up a post in QW9's central project and technical support team working directly for the
Director of Strategy, who is also relatively new to the organisation. In an initial briefing with you, the Director
explains that he has met with most senior managers and discussed their feelings on the strengths and
weaknesses of the company. He has concluded that there are a number of areas that need to be addressed,
including two from the area of human resource management, namely, performance related rewards and
performance management.
Performance related rewards. QW9 experiences difficulty in recruiting staff even though it pays
comparable salaries to its rivals. Senior managers do not feel that there are problems with either staff
morale or the external image of the company The Director of Strategy explains that although QW9 offers a
number of benefits to its employees beyond basic pay, this is not made explicit enough either internally or
externally. The Director has so far identified a good pension scheme, flexitime, personal insurance cover
at reduced rates, a subsidised canteen and a social club. You have also heard it said that the balance
between a professional and personal life is a distinguishing feature of being an QW9 employee. It is the
Director's view that all benefits should be examined and a 'total reward package' approach should be
progressed. This would draw together all the financial and non-financial benefits (including working
practices, development opportunities and the challenge of working for QW9 itself) into an integrated
package which would be available to all employees.
Performance management. A formal performance appraisal system supported by standardised procedures
and paperwork has operated for a number of years. The scheme has clear organisational objectives
centred on staff development and improved performance rather than as a basis for paying individual
annual bonuses. It is, however, not well regarded by either managers or staff and its objectives are not
being met. Senior managers complain about the time that is taken up with the process. Exit interviews
are conducted whenever someone leaves QW9, and a review of a sample of recorded comments indicates
staff feelings on the scheme very clearly: 'appraisal is just a paper exercise', 'a joke', 'a waste of time and
effort'.
Required
(a) Discuss the advantages and disadvantages of QW9 developing a 'total reward package' approach.
(10 marks)
(b) Explain the possible reasons why the objectives of the formal appraisal system are not being met.
(10 marks)
(c) Explain the purpose of a total reward package scheme and identify three areas, relevant to the design of
such a scheme, that QW9 should investigate. (5 marks)
(Total = 25 marks)
(Total for Section C = 50 marks)
244 Mock Exam 1: Questions
Answers
A plan of attack
Before the three hours writing time starts, you are allowed 20 minutes to read through the paper. Use this time
wisely in effect it gives you an extra 20 minutes to gain the marks you need to pass.
What should you do in this 20 minutes?
We recommend you spend the first ten minutes of reading time scanning the paper and identifying the main
topic areas covered.
The second ten minutes, we suggest you simply start working through the Section A questions by writing your
answers on the question paper. These answers can then be transferred very carefully to your answer booklet
when the exam starts. Remember though, you must not write in your answer booklet during the reading time.
Using the time in this way should mean that later in the exam, when you reach Section C, you have sufficient
time to read both questions carefully and plan your answers to them.
Turn back to the question paper now, and we'll sort out a plan of attack for Mock exam 1.
Section C
Once you've done Sections A and B, you are required to answer two longer questions available in Section C.
Question 3. You must spot the key threat in the scenario and make reasonable suggestions in Part (a). In
Parts (b) and (c) use your understanding of ethical and social issues and apply it to the banking sector.
Dont be afraid to draw on real-world knowledge gained from wider reading and media coverage.
Question 4. Part (a) could be answered using text book knowledge of reward packages, but your answer
to Part (c) must be related to the scenario. The same applies to part (b) dont provide general reasons
for appraisal system failure, your points must be relevant to the scenario.
General advice
Don't forget that all questions in the E1 exam are compulsory.
248 Mock Exam 1: Answers
SECTION A
Question 1
1.1 B Penetration pricing involves setting a relatively low price for a product in order to increase the
organisations share of the market.
1.2 A Expert systems allow general users to benefit from knowledge and techniques of human experts.
1.3 D Rodgers seven-point plan consists of: circumstances (background), attainments, disposition,
physical make-up, interests, general intelligence and special aptitudes.
1.4 B Content theories, such as Maslows Hierarchy of Needs, assume motivation is directed at fulfilling
personal needs.
1.5 A Porters value system reflects the importance of adding value at all stages in the supply chain
from the first supplier in the chain to the end-user or customer.
1.6 D ABC inventory management focuses on the most expensive items as a priority as their value
justifies the extra administrative effort.
1.9 C Teleworking means working away from the organisations premises, usually from home .
1.10 C Induction involves familiarising an individual with the organisation after they have been selected
for a position and have accepted the role.
250 Mock Exam 1: Answers
SECTION B
Question 2
Marking scheme
Marks
(b) The benefits of effective management information systems (used by all grades of managers) include:
Provision of timely information enabling managers to take informed decisions as and when
required (from daily stock re-ordering to assessing weekly or monthly staffing requirements).
Reducing inventory holding costs by enabling Just-in-Time.
Providing competitive advantage as customers are provided with effective customer service (eg
monitoring customers to identify their requirements in advance).
Other benefits, relating to executive information systems (used at senior manager or board level) include:
Provision of summary, company-wide data enabling directors/senior managers to identify key
areas for further investigation and action.
Allow the monitoring of competitors (eg active review of website changes) to ensure the
organisation is aware of and can react to (or anticipate) changes in the competitive environment in
a timely basis.
(c) Issues to consider when transferring from business to business (B2B) trading to consumer trading (B2C)
include:
Payment methods. B2C trading will normally mean customers pay for goods immediately, B2B
normally allows payment on account. Facilities for on-line payment will be needed on the website.
Web-enable databases. For example, inventory databases need to be accessible to customers.
B2C customers will expect to see stock availability prior to placing orders.
Database web search. Company websites should include search facilities that allow customers to
find products they require.
User-friendly website. B2C customers require a clear, well presented, easy to navigate site.
Investment in the website may be necessary.
Regular price reviews. The Internet allows for easy comparison between supplier prices.
Companies may need to review prices charged compared to competitors on a regular basis to
ensure competitiveness.
(f) The development of the use of quality circles could be encouraged by:
Rewarding the circle for suggestions that are implemented (eg a share of any savings made).
Providing a budget and support to run the quality circle in terms of room provision, refreshments,
staff to take minutes etc.
Ensuring management are supportive and prepared to act on useful suggestions from the circle.
Providing an explanation as to why suggestions not implemented were rejected.
Management asking the circle for suggestions and comments on specific issues and problems
facing the company, without anticipating the outcomes.
Mock Exam 1: Answers 253
SECTION C
Question 3
Marking scheme
Marks
Human resources
Marketing and customer service professionals should be recruited at the expense of traditional bankers.
A broad range of skill sets and experience should be brought in by employing staff from markets outside
banking.
Recruitment, selection and promotion policies should reflect the new skills/experience mix. Senior
management must also reflect this diversity to counter the lack of marketing, HR and customer service
experience.
Training should be given to promote customer focus and new marketing techniques.
Information technology systems
Systems should be updated to focus on the need for customer focus and quality of information.
New systems may be needed to monitor marketing and customer satisfaction.
Systems should allow feedback from customers and marketing campaigns to be available to senior
management who can use it to make strategic decisions.
Systems should allow awareness of customer needs such as ethical behaviour or social responsibility to
filter out to all staff.
Question 4
Marking scheme
Marks
Alternative approach
Other advantages and disadvantages that you might have mentioned include:
Advantages
Attract suitable potential employees
QW9 operates in a competitive industry and must attract the highest quality staff to achieve high
standards of customer care. However it is having problems attracting suitable applicants. By packaging all
the benefits on offer and communicating it effectively in recruitment literature, QW9 may resolve this
problem.
Improve staff motivation
Pay is not always a motivator and therefore it is important to offer a range of benefits that meet a diverse
range of motivational needs. For example, flexitime allows staff to maintain a healthy work life balance
which will maintain interest and motivation in the job for a long period.
Disadvantages
It ignores other factors
The scheme ignores some other important factors concerning staff welfare and motivation. Those in highly
stressful roles will still be stressed and employees working in under staffed departments may not be able
to take full advantage of benefits such as flexitime.
Staff dissatisfaction
Not all staff will be happy with the benefits on offer and many may just prefer more money. Those who do
not want the benefits on offer may feel left out and leave the organisation.
(b) Tutorial note. This answer is more detailed than you need for ten marks as it shows a range of possible
answers. Five well explained points is enough to earn full marks here.
Limited information is available regarding QW9's appraisal system. However, it is clear that the
organisation has taken a formal approach using standardised forms with clear objectives for staff
development and performance improvements.
Problems with the system can be considered under two headings, firstly inherent problems with the
design and implementation of the system, and secondly problems concerning its operation.
Design and implementation problems
The system may have been poorly designed in the first place. For example, it may be based on systems
used by other organisations and no thought given to whether it is suitable for QW9.
The design of the system may have reflected the needs of the organisation at an earlier time but is no
longer relevant because the company has 'moved on'.
There may have been a lack of consultation and communication with senior managers when the system
was being developed. They may view it as being imposed on them and therefore are not interested in
making it work.
Appraisal schemes should provide benefits which justify the cost and effort put into them. Senior
management comments such as 'a waste of time and effort' indicate that there is an imbalance between
what is put into the scheme and what comes out. This may have been caused by the system being put
into place because one was thought to be needed rather than as a true method of improving staff
development and performance.
Mock Exam 1: Answers 257
Operational problems
Senior managers may have insufficient time to conduct the appraisal process properly. This may reduce
the scheme into a form filling exercise just to meet HR requirements, missing the point of the scheme and
its objectives.
The scheme focuses on staff development needs. Invariably this means additional departmental training
costs that will have an impact on the profits each manager makes. Therefore, it is not necessarily in the
interest of some managers to have large numbers of staff undergoing training. This of course is a short-
sighted view as training should in the long-run improve profitability, but managers may not wish to wait
for such benefits to materialise.
The scheme is not linked to annual bonuses. Employees are likely to act in a manner that maximises
their bonus, which may be at odds with the objectives of the appraisal system.
Standard procedures indicate a bureaucratic or mechanical approach to appraisals. Senior mangers will
be faced with a large volume of identical paperwork that needs to be processed in addition to their
existing work load. There is likely to be a temptation to rush through the process with not much thought
to the objectives just to get it done.
Appraisal schemes often involve subjective judgements and opinions by senior managers over their staff.
There is a risk that employees are not assessed correctly or consistently meaning that some staff who do
not require training are offered it whilst others that need help to improve their performance are not.
(c) Total reward package
A 'total reward package' comprises monetary and non-monetary, motivators offered to staff. These
packages recognise that individuals are all different and may not be motivated by money alone. The key
principle is that employees can pick and choose what benefits they receive rather than everyone receiving
the same. Employees can tailor their remuneration packages to suit their needs at any given time
QW9 should investigate a number of important areas that are relevant to the design of the total reward
package. These areas are:
What benefits are already on offer and what other benefits could be offered.
What employees think about current and potential benefits.
The costs and consequences of the new scheme.
258 Mock Exam 1: Answers
CIMA
Paper E1 (Operational)
Enterprise Operations
Mock Exam 2
Question Paper
DO NOT OPEN THIS PAPER UNTIL YOU ARE READY TO START UNDER
EXAMINATION CONDITIONS
260 Mock Exam 2: Questions
Mock Exam 2: Questions 261
SECTION A 20 marks
Question 1
1.2 Which ONE of the following is NOT normally a barrier to international trade?
A High levels of consumption tax
B Subsidies for domestic (home) producers
C Customs duties
D Embargoes (2 marks)
1.3 Under a free market economy prices are determined by which ONE of the following?
A The stock market
B Government regulation
C Multinationals
D Supply and demand (2 marks)
1.5 Under an ABC inventory management system which ONE of the following items should be monitored
most closely?
A 'A' classified items
B 'B' classified items
C 'C' classified items
D All items equally (2 marks)
1.6 Which ONE of the following characteristics is NOT normally associated with a Non-Governmental
Organisation (NGO)?
A Furthering humanitarian causes
B Championing social causes
C Making profits
D Exercising independence (2 marks)
262 Mock Exam 2: Questions
1.8 Mintzberg's design of an effective organisation does NOT include which ONE of the following
categories?
A Technostructure
B Outsource partners
C Operating core
D Strategic apex (2 marks)
1.10 Reck and Long's strategic positioning tool measures the contribution of which ONE of the following
organisational functions?
A Quality control and assurance
B Purchasing and supply
C The management of systems
D The management of human resources (2 marks)
(Total = 20 marks)
Mock Exam 2: Questions 263
SECTION B 30 marks
Answer ALL parts of this question
Question 2
(a) Describe FIVE types of loss that a company may face when investing in another country unless the risks
are managed. (5 marks)
(b) Distinguish a wide area network (WAN) from a local area network (LAN) providing an example of each.
(5 marks)
(c) Explain the relationship between system implementation and a systems development life cycle (SDLC).
(5 marks)
(d) Describe the potential disadvantages of introducing Just-In-Time (JIT) operations within a manufacturing
organisation. (5 marks)
(e) Explain FIVE ways in which advances in technology have allowed international trade to expand. (5 marks)
(f) The implementation of a new information system may sometimes meet with staff resistance.
Explain TWO management strategies for overcoming resistance that have the advantage of speed but
could raise ethical and possibly legal concerns. (5 marks)
(Total = 30 marks)
264 Mock Exam 2: Questions
SECTION C 50 marks
Answer BOTH questions
Question 3
A professional management body is funding a major research project into the relationship between certain HR
systems and workplace motivation. As part of this project the University of S2013 has been engaged to
investigate the use of staff performance appraisal systems in large organisations. The University's work involves a
number of stages:
Stage 1: questionnaires issued to all large organisations to understand the range of performance appraisal
systems operating.
Stage 2: initial results from stage 1 discussed with a group of senior managers (such as HR directors and
chief executives).
Stage 3: focus group meetings with employees at all levels within the organisations surveyed to
understand employee motivations, attitudes and experiences.
Stage 4: final report to the professional body and subsequent dissemination of findings.
Stage 3 has now been completed and a number of interesting issues have emerged:
The use of formal performance appraisal systems varies significantly between sectors from 80% of
financial service organisations to only 50% in the retail sector.
Organisations not using an appraisal system do not feel that the potential benefits of a formal system
justify the time and cost involved in operating it.
Of the systems in operation, 90% involved an annual meeting between employees and their appraiser,
normally their line manager.
15% of organisations used the outcomes from the system to help determine pay.
There was little relationship between levels of motivation and the existence of a staff performance
appraisal system. (Motivation was more closely related to issues such as organisational reputation and the
operation of environmental action and sustainability programmes.)
Employees were generally critical of their own organisation's system of formal staff performance
appraisal.
Required
(a) Describe the potential benefits of a formal staff performance appraisal system for a large organisation.
(10 marks)
(b) Explain the possible reasons for employees being critical of their own organisation's system of formal staff
performance appraisal. (10 marks)
(c) According to the research findings, environmental action by organisations and sustainability programmes
are highly regarded by employees. Explain why this might be the case. (5 marks)
(Total = 25 marks)
Mock Exam 2: Questions 265
Question 4
Repville is a region that has long been associated with growing fine quality fruit. Up until a century ago all
produce was transported by rail for sale at markets in the countrys major cities. This changed when a
cooperative of the regions fruit producers called Repville Cooperative was formed and part of the fruit harvest
was preserved, bottled and sold more profitably to an intermediary. Today, Repville is a private company and its
products account for the entire regions harvest. The very word 'Repville' is associated with high quality, uniquely
flavoured jams and marmalades. These products are sold in exclusive outlets and delicatessens throughout the
country and are easily recognised by their distinctively coloured and shaped glass bottles which are similar to
those used a century ago.
The company recently appointed a new Head of Strategy from XYZ where she was Marketing Director. (XYZ is a
fast growing low cost international producer of household furniture which appears in many stores, in some cases
bearing the stores name). Having reviewed Repvilles marketing and other operations she has produced a draft
strategy which she has discussed with senior managers at a company 'away day'. Key features of the strategy
include a doubling of revenues within five years and a need to strengthen existing marketing practices. Part of
her proposals for strengthening marketing practices will involve the purchase of Customer Relations Management
(CRM) software. (She favours particular software that is used by XYZ and is 'tried and tested').
Reactions to the draft strategy are 'mixed' and although senior managers favour a growth strategy, some believe
that revenue projections are too ambitious. Others fear that rapid growth may damage the brand. One manager
warned that 'Consumer goods vary enormously by type, Repville operates an entirely different marketing model to
XYZ, and what worked at XYZ may not work here'.
Required
(a) Discuss different marketing possibilities for increasing revenue which will not damage Repville's brand.
(10 marks)
(b) Explain the differences between Repville and XYZ in terms of marketing considerations. (10 marks)
(c) Describe the advantages of the Head of Strategy's idea for strengthening customer relations management
by using CRM software. (5 marks)
(Total = 25 marks)
(Total for Section C = 50 marks)
266 Mock Exam 2: Questions
Answers
A plan of attack
Before the three hours writing time starts, you are allowed 20 minutes to read through the paper. Use this time
wisely in effect it gives you an extra 20 minutes to gain the marks you need to pass.
What should you do in this 20 minutes?
We recommend you spend the first ten minutes of reading time scanning the paper and identifying the main
topic areas covered.
The second ten minutes, we suggest you simply start working through the Section A questions by writing your
answers on the question paper. These answers can then be transferred very carefully to your answer booklet
when the exam starts. Remember though, you must not write in your answer booklet during the reading time.
Using the time in this way should mean that later in the exam, when you reach Section C, you have sufficient
time to read both questions carefully and plan your answers to them.
Turn back to the question paper now, and we'll sort out a plan of attack for Mock exam 2.
Section C
Once you've done Sections A and B, you are required to answer the two longer questions in Section C.
Question 3. To earn the marks on offer in part (a) you should generate ideas, in general, of the benefits
that a performance appraisal system might bring.
Part (b) can be approached in general too, but you should try to link your points to the scenario if
possible. You may be able to use your personal knowledge of appraisal systems here.
In part (c) you should think about why employees might enjoy working for a business that operates
sustainably. Try to come up with as wide a range of ideas as possible.
Question 4. The trick to answering part (a) is not to come up with general marketing ideas. Setting out
what is important to Repville at the start will help you stay on track.
In part (b), try to build up a picture of the two companies. They could be considered complete opposites
so generating differences should not be too difficult.
In part (c), remember you only need to come up with advantages.
270 Mock Exam 2: Answers
General advice
Don't forget that all questions in the E1 exam are compulsory.
SECTION A
Question 1
1.1 D Lean production or lean process improvement involves the systematic elimination of waste.
1.2 A Subsidies, customs duties and embargos are all barriers to international trade. Consumption tax
affects all goods sold, both domestically produced and imported.
1.3 D In a free market, prices are determined by market forces supply and demand.
1.4 A Inflation, investment and unemployment are all macroeconomic factors. Price and demand within
a particular market is a microeconomic factor.
1.5 A In an ABC system, items are ranked according to their value A is high value, B is medium
value and C is low value. High value A items are monitored the most closely.
1.6 C Non-governmental organisations are defined by the World Bank as private organisations that
pursue activities to relieve suffering, promote the interests of the poor, protect the environment,
provide basic social services or undertake community development. They are generally not profit-
oriented.
1.7 C Free trade is sometimes referred to as liberalisation or liberal trade policies. This occurs when
governments do not interfere in international trade.
1.8 B Mintzbergs organisation includes, the operating core, technostructure, middle line, strategic apex
and support staff.
1.10 B Reck and Longs strategic positioning tool identified a four-phase development of purchasing within
organisations.
272 Mock Exam 2: Answers
SECTION B
Question 2
(a) - Candidates would often describe the risks involved when investing in another country without dealing with
the types of loss a company might face.
(b) - This sub-question was generally poorly done. The differences between a WAN and a LAN were not well
distinguished.
(c) - Some candidates confused SDLC and Implementation.
(d) - This sub-question was generally well answered with potential disadvantages of JIT well described.
(e) - Answers were sometimes too vague e.g. explaining that there could be improvements in transport due to
technology but without explaining how the technology had helped.
(f) - This sub-question was generally well attempted though some candidates simply listed theoretical
alternatives.
Marking scheme
Marks
(a) Types of loss that a company may face when investing in another country
There are a number of types of loss that an organisation may face when making an overseas investment.
It is important that the risks are managed appropriately.
Loss of business assets
Investing overseas means spending capital on buildings, plant and equipment. After the investment is
made there is a risk that the organisation may lose ownership of these assets due to the actions of the
government. For example by compulsorily purchasing shares in the overseas operation.
Loss of profit
There is a risk that the organisation will not achieve the profit that it expects will be created from the
investment. Governments may change corporation tax rates or introduce other policies that make business
operations more expensive and exports from the country may be affected by trade disputes between
nations.
Mock Exam 2: Answers 273
Loss of business
Business agreements and contracts on which the investment was made may be cancelled or renegotiated.
Loss of business infrastructure
Wars, political unrest or terrorism may result in damage to property, such as land and buildings, owned
by the organisation.
Loss of employees
Wars, political unrest or terrorism may cause a loss of employees or put off experienced staff from
relocating to the country of operation. Hiring new employees may prove difficult.
(b) Differences between a wide area network (WAN) from a local area network (LAN)
The two main types of network are Local Area Networks (LANs) and Wide Area Networks (WANs).
The difference between the two is where the networked devices are located.
Local Area Networks are often found within an office and are often used to connect printers and other
peripherals to computers.
Wide Area Networks are used when the devices are dispersed geographically even around the world.
Very often this type of network is not owned by one particular organisation, instead several organisations
are involved in supplying one small part of the network.
Examples: LAN the network within an office of a business organisation
WAN the Internet
(c) System implementation and the systems development life cycle
Implementation is one part of the systems development life cycle (SDLC). The SDLC is a process where a
new system is created or an existing system is amended. It involves a number of different staff and
managers at each stage. The main stages of the SDLC are Planning, Analysis, Design, Development and
Implementation.
The main steps in the implementation phase of an information system are as follows.
Installation of the hardware and software
Testing
Staff training and production of documentation
File conversion
Changeover
The items in the list above do not necessarily happen in a set chronological order and some may be done
at the same time for example staff training and system testing can be part of the same operation. The
requirements for implementation vary from system to system.
(d) Just-In-Time (JIT) operations
Just-in-time (JIT) is an approach to operations based on the idea that goods and services should be
produced only when they are needed neither too early (so that inventories build up) nor too late (so that
the customer has to wait). JIT is also known as 'stockless production' and may be used as part of a lean
production process. In its extreme form, a JIT system seeks to hold zero inventories.
Disadvantages
The following are disadvantages of the JIT system:
Investment
For a business to switch to a JIT system a significant investment in new systems is required.
Risk of lost sales
Because the business does not keep inventories it may not be able to respond quickly to a sales
opportunity and may lose sales as a consequence.
Risk of human and system failings
The lack of any buffer inventory means that the business is reliant on all systems and human operators
performing as they should. If a system fails or there is human error there is no fall-back position.
Reliance on suppliers
Under a JIT system, the business is heavily reliant on the quality of their suppliers goods and on their
ability to delivery on-time as required.
274 Mock Exam 2: Answers
SECTION C
Question 3
Marking scheme
Marks
(a) Up to 2 marks per valid point referenced to the scenario; 1 point each for brief general 10
(but relevant) points
(b) Up to 2 marks per valid point referenced to the scenario; 1 point each for brief general 10
(but relevant) points
(c) 1 mark each for each point. 5
25
Our answer shows what we consider the most appropriate points to make. Other relevant points that
answer the question would earn marks. However, irrelevant points that do not answer the question would
not earn marks.
Alternative approach
Other areas that you may have covered include:
Outdated system
System does not fit with organisation
Poor communication
Lack of appraisal planning and appraisal technique
(c) Sustainability
The University research found that staff motivation is closely linked to environmental action and
sustainability programmes. There are a number of reasons why this may be the case.
Organisational culture
An organisation that adopts sustainability programmes and environmental action will develop a culture
that attracts new employees who share its ideals. Employees, who did not necessarily share these values
before they were introduced may enjoy the positive nature of the new culture. Both types of employee will
be motivated by the organisation.
Employer branding and social standing
Being environmentally friendly can boast the image and brand of an organisation through positive news
reports and increased awareness in the wider community. Employees will find this motivating, especially
if they are given a role to play, in terms of meaningful work and responsibility, that supports the
organisations practices.
Employee feedback
Organisations that develop such cultures often listen to their employees and encourage their feedback. For
example, by hearing employee suggestions that improve sustainability in operational areas. Employees are
more likely to be motivated if they are listened to and see their suggestions being actioned by senior
management.
Job security
Reducing waste and improving operational efficiency are both objectives of sustainability policies.
However, they also have benefits such as reduced operating costs (as less energy or water is consumed).
Sales revenue may increase as the organisation attracts customers that like what the company stands for
and therefore profitability may rise. All these factors may give employees comfort that their jobs are
relatively secure.
Pride
Working for an organisation that is socially responsible may be a source of pride for many employees
because it differentiates it from other organisations. Being different and having their own identity are
important to many employees who share the values of the organisation.
278 Mock Exam 2: Answers
Question 4
Marking scheme
Marks
(a) Up to 2 marks per valid point referenced to the scenario; 1 point each for brief general 10
(but relevant) points
(b) Up to 2 marks per valid point referenced to the scenario; 1 point each for brief general 10
(but relevant) points
(c) 1 mark each for each point. 5
25
Our answer shows what we consider the most appropriate points to make. Other relevant points that
answer the question would earn marks. However, irrelevant points that do not answer the question would
not earn marks.
Diversification
Diversification involves producing new products for new markets. It is a combination of product and
market development and is a risky strategy because the organisation is moving into areas in which it has
little or no experience with untested products. For example it may come up with a new type of preserve
made from a superfood that is highly nutritious and could be sold to the sports market.
Co-branding
Co-branding is where two separate, but compatible brands are used to support each other. For Repville
this could mean finding a hotel or restaurant chain to stock its products and promote its name on its
menus. Diners would experience the product for themselves and may decide to switch to Repvilles
products when eating at home. The risk is that adverse publicity or damage to the reputation of the co-
brand may damage Repvilles reputation too.
Alternative approach
Other strategies that you could have mentioned include:
Improving brand awareness
Adjustments to product mix
Adjustments to product mix
Adjustments to promotional mix
Adjustments to place mix
Adjustments to price mix
Brand
Branding has little importance for XYZ because its products are not distinctive the company
manufactures furniture for stores that is sold under the stores name. For Repville, branding is of high
importance (just like other fast moving consumer goods) because its packaging, traditional image and
quality make the brand unique. Consumers dont just buy jam, they buy Repville jam.
Alternative approach
Other points that you could have made include:
Consumers purchase to meet different needs
Consumer buying process different
Volume of sales is different
Differences in other aspects of the marketing mix
Mock Exam 3
Question Paper
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282 Mock Exam 3: Questions
Mock Exam 3: Questions 283
SECTION A 20 marks
Question 1
1.1 Loss of goodwill and the expense of product recalls are known as which ONE of the following?
A External failure costs
B Costs of lean
C Excess production costs
D Transaction costs (2 marks)
1.2 The psychological contract is an important factor when considering which ONE of the following?
A Staff retention
B Supply networks
C Buyer behaviour
D Corporate political activity (2 marks)
1.3 Assessment centres are associated with which ONE of the following activities?
A Staff selection
B Career counselling
C Focus group market research
D Societal marketing (2 marks)
1.6 A lack of physical presence and extensive use of IT are typical features of which sort of organisation?
A Non-governmental organisations (NGO)
B Multinational enterprises (MNE)
C Shamrock organisations
D Virtual organisations (2 marks)
284 Mock Exam 3: Questions
1.7 Which ONE of the following features is NOT normally a result of gaining ISO9000?
A Improved marketing
B Improved quality
C Work rationalisation
D Improved industrial relations (2 marks)
1.8 The quality management thinker Philip Crosby is most closely associated with which ONE of the
following ideas?
A Fitness for purpose
B The fishbone diagram
C Zero defects
D Business process re-engineering (2 marks)
1.9 Herzberg's dual (two) factor theory involves which ONE of the following?
A Theory X and Theory Y workers
B Hygiene factors and motivators
C Low and high power-distance
D Carrots and sticks (2 marks)
1.10 Personal characteristics, qualifications and necessary experience expected of a particular post holder
are normally all found in which ONE of the following documents?
A Job description
B Person specification
C Reference letter
D Summary appraisal meeting record (2 marks)
SECTION B 30 marks
Answer ALL parts of this question
Question 2
(a) Describe FIVE different improvements a manufacturing organisation might experience as a result of
introducing Total Productive Maintenance (TPM). (5 marks)
(b) Describe the different organisational benefits of Information Systems (IS) and Information
Technology (IT). (5 marks)
(c) An individual employee's productivity level is influenced by a number of factors including those
within the control of the organisation and those unique to a particular individual.
Describe briefly FIVE factors unique to a particular individual that are likely to influence an
employee's productivity.
(5 marks)
(e) The ideas and principles established by the well-known theorist F.W. Taylor have implications for
both operations and management even today.
Describe briefly FIVE of these ideas and principles. (5 marks)
SECTION C 50 marks
Answer BOTH questions
Question 3
OK4u is a company with diverse operations across two continents. Originally a small textile manufacturer, OK4u
now also operates a large electronics company, hotels, a leisure chain and owns a household cleaning brand.
The company is not listed in the UK and therefore is not subject to the UK Listing Rules and Corporate
Governance Code (which are intended to help achieve good corporate governance).
Last year, the fortunes of OK4u's major rival, IPP, took a downturn following a fraud investigation. Certain
allegations were made against AK, the high profile entrepreneur at the heart of IPP's business empire and IPP's
share price collapsed. AK, who acts as IPP's Chairman and Chief Executive, now faces charges of theft totalling
millions of dollars. Press reports suggest that his individual control over finances allowed him to transfer funds,
take money for personal use and borrow to buy IPP shares without requiring another director's counter-signature.
Each quarter, exceptional profits were reported and the share price soared - until the dramatic collapse. One
influential newspaper suggested that AK's individual power was able to grow because of a lack of corporate
governance and a 'cultural tolerance in the countries within which IPP operated'.
Naturally, OK4u wishes to distance itself from the actions of its rival, particularly as both companies operate in
the same markets. In a press statement, OK4u confirmed its commitment to 'serve rather than exploit our
stakeholders'. Following a complete review, led by an independent management consultant, the company has
appointed a new Director of Compliance and Ethics. Her role is to implement the consultant's report, encourage
ethical operations and strengthen OK4u's system of corporate governance. She has also announced an intention
to establish a minimum professional standard amongst all OK4u's managers and is interested in the lessons that
can be learnt from existing established codes of professional practice.
Required
(a) Explain the benefits of good corporate governance for both OK4u and IPP. (10 marks)
(b) Explain, using Hofstede's thinking on national culture, how cultural tolerance could have allowed AK's
power to grow. (10 marks)
(c) Describe FIVE features of CIMA's Code of Ethics for Professional Accountants that OK4u's Director of
Compliance and Ethics could learn from. (5 marks)
(Total for Question Three = 25 marks)
Mock Exam 3: Questions 287
Question 4
YY has worked for the manufacturing company RU2 all his adult life and is currently Production Manager.
Although he can be uncooperative and single-minded at times, he is respected for his experience, honesty, direct
speaking and the results he achieves.
Change is coming to RU2 and many senior managers have gradually been replaced by younger managers with
different ideas and approaches. A new Managing Director (MD) was appointed six months ago but YYs first
dealing with him did not go well. YY requested that some of the production machinery be upgraded but his
request was declined until a full written proposal including an investment appraisal analysis was produced. No
proposal has been produced and no machinery has been upgraded since this time.
When RU2s Senior Sales Manager retired last month he was replaced by a new Marketing Manager. (The job
advertisement referred to RU2 as a company 'undergoing significant change and looking to develop a more
customer-led approach'). YY is irritated to find that the MD has approved the purchase of a Customer
Relationship Management (CRM) system straightaway. YY told colleagues that the CRM system will be 'a waste
of money that could be spent elsewhere'. Now the new Marketing Manager is, for the first time, developing a
comprehensive marketing plan and she has invited a number of senior colleagues across the organisation to help
contribute to the plan including YY. YY immediately declined the invitation telling the Marketing Manager that
she would do well to 'concentrate on the basic job of selling rather than wasting time drawing up pointless
plans'.
Required
(a) The new Managing Director wants RU2 to have more of a marketing focus and become more customer-
led. Describe the impact on RU2 of such a development. (10 marks)
(b) Explain the benefits of developing a marketing plan for RU2. (10 marks)
(c) Identify the range of possible costs associated with a Customer Relationship Management (CRM) system.
(5 marks)
(Total for Question Four = 25 marks)
A plan of attack
Before the three hours writing time starts, you are allowed 20 minutes to read through the paper. Use this time
wisely in effect it gives you an extra 20 minutes to gain the marks you need to pass.
What should you do in this 20 minutes?
We recommend you spend the first ten minutes of reading time scanning the paper and identifying the main
topic areas covered.
The second ten minutes, we suggest you simply start working through the Section A questions by writing your
answers on the question paper. These answers can then be transferred very carefully to your answer booklet
when the exam starts. Remember though, you must not write in your answer booklet during the reading time.
Using the time in this way should mean that later in the exam, when you reach Section C, you have sufficient
time to read both questions carefully and plan your answers to them.
Turn back to the question paper now, and we'll sort out a plan of attack for Mock exam 3.
Section C
Once you've done Sections A and B, you are required to answer the two questions in Section C. Almost all
Section C questions will require you to relate the points you make to the organisation and situation described in
the scenario.
In question 3 part (a) think about what corporate governance is before relating this knowledge to the two
organisations.
Part (b) requires you to apply Hofstedes theory. If you do not know this theory then you should move on
and use the time on another question.
Keep your answer to part (c) closely related to the scenario. You just need to describe five features so
dont waste your time considering any more.
292 Mock Exam 3: November 2013 exam answers
Question 4 part (a) requires you to think about what a marketing focus is and what it means to become
customer-led.
If youre struggling in part (b), then start by describing what a marketing plan is. Once you have done this,
some benefits should come to mind.
In part (c) you just need to identify possible costs. Keep your answer focussed on this requirement.
General advice
Don't forget that all questions in the E1 exam are compulsory.
SECTION A
Question 1
1.1 A External failure costs arise from inadequate quality that is identified after the product or service has
been transferred from the organisation to the customer.
1.3 A Assessment centres are used in the process of selecting new staff. They refer to the process of
selection rather than to a specific building.
1.4 A A supply chain is an interconnecting group of organisations which relate to each other through
linkages between different processes and activities involved in producing products/services to the
ultimate consumer.
1.5 B Information at the tactical level within an organisation is designed to help middle managers
monitor and control operations.
1.6 D A virtual organisation, or company, is actually a collection of separate companies, each with a
specific expertise who work together to compete for bigger contracts/projects than would be
possible if they worked alone. They often rely on new technology such as remote networking, the
Internet and extranets.
1.7 D ISO 9000 is a process standard that is granted to organisations on a certified or compliant status
basis. It relates to the quality of an organisations processes rather than the products or services
produced.
Becoming ISO 9000 certified should result in: Improved marketing (because ISO accreditation
allows an organisation to differentiate itself from its competitors), improved quality (due to
improved internal processes) and work rationalisation (as focus on the quality of their processes
will allow the business to improve efficiency through analysis of its current ways of working).
1.8 C Crosby (1979) wrote about quality costs. One of his absolutes of quality management is zero
defects.
1.9 B Herzbergs two-factor content theory identifies motivators and hygiene factors.
1.10 B A person specification sets out the skills and qualities required of the person who will fill a role.
294 Mock Exam 3: November 2013 exam answers
SECTION B
Question 2
Marking scheme
Marks
Motivation
Motivation is an employees desire to perform their role. Individuals who are highly motivated are
generally more productive because their work rate is higher. At the individual level, motivation may come
from the enjoyment of performing the task or from their need for payment.
Personal environment
An individuals personal environment will affect their productivity. Those with a stable and happy home-
life will be happier in themselves and be able to devote their energy to their task in hand, rather than
being distracted by worrying about concerns they have at home.
(d) Quality circles and quality control inspection.
The nature of quality circles and quality control inspection are discussed below.
Quality circles
A quality circle is a team of workers from within the organisation which meets at intervals to discuss
issues relating to the quality of the product or service produced. All relevant aspects of quality are
discussed, from materials from suppliers through to production processes and outputs.
Quality control inspection
Quality control inspection involves inspecting products at various stages of the production process to
check that the quality of the product meets the standard expected. It could occur, for example, when raw
materials are received, at some point during the production process, and once the final product has been
completed.
Quality circles versus quality control inspection
The key differences between quality circles and quality control inspection include:
Approach to quality
The use of quality control inspections is associated with the traditional approach to quality that of
detecting poor quality after it occurred. Quality circles reflect the modern approach of preventing poor
quality occurring in the first place.
Approach to waste
By building quality into the production process, quality circles seek to minimise wasted materials, labour
and other inputs in the production process. Quality control inspections do not prevent wasted resources
because they allow poor quality to occur and then detect it afterwards.
Relationship with suppliers
The modern approach to quality, of which quality circles are part, involves an organisation building strong
relationships with its suppliers so that some reliance can be placed on the quality of the raw materials or
parts that enter the production process. Under the traditional inspection approach to quality, such close
relationships were not required because the organisation would attempt to detect poor quality inputs at
the goods received stage.
(e) Ideas and principles of FW Taylor
The main ideas and principles of FW Taylor include:
Scientific management
Taylor discovered a link between employee ability and the objectives of a firm and developed the idea of
scientific management. This idea states that management should be based on well-recognised, clearly
defined and fixed principles, instead of depending on more or less hazy ideas. It includes the following
four principles.
The development of a true science of work
'All knowledge which had hitherto been kept in the heads of workmen should be gathered and recorded
by management. Every single subject, large and small, becomes the question for scientific investigation,
for reduction to law.'
Mock Exam 3: November 2013 exam answers 297
SECTION C
Question 3
Marking scheme
Marks
(a) Up to 2 marks per valid point referenced to the scenario; 1 point each for brief general
(but relevant) points 10
(b) Up to 2 marks per valid point referenced to the scenario; 1 point each for brief general
(but relevant) points 10
(c) 1 mark each for each point. 5
25
Our answer shows what we consider the most appropriate points to make. Other relevant points that answer
the question would earn marks. However, irrelevant points that do not answer the question would not earn
marks.
Future listing
By adopting good corporate governance policies before it is required to OK4u can strengthen its reputation
with potential investors and the stock market. This may help the organisation raise more finance if it
decides to become listed in the future.
Benefits of good corporate governance to IPP
For IPP, the main objective of adopting good corporate governance is to learn from past mistakes and
prevent them from happening again. Some benefits of good corporate governance to IPP include:
Prevent power being held by one individual
Good corporate governance involves separating the roles of Chairman and Chief Executive so that power is
not held by one individual. For IPP to move on it must reduce the risk of one individual wielding too much
power (as AK did) and adopting good governance is one way of achieving that.
Improve board involvement
Good corporate governance would improve the involvement of IPPs board in business decisions. For
example, board meetings should be held regularly and committees set up to look into the organisations
operations. This will be necessary to fill the power gap as well as to bring stability to the organisation.
Improve internal control
The problems caused by AKs behaviour were in part due to poor internal control procedures that allowed
him to effectively take control of the businesss finances. Strong internal controls, such as an internal
audit department would prevent fraudulent behaviour occurring in the future.
Prevent emphasis on short-term profits
IPP reported exceptional profits each quarter and this led to the spike in share price. The emphasis IPP
placed on quarterly reporting may have contributed to AK manipulating the accounts to achieve the
desired results. Good corporate governance places more emphasis on the long-term financial picture that
should prevent such problems re-occurring.
Prevent misleading accounts and information
Good corporate governance would put into place internal and external controls that should increase the
quality of a companys financial reporting and go some way to preventing reports from misleading the
market about the organisations financial position.
(b) Hofstede
Hofstede analysed the cultural differences of employees of IBM in the 1960s and 1970s and identified
five dimensions that contributed to them.
Power-distance
This refers to how far society and organisations tolerate an unequal distribution of power. In high power-
distance cultures (eg India) and organisations, power tends to be concentrated at the top and managers
exert their status and power over subordinates. The consequences of high power distance are an
autocratic organisation, many layers of management and different work statuses of managers and sub-
ordinates.
It is clear that IPP operated with a high power-distance culture. Tolerance for this has resulted in those
working under AK accepting that power should be concentrated with him at the top of the organisation
and that AK should exert his status and power over them and this allowed AK to get away with his
actions.
Uncertainty avoidance
This measures the extent to which people are able to tolerate ambiguity and uncertainty. For example,
whether individuals wait until they are completely sure of all details before acting. The consequence of
high uncertainty avoidance is that rules and regulations will prevail, along with formal structures and
standardisation.
It seems likely that IPP had low uncertainty avoidance as evidenced by the lack of rules and procedures,
such as AKs ability to use IPP funds without requiring a counter signature on withdrawals and transfers.
300 Mock Exam 3: November 2013 exam answers
Tolerance for this culture allows a lack of structure, which has led to a lack of controls over AKs
behaviour.
Individualism versus collectivism
This measures the extent to which people see themselves in individual terms as opposed to being
members of a group be it family, company, caste, class or even simply a sporting club. Consequences of
high individualism are autonomy, personal achievement and self-reliance.
AK appears to have operated fairly independently, without input from other directors or employees,
implying a high individualism culture, which may have allowed AKs power to grow due to limited checks
on his actions.
Masculinity versus femininity
This is about the degree to which a culture encourages one set of qualities (the 'masculine' ones such as
competitiveness and assertiveness) as opposed to another set (the so-called 'feminine' ones such as
concern for others, attention to quality of life or to the environment). Consequences of high masculinity
include achievement of challenge, high status being sought and high earnings required.
It could be that IPP had a rather masculine culture, leading AK to feel competitive and combative with
other employees, hence his choice to behave in a self-serving manner. Or conversely, if IPP had a more
feminine culture, AK may have had less challenge from other employees and was thus able to carry out
his operations discreetly.
Long-term orientation (Confucian dynamism)
This refers to whether people associate themselves with a long-term (forward looking) orientation (values
such as thrift and perseverance often associated with China) or a short-term (historical) orientation
(values such as tradition, meeting social obligations and saving face often associated with Germany).
The consequences of high long-term orientation are that education and training will be respected and
employees will have a strong ethic of work.
AK appears not to have had a focus on the long term success of the business, and if this short-term
orientation pervaded the culture of the organisation, other employees were less likely to challenge his
approach allowing him to operate without objection.
(c) CIMAs Code of Ethics for Professional Ethics
CIMAs Code of Ethics is based on five fundamental principles that OK4us Director of Compliance and
Ethics could learn from when establishing a minimum behaviour standard for the company.
Integrity
This is more than not telling lies it means not being party to anything which is deceptive or misleading.
Employees should be straightforward, honest and truthful in all professional and business relationships.
Objectivity
This is founded on the idea of fairness and avoiding all forms of bias, prejudice and partiality. Employees
should not only be objective when making professional and business decisions, but they should be seen to
be objective too. This means not accepting inappropriate gifts or hospitality.
Professional competence and due care
Individuals must ensure they remain up-to-date with current developments and are technically competent
to perform their role. Managers with staff working under them must ensure that their sub-ordinates also
have the appropriate training and supervision.
Confidentiality
Anyone that an employee comes into contact with is entitled to expect that confidential information about
them or their work will not be revealed without specific permission or unless there is a legal or
professional right or duty to do so.
Professional behaviour
Employees should behave in such a way as to protect the reputation of the business and any professional
bodies that they belong to. They should also comply with all relevant laws and regulations.
Mock Exam 3: November 2013 exam answers 301
Question 4
Marking scheme
Marks
(a) Up to 2 marks per valid point referenced to the scenario; 1 point each for brief general
(but relevant) points 10
(b) Up to 2 marks per valid point referenced to the scenario; 1 point each for brief general
(but relevant) points 10
(c) 1 mark each for each point. 5
25
Our answer shows what we consider the most appropriate points to make. Other relevant points that answer
the question would earn marks. However, irrelevant points that do not answer the question would not earn
marks.
Culture
Perhaps the biggest change to RU2 will be in its culture. Employees such as YY will have to become more
flexible and pragmatic in their attitude. Ultimately all staff should have customer satisfaction as their
objective and they should do all they can to achieve it.
(b) Benefits of developing a marketing plan
RU2 has not had a marketing plan in the past and the new Marketing Manager is beginning to develop
one. The benefits to RU2 of developing a marketing plan include:
Alignment with corporate strategy
A marketing plan is driven by, and therefore must be consistent with, an organisations overall corporate
strategy. The first benefit of this is that RU2 must develop a corporate strategy as well as a marketing
plan. This will force the business to define its objectives and think about its operations in a way that it
may not have done before. This will help focus each department on what is expected of it with the
manager being accountable for departmental results and should all help improve RU2s financial
performance.
Consider the environment outside of RU2
A key part of a marketing plan is a situation analysis. This involves the organisation looking at external
opportunities and threats to the business something that RU2 may not have done before. For the first
time, the organisation will be outward looking and this is a good thing. It may identify new potential
sources of revenue and spot dangers to its long-term survival that it might not have otherwise done.
Allocate the marketing budget effectively
The selection of target markets and application of the marketing mix will be determined by the marketing
plan and this will have two benefits to RU2. Firstly, the marketing spend will be carefully controlled and
used for a specific purpose (therefore reducing wasted expenditure) and secondly, what is spent will be
used to execute a carefully thought out strategy. This should mean that a better return is created from the
marketing money invested.
Helps plan production and operations
The marketing plan will drive the output required from RU2s production departments. For the first time,
these departments will have a planned level of output that they are required to meet. This enables the
production manager (YY) to plan and budget for his department more effectively. If he believes he will be
under staffed, or requires new equipment, then his requests for investment will have more weight. The
plan should ensure that RU2 has sufficient resources in place to meet its expected level of demand. This
means no revenue is lost if the company has under-capacity, or resources wasted through over-capacity.
Long-term view
A marketing plan takes a tactical view (for the coming financial year) and a strategic view (up to five
years time). This long-term view enables RU2 to start planning new products rather than purely focussing
on selling the products that it currently makes. This supports its new customer-led approach as the
company with have time to develop a product range that meets the needs of its customers and should
help secure the companys future as it can respond to changing customer tastes and trends.
(c) Possible costs of the CRM system
Some possible costs associated with RU2s new CRM system include:
Development costs
These are costs incurred during the development phase of the system. For example, the costs of buying
the software or having it written by programmers if it is bespoke.
Installation costs
Installation costs are incurred when the system is assembled. For example the costs of new hardware and
labour costs of the developers or specialists to install the software on the hardware.
Training costs
Staff will need to be trained to use the new CRM system. This may be done in-house or at an external
location. The cost of lost staff time will be included as well as the price of the training payable by RU2.
Mock Exam 3: November 2013 exam answers 303
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