Business Management Sample Paper 3 Questions and Suggested Solutions

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NOTES TO USERS ABOUT SAMPLE PAPERS

Sample papers are published by Accounting Technicians Ireland. They are intended to provide guidance to students and their teachers regarding the style and type of question, and their suggested solutions, in our examinations. They are not intended to provide an exhaustive list of all possible questions that may be asked and both students and teachers alike are reminded to consult our published syllabus (see www.AccountingTechniciansIreland.ie) for a comprehensive list of examinable topics. There are often many possible approaches to the solution of questions in professional examinations. It should not be assumed that the approach adopted in these solutions is the only correct approach, particularly with discursive answers. Alternative answers will be marked on their own merits. This publication is copyright 2015 and may not be reproduced without permission of Accounting Technicians Ireland. © Accounting Technicians Ireland, 2015.

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INSTRUCTIONS TO CANDIDATES

Answer FOUR questions in total Answer at least ONE question from Section A Answer at least ONE question from Section B Answer at least ONE question from Section C Answer ONE additional question from ANY section (A, B or C). If more than the requisite number of questions are answered, then only the requisite number, in the order filed, will be corrected. Candidates should allocate their time carefully. Answers should be illustrated with examples, where appropriate.

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Section A

(Answer at least ONE of the questions in this section)

Question 1

(a) Distinguish between Innovation and Creativity in a business context.

(4 marks)

(b) Describe the three (3) sets of variables that have been found to stimulate

innovation.

(21 marks)

Total: 25 Marks

Question 2

(a) Define Marketing

(5 marks)

(b) The “Ansoff growth matrix” assists organizations to map strategic product market growth.

Draw a diagram to illustrate the Ansoff matrix and use this to outline any two of the

four strategies available to an organisation.

(12 marks)

(c) Write a short explanatory note on any two (2) of the following;

Social media marketing

Search Engine Optimization (SEO):

Search Engine marketing (SEM):

Content marketing

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Email marketing

SMS marketing

Video marketing/video infographics

(8 marks)

Total: 25 Marks

Section B (Answer at least ONE of the questions in this section)

Question 3 (a) Outline five key functions of a business.

(5 marks)

(b) Explain BOTH of the following business concepts, using examples where

appropriate:

SWOT Analysis;

PESTLE Analysis.

(10 marks)

(c) Discuss four key objectives when undertaking environmental scanning.

(10 marks)

Total: 25 Marks

Question 4

(a) Discuss two limitations of Maslow’s “hierarchy of needs” model.

(5 marks)

(b) Explain the concept and discuss the relevance of “equity theory”.

(10 marks)

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(c) Comment on the relevance of Vroom’s “expectancy theory” in today’s economic

environment.

(10 marks)

Total: 25 Marks

Section C

(Answer at least ONE of the questions in this section)

Question 5 ‘Workplace diversity comes in several forms’ (Robbins et al, 2015) Discuss any five (5) of these forms of diversity and the potential complications for management arising from such diversity.

(25 marks) Question 6 Business ethics and the concept of ‘social responsibility’ have become increasingly important in the modern business world. (a) Describe the term ‘code of ethics’.

(5 marks)

(b) Describe the six (6) stages of moral development.

(12 marks)

(c) Describe the term ‘social responsibility’.

(8 marks)

Total: 25 Marks

REMINDERTOSTUDENTS–Youarerequired toanswerFOURquestions intotal.Makesurethatyouhavecompletedtherequirednumberofquestions.

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Suggested Solutions

DRAFT ONLY

SECTION A

Question 1

(a) Innovation The way organisations thrive today is through innovation or they

will die! The standard of innovation to which many organisations strive is that

achieved by such companies as 3M, Toyota, and Sony.

Creativity means the ability to combine ideas in a unique way or to make

unusual associations between ideas. Example, Mattel. Innovation is the process

of taking a creative idea and turning it into a useful product, service, or method

of operation. Some people believe that creativity is inborn; others believe that

with training anyone can be creative.

(b) There are three sets of variables that have been found to stimulate

innovation. They pertain to the organisation’s structure, culture, and human

resource practices.

EXHIBIT 7-5 Innovation Variables STIMULATE INNOVATION

Cultural Variables

• Acceptance of Ambiguity

• Tolerance of the Impractical

• Low External Controls

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• Tolerance of Risks

• Tolerance of Conflict

• Focus on Ends

• Open-System Focus

• Positive Feedback

Structural Variables

• Organic Structure

• Abundant Resources

• High Inter unit Communication

• Minimal Time Pressure

• Work and Network Support

Human Resources Variables

• High Commitment to Training and Development

• High Job Security

• Creative People (Robbins, 2013)

Question 2

(a) Kotler defines marketing as; ‘the science and art of exploring, creating, and

delivering value to satisfy the needs of a target market at a profit. Marketing

identifies unfulfilled needs and desires. It defines, measures and quantifies the

size of the identified market and the profit potential. It pinpoints which segments

the company is capable of serving best and it designs and promotes the

appropriate products and services. (http://www.kotlermarketing.com/phil_

questions.shtml#answer3)

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(b)

The Ansoff Matrix has four alternatives of marketing strategies; Market

Penetration, product development, market development and diversification.

(An explanation of any TWO of these is required; examples below)

Market Penetration

When we look at market penetration, it usually covers products that are

existence and that are also existent in an existing market. In this strategy,

there can be further exploitation of the products without necessarily

changing the product or the outlook of the product. This will be possible

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through the use of promotional methods, putting various pricing policies that

may attract more clientele, or one can make the distribution more extensive.

In Market Penetration, the risk involved in its marketing strategies is usually

the least since the products are already familiar to the consumers and so is

the established market. Another way in which market penetration can be

increased is by coming up with various initiatives that will encourage

increased usage of the product. A good example is the usage of toothpaste.

Research has shown that the toothbrush head influences the amount of

toothpaste that one will use. Thus if the head of the toothbrush is bigger it

will mean that more toothpaste will be used thus promoting the usage of the

toothpaste and eventually leading to more purchase of the toothpaste.

Product Development

In product development growth strategy, new products are introduced into

existing markets. Product development can differ from the introduction of a

new product in an existing market or it can involve the modification of an

existing product. By modifying the product one would probably change its

outlook or presentation, increase the products performance or quality. By

doing so, it can appeal more to the already existing market. A good example

is car manufacturers who offer a range of car parts so as to target the car

owners in purchasing a replica of the models, clothing and pens.

Market Development

The third marketing strategy is Market Development. It may also be known

as Market Extension. In this strategy, the business sells its existing products

to new markets. This can be made possible through further market

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segmentation to aid in identifying a new clientele base. This strategy

assumes that the existing markets have been fully exploited thus the need

to venture into new markets. There are various approaches to this strategy,

which include: New geographical markets, new distribution channels, new

product packaging, and different pricing policies. In New geographical

markets, the business can expound by exporting their products to other new

countries. It would also mean setting up other branches of the business in

other areas that the business had not ventured yet. Various businesses

have adopted the franchise method as a way of setting up other branches in

new markets.

A good example is Guinness. This beer had originally been made to be sold

in countries that have a colder climate, but now it is also being sold in

African countries. The other method is via new distribution channels. This

would entail selling the products via e-commerce or mail order. Selling

through e-commerce will capture a larger clientele base since we are in a

digital era where most people access the internet often. In New Product

packaging, it means repacking the product in another method or dimension.

That way it may attract a different customer base. In Different pricing

policies, the business could change its prices so as to attract a different

customer base or so create a new market segment. Market Development is

a far much risky strategy as compared to Market Penetration. This is so as it

is targeting a new market and one may not quit tell how the outcome may

be.

Diversification

The last strategy is Diversification. This growth strategy involves an

organization marketing or selling new products to new markets at the same

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time. It is the most risky strategy among the others as it involves two

unknowns, new products being created and the business does not know the

development problems that may occur in the process. There is also the fact

that there is a new market being targeted, which will bring the problem of

having unknown characteristics. For a business to take a step into

diversification, they need to have their facts right regarding what it expects

to gain from the strategy and have a clear assessment of the risks involved.

There are two types of diversification. There is related diversification and

unrelated diversification. In related diversification, this means that the

business remains in the same industry in which it is familiar with. For

example, a cake manufacturer diversifies into a fresh juice manufacturer.

This diversification is in the same industry which is the food industry. In

unrelated diversification, there are usually no previous industry relations or

market experiences. One can diversify from a food industry to a mechanical

industry for instance.

A good example of the unrelated diversification is Richard Branson. He took

advantage of the virgin brand and diversified into various fields such as

entertainment, air and rail travel foods etc. Another example is the easy jet

which has diversified into car rentals, gyms, fast foods and hotels. Though

diversification may be risky, with an equal balance between risk and reward,

then the strategy can be highly rewarding. Another advantage of

diversification is that in case one business suffers from adverse

circumstances the other line of businesses may not be affected.

Analysis Paralysis

Some schools of thought believe that the use of strategic management tools

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such as the Ansoff Matrix can result in an overuse of analysis. In fact,

Ansoff himself thought about this and it was he who first mentioned the now

famous phrase "paralysis by analysis". Make sure that you do not fall victim

to procrastination caused by excessive planning.

(http://www.ansoffmatrix.com/)

(c) Write a short explanatory note on any two (2) of the following; (8 marks)

Social media marketing: this has risen hugely in popularity and there are

now countless dedicated agencies scattered around the web which

promise to help with it. Facebook, Twitter, Pinterest and LinkedIn are all

examples of social networks which can be used as a part of your

marketing efforts, although they are far from the only ones.

Social media marketing allows two-way communication between a company

and consumer in a way that wasn’t previously seen and it’s safe to say that it

has changed business approach to marketing as now, the consumer holds the

power.

It’s also based on one of the most effective forms of advertising; word of mouth.

Social media means that communication can be a lot more targeted and

personalized than other forms of marketing, as companies get the chance to

receive feedback from customers daily.

It’s also useful for making content ‘go viral’, something which can help to

strengthen a brand very quickly. It’s brand personality that makes social work

so well, as if this is done correctly, across the board, then it can boost

engagement considerably.

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Search Engine Optimisation

Search Engine Optimization (SEO): is a means of optimizing the content

of a website in order to gain better placement on the Search Engine

Results Page (SERPS). A variety of techniques are employed to achieve

this and it’s not a job for amateurs really as there are many pitfalls that

could have Google frowning on your site.

SEO includes:

Keyword research and usage, on-page and off (within HTML)

Link building /outreach blogging

Content delivery

Site structure

Analytics

This is not an exhaustive list, but it does give an indication of how much work is

necessary in order to optimize a site.

Search Engine Marketing

Search Engine marketing (SEM): is similar to, but incorporates, SEO and

uses many of the same techniques as a part of that. The main difference

between the two terms is that SEM also includes paid online advertising

models, such as pay-per-click (PPC).

PPC advertising models are those such as Google Adwords and Bing, which

only require payment when the ad is clicked through to the target website. SEM

also requires keyword analysis as the words and phrases used in the ad and

site and these need to be monitored carefully to reflect the market and current

search engine rules.

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Whilst it can be said that SEM encompasses all kinds of digital marketing, it’s

more commonly thought of in a narrower niche, to describe paid models.

Content Marketing

Content marketing: is a technique where content is produced and

distributed with the intention of providing relevant, interesting content to

attract and engage a particular audience that a business is targeting. The

creation of useful content is a way of developing communication with the

customer in order to drive engagement and customer action. Content

can mean anything from blogs to videos and whitepapers tend to work

well using content marketing techniques too. The goal is to win customer

loyalty and retain it.

Email Marketing

Email marketing: remains a very effective tool, despite claims that it isn’t

as important as social these days. Modern email marketing is just

beginning to evolve so that it can be linked to a database in order to

personalise it, so that individual groups of customers can be sent mail

based on previous purchases and interests.

SMS marketing: is also highly effective and rising in popularity, due to

the fact that many of us no longer go anywhere without our cell phones.

This ‘always-on’ aspect means that when SMS marketing is used, it’s

highly likely that the customer will at least read the text.

Video marketing/video infographics: is again becoming hugely popular

and it’s likely that we’ll see an even bigger move in its direction this year

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as more and more businesses begin to recognise the potential it has.

People take in more information when watching video and are more

likely to engage, so it’s certainly worth looking at.

Whilst image-based infographics are already hugely popular, making these in

the form of a series of frames for video is beginning to really take off in the

digital marketing space too.

Question 3

(a) The business functions are the actions performed by a department or

person. The business cannot operate without these or people carrying out the

tasks related to these areas.

The main functional areas are Management (to plan and co-ordinate the

business tasks), Human Resources(to manage the employees and employment

processes), Marketing (to identify the customers and their needs), Finance (to

ensure cash-flow) and Information Technology (to support the business

processes).

(b) SWOT Analysis

Defining current position and objectives - is the organisation performing

satisfactorily? Are there opportunities it should be pursuing or weaknesses it

should be concerned about?

External/Internal analysis – how will the organisation go about achieving its

goals? What are the factors within and outside the organisation that might help

or hinder its performance?

Analysing gaps and matching capabilities - does the organisation have the

human and material resources to fulfil its objectives? Can it get them? Or are

the objectives realistic?

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Once an appropriate SWOT analysis has been undertaken, an organisation is

in a position to devise strategies to counter threats and weaknesses and to

capitalise on opportunities and strengths This form of analysis of the current

situation, allows organisations to determine the direction it should take,

the resources it will need and the tactics, or parameters it should operate within

to achieve its objectives.

PESTLE Analysis

PESTLE analysis is a technique for analysing the macro-environment of an

organisation under the following headings – political economic, socio-cultural,

technological, legal and environmental.

Analysis of the political and legal environment involves considering the impact

of changes in requirements,safety regulations, consumer protection legislation,

parties in Government, EU developments and other factors.

Consideration of key issues such as the levels of demand within the economy,

interest rates, foreign exchange, grants and inflation are indicative of the

economic variables to be monitored.

The social-cultural environment encompasses issues of a demographic nature,

such as in the structure of the population – gender, income distribution,

emigration and issue of a cultural nature (such as, language, customs and

religion).

The technological environment includes consideration of the threats and

opportunities arising from IT and scientific developments in various areas.

PESTLE analysis is an important part of the environmental scanning process

which feeds in to strategy formulation.

(c) Environmental scanning is the process of collecting information to carry out

a systematic analysis of the forces affecting the company and identifying

potential threats and opportunities with a view to generating

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future strategies.

The following are four objectives for the business to benefit from the process:

Detect trends and events important to the organisation

This helps the business to be more aware of the movements in the marketplace

and who is causing these changes. It will help the business understand the

competition and ensure that the business is correctly placed in the industry.

Define potential opportunities, threats or changes for the organisation implied

by those trends and events

This will ensure that the organisation’s goals and objectives change in order to

develop and grow the business. Potential opportunities are the basis for new

product development and service provision. If the business can identify

opportunities, it can generate new business and try to eliminate threats.

Promote a future orientation in the thinking of management and staff

This ensures that the organisation is always looking forward to maximise

opportunities and continue to satisfy customers.

In addition, it helps ensure that the correct skills and abilities of management

and staff are updated and that the correct employees are appointed in the

correct position to carry out the business task. This should also ensure some

flexibility in the organisation.

Alert management and staff to trends that are converging, diverging or

interacting

This will improve the understanding of the market and maximise the use of

resources that the company has, or has access to, in order to follow the market.

This will have a significant influence on the processes, tasks and offerings the

business can and does provide to the market.

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Question 4

(a) The main limitation of Maslow’s theory is that different people will place

different weightings on their needs, and will have different relationships

between motivating factors and their needs. For example, some people may

see money as merely fulfilling a security need, and will be happy to work to a

certain level of wages and achievement.

In contrast, some people may see their earning power as a key part of their self-

esteem, and will work harder and harder if they are given the opportunity for

increasing financial rewards. It is also difficult for a manager to determine what

need is driving an employee at any one time, particularly as employees’ needs

will often be affected by external factors such as their family life and social life

outside of work.

In addition, there is no empirical evidence to support Maslow’s hierarchy as

applying to all people, and there is evidence to support a different order of

needs in many circumstances. For example, people such as Ghandi and

Mother Teresa sacrificed some of their security to help others, hence achieving

esteem and self-actualisation without fulfilling their security needs.

Also, many artists and actors will struggle by on minimum wages, with only

minimum food and security, in the pursuit of recognition and achievement within

their chosen career.

There is also little evidence to support the argument that people focus on one

need at once, and will often consider many needs when making a decision.

(b) Adam’s equity theory (sometimes also referred to as ‘Justice Theory’) is built

on the belief that employees become de-motivated both in relation to their job

and their employer, if they feel as though their inputs are greater than the

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outputs. Employees can be expected to respond to this in different ways,

including: de-motivation, reduced effort and eventually becoming disgruntled.

Inputs include all of the elements an individual puts into their job and includes:

effort, loyalty, hard work, commitment, skill, ability and enthusiasm.

Outputs, on the other hand, are what the individual receives as an outcome of

their inputs. They include variables such as financial rewards, recognition,

reputation, responsibility, praise and job security.

Equity theory asserts that positive outcomes and high levels of motivation can

be expected only when employees perceive their treatment to be fair. If the

balance lies too far in favour of the employer, some employees may work to

bring balance between inputs and outputs on their own, by asking for more

compensation or recognition.

Benefits:

Can help managers identify whether employees are generally satisfied or

dissatisfied in job situations;

Managers can analyse inputs against outputs and so implement strategies to

increase motivation.

Limitations:

Model may be too simplistic in its delivery;

Doesn’t consider cultural or socio-economic variables.

(c) This theory identifies important expectations that individuals bring to the

workplace and focuses on the relationship between the effort put in and the

expectations concerning the actual reward.

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Using Expectancy, managers can improve workers beliefs in their performance

ability by increasing training to improve skills, coaching, and increasing the

worker’s sense of usefulness through positive feedback.

Secondly, managers can be consistent in their application of rewards and

positive feedback. This is instrumentality in action.

Finally, using the valence principle, managers can learn what outcomes’

rewards are most important and desired by employees and so provide them.

Focused, rather than random, rewards will increase workers’ motivation to put

in the effort to gain them.

Overall, no one framework can be used to deal with the complexities of reality

but, in appropriate conditions and circumstances, expectancy theory has a

significant role to play in contributing to motivation in work environments.

Expectancy Theory is still valid, but if you apply it at the ‘task level’, it is

incomplete as a conceptual framework for understanding human behaviour.

If you apply it at the ‘career level”, then it becomes a really powerful analytical

tool that could reveal insights about a person.

For example - can I become successful if I choose to pursue this career? If I

become successful, what’s my reward? Is the reward worth the effort, as well as

the sacrifices that I might be called upon to make?

Maybe that’s why some women quit full time employment after having children.

They may re-evaluate the ‘reward’ they get from competing in the workplace.

Question 5

‘Workplace diversity comes in several forms’ (Robbins et al, 2015)

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Discuss five (5) of these forms of diversity and the potential ramifications for

management.

Workforce diversity is defined as the ways in which people in an organisation

are different from and similar to one another. Workplace diversity comes in

several forms. All of these forms have potential ramifications for management;

Candidates should discuss 5 of the forms as listed below;

a) Age

b) Gender

c) Race and Ethnicity

d) Disabilities/Abilities

e) Religion

f) LGBT: Sexual Orientation and Gender Identity

g) Other Types of Diversity 1) Diversity is not limited to the topics above; it

refers to any dissimilarities or differences that might be present in a workplace.

2) Other types of workplace diversity that managers might confront and have to

deal with include socioeconomic background (social class and income-related

factors), team members from different functional areas or organisational units,

physical attractiveness, obesity/thinness, job seniority, or intellectual abilities.

Question 6

(a) Describe the term ‘code of ethics’

A code of ethics is a formal statement of an organisation’s primary

values and the ethical rules it expects employees to follow. In addition,

decision rules can be developed to guide managers in handling ethical

dilemmas in decision making. The variables are included in the three

content categories found common to various corporate codes of ethics.

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(a) Describe the six (6) stages of moral development.

Research confirms three levels of moral development, each level has

two stages; (Robbins et al, 2015). Candidates should describe the

elements as detailed in the figure on page 179 in the core text.

(c) Describe the term Social responsibility

Managers regularly face decisions that have dimensions of social

responsibility. Examples include employee relations, philanthropy,

pricing, resource conservation, product quality and safety, and

doing business in countries that violate human rights.

There are two opposing views of social responsibility. The

classical view is the view that management’s only social

responsibility is to maximise profits. The socioeconomic view is

the view that management’s social responsibility goes beyond the

making of profits to include protecting and improving society’s

welfare.