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Business Management 1

st Year Examination

May 2015

Solutions & Marking Scheme & Examiner’s Comments

Business Management May 2015 1st Year Paper

2

NOTES TO USERS ABOUT THESE SOLUTIONS

The solutions in this document are published by Accounting Technicians Ireland. They are intended to

provide guidance to students and their teachers regarding possible answers to questions in our

examinations.

Although they are published by us, we do not necessarily endorse these solutions or agree with the views

expressed by their authors.

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 ideal or the one preferred by us.

Alternative answers will be marked on their own merits.

This publication is intended to serve as an educational aid. For this reason, the published solutions will

often be significantly longer than would be expected of a candidate in an examination. This will be

particularly the case where discursive answers are involved.

This publication is copyright 2015 and may not be reproduced without permission of Accounting

Technicians Ireland.

© Accounting Technicians Ireland, 2015.


of 32 Bus Mgmt S2015 (BM)

Accounting Technicians Ireland

1st Year Examination: Summer 2015

Paper: BUSINESS MANAGEMENT

Thursday 14th

May 2015

9.30 a.m. to 12.30 p.m.

INSTRUCTIONS TO CANDIDATES

Answer FOUR questions in total. QUESTION 1 IN SECTION A IS COMPULSORY AND MUST BE

ANSWERED. Answer ANY THREE questions in Section B. If more than the required number of

questions is answered, then only that number, in the order filed, will be corrected.

Candidates should allocate their time carefully.

Answers should be illustrated with examples, where appropriate.

Question 1 begins on page 2 overleaf.



SECTION A

Answer QUESTION 1 (Compulsory) in this Section

QUESTION 1 (Compulsory)

A colleague of yours works with a Credit Union Association with members and branches throughout the

country. He has been asked to prepare a report on the impact of macro environmental factors on the industry

over the last five years. He approached you for assistance. You suggested he should consider using the PESTEL

model. He was not familiar with the model and asked if you could explain it to him and describe how it might be

applied to the Credit Union industry.

You are required to:

(a) Explain the PESTEL model and describe any FOUR of the variables within the model.

10 Marks

(b) Using the PESTEL model identify and describe FOUR macro-environmental factors that have had a

major affect on the Credit Union industry over the last five years.

10 Marks

(c) Describe TWO areas of Credit Union activity where ethics would be of major relevance.

5 Marks

Total 25 Marks

SECTION B

Answer any THREE of the six questions in this Section

QUESTION 2

(a) “It is widely believed that leadership is an innate quality”.

Describe the trait theory of leadership and critically assess its merits and limitations as a theory of

organisational leadership.

13 Marks

(b) “Organisations are structured in a variety of ways depending on their objectives and culture”.

Outline THREE forms of organisational structure and give ONE advantage and ONE disadvantage

associated with each.

12 Marks

Total 25 Marks

QUESTION 3

You are the newly appointed marketing executive in a group with a chain of hotels throughout the country. You

have been requested to prepare a briefing paper on service marketing.

You are required to

(a) Explain the FOUR features which typically distinguish services from products.

10 Marks

(b) Briefly explain FIVE of the seven factors which make up the extended marketing mix for services. In

developing your explanation you should outline how each factor might be applied in the hotel services

sector.

15 Marks



Total 25 Marks

QUESTION 4

“Content theories of motivation assume that needs are the most important determinant of an individual’s level of

motivation”.

(a) Describe in detail Maslow’s Hierarchy of Needs Theory of Motivation (with diagram).

7 Marks

(b) Identify TWO merits and TWO limitations associated with this theory in the present business

environment.

8 Marks

(c) Describe any FOUR of the five stages in Tuckman’s theory of group/team development and comment

on its relevance to the management of contemporary organisations.

10 Marks

Total 25 Marks

QUESTION 5

(a) Describe what is meant by the term “Market Segmentation”. Explain FOUR categories of variables

which are commonly used to segment markets, giving examples in support of your answer in each case.

10 Marks

(b) Explain how the market for outward bound foreign holidays might be segmented, highlighting THREE

different types of holiday maker that may be identified and explain how this information might be used

in tailoring marketing effort.

10 Marks

(c) “Product Packaging has a purely functional protective role”. Do you agree? Give reasons in support of

your answer.

5 Marks

Total 25 Marks

QUESTION 6

(a) “Computer Security is rarely out of the news in today’s business environment”.

Identify FIVE intentional threats to computer security and explain how these impact on the security of

an information system.

10 Marks

(b) Briefly outline THREE arguments for and THREE arguments against the “buy” option when acquiring

information systems .

10 Marks

(c) Explain the meaning and relevance of the “requirements analysis” stage of the systems development

life cycle.

5 Marks

Total 25 Marks



QUESTION 7

(a) “The astute allocation of resources is a key element of organisational management”.

Describe the main stages in the budgeting process.

10 Marks

(b) Identify FOUR sources of finance available to organisations, TWO short term and TWO long term.

Briefly describe ONE short term source of finance and ONE long term source of finance.

10 Marks

(c) Explain how liquidity should be monitored in organisations.

5 Marks

Total 25 Marks



1st Year Examination: May 2015

Business Management

Suggested Solutions

and

Examiner’s Comments

Students please note: These are suggested solutions only; alternative answers may also be deemed to be correct

and will be marked on their own merits.

Statistical Analysis – By Question

Question No. 1 2 3 4 5 6 7

Average Mark (%) 67% 45% 60% 60% 62% 61% 59%

Nos. Attempting 1067 366 548 581 723 563 385

Statistical Analysis - Overall

Pass Rate 85%

Average Mark 60%

Range of Marks Nos. of Students

0-39 112

40-49 51

50-59 243

60-69 336

70 and over 327

Total No. Sitting Exam 1068

Total Absent 334

Total Approved Absent 39

Total No. Applied for Exam 1441

General Comments:

Overall the standard of answers was satisfactory with students demonstrating high levels of engagement

with the themes and a good understanding of the concepts and issues examined.

In general student’s answers were comprehensive in scope, well supported with real life examples and

very well presented.



Examiner’s Comments on Question One

Solution One (COMPULSORY)

PART A

PESTEL analysis is a technique for analysing the macro environment of an organization under the following

headings – political, economic, socio-cultural, technological, legal and environmental considerations.

Analysis of the Political environment involves considering the impact of changes in Taxation requirements,

Safety regulations, Consumer protection legislation, Parties in Government, EU Developments etc.

Consideration of the levels of demand within the economy, interest rates, foreign exchange rates, grants,

inflation etc. are indicative of the economic variables to be monitored and considered.

The Socio-Cultural environment encompasses issues of a demographic nature, such as, changes in the structure

of the population – age, gender, income distribution, emigration etc. and issues of a cultural nature, such as,

language, customs, religion etc.

The Technological environment includes consideration of the threats and opportunities arising from IT and

scientific developments in various areas.

Organisations must be aware of the legal parameters of their markets and operating environments including

issues related to employment law, contract law etc.

Increasingly organizations are developing strategies to minimize the effects their operations have on the

ecological systems etc.

The PESTLE model uses a wide lens to assess how broader or more general developments in the Political,

Economic, Socio-cultural, Legal, Technological and Environmental landscapes might impact an industry. Its

effects tend to be the same for all entities in the industry whereas Porter’s model provides a more focused and

tailored analysis of the specific effects of developments on the relative competitive position of major players

within an industry.

Marks Allocated

2 marks for description of four PESTLE elements

2 marks for overall quality and presentation 10 Marks

PART A

This was very well answered by the majority of students. Students were well able to identify the

variables within the model and to explain how these impact industries and businesses. A rich range of

real life examples were provided in support of their answers.

PART B

Students demonstrated good analytical skills in relating the PESTEL model to changes that have

taken place in the Credit Union sector over the last five years.

PART C

The majority of students demonstrated a good understanding of ethical matters and were comfortable

describing areas of Credit Union activity where ethics are of major relevance.



PART B

Many environmental factors have influenced the development of the credit union sector / industry over the last

five years. A number of these are set out below:

Political

Developments in the political field – such as international policies on banking and finance – BASLE agreements

and the work of the European Central Bank and other Central Banks on stress tests, quantitative easing, interest

rate reductions and mortgage lending conditions etc. all impact on Credit Union activity.

Technology

Actual developments in the capacity of IT devices (in particular smart phones) have greatly enhanced the range

of services they perform (e.g. on line banking etc.) All these developments have significantly impacted

consumer’s expectations and this has led to intense competition amongst players in the industry. It is probably

fair to say Credit Unions are playing catch up to the mainstream banks in this area. As such it provides both

opportunities and threats for Credit Unions.

Economic

The recession has impacted most industries negatively and this is one industry that appears to have suffered

significantly. People’s disposable income and capacity to save has been greatly reduced. This negatively

impacts on the supply of savings funds credit unions depend upon.

Similarly a number of Credit Unions engaged in unwise investment and lending practices during the boom

which has left them in precarious financial positions. Many indeed have been forced to merge with other Credit

Unions.

Socio Cultural factors

Socio cultural factors such as attitudes and perceptions and patterns of behaviour have changed as a result of the

recession etc. Attitudes to spending and borrowing in particular have hardened since the recession with people

being cautious and circumspect with what they do with their money and in terms of their dealings with financial

institutions. Societal expectations favour stronger governance and Credit Unions are expected to adhere to

tighter fiscal rules and codes of conduct.

Legislation

Legislation regarding freedom of information, data protection and invasion of privacy etc. are all playing catch

up to the developments that are taking place in this environment. New laws and protocols are being developed

to better regulate the sector on an on-going basis. People have changed and they expect financial institutions to

adopt the highest regulatory standards.

Marks Allocated

2 marks per influence (maximum of four influences)

2 marks for overall quality and presentation 10 Marks



PART C

As a result of the financial scandals and crisis over the last number of years people now demand a very high

level of ethical behaviour from financial institutions. A light touch approach to regulation is no longer tenable.

The recession has affected regulators, consumers and Governments expectations significantly. This applies to all

facets of Credit Union activity but particularly its prudential activity. (e.g. granting of credit, investment

decisions, the advertising of services, the holding of reserves and the transparency of its governance and

accountability regimes).

Marks Allocated

2 marks per area of activity (Max of two activities)

1 mark for overall quality

5 Marks

Total 25 Marks



Examiner Comments on Question Two

Solution Two

PART A

Trait Theory of Leadership

Trait theory is one way to describe who leaders are. Trait theory suggests that effective leaders possess a similar

set of traits or characteristics. Traits are relatively stable characteristics, such as abilities, psychological motives,

or consistent patterns of behaviour. Trait theory is also known as the ‘great person’ theory because early

versions of the theory stated that leaders were born not made.

For some time it was thought that trait theory was wrong and that there are no consistent trait differences

between leaders and non-leaders, or between effective and ineffective leaders. However, more recent evidence

shows that ‘successful’ leaders are not like other people, that successful leaders are indeed different from the

rest of us. More specifically leaders are different from non-leaders in the following traits; drive, the desire to

lead, honesty / integrity, self-confidence, emotional stability, cognitive ability, and knowledge of the business.

There is much debate as to whether traits are biologically inherent in some people or whether people develop

them over time and situations.

Whilst the trait approach has become somewhat discredited, more recent research has examined traits which are

conducive to leadership. These include the following:

Demonstrated emotional composure and stability

Capacity to remain calm and confident during crisis rather than angry or moody

Ability to admit and try to correct mistakes rather than blaming others

Strong interpersonal skills that prevent problems arising in the first instance

Traits alone however, aren’t enough for successful leadership. Leaders who possess these desirable traits (or

many of them) must also behave in ways that encourage people to achieve group or organizational goals. Two

key leadership behaviours are (i) initiating structure, which improves subordinate performance, and (ii)

consideration, which improves subordinate satisfaction. Some argue there is no ‘best’ combination of these

behaviours.

Strengths

Limitations

Certain traits are measurable, and can be

identified (e.g. emotional stability)

Creating a classification of traits assists

managers in identifying employees with

potential for promotion, i.e. it assists in

identifying future leaders.

Situational (internal or context) forces are

deemed to be of secondary importance

Socio-economic (external circumstances)

factors are deemed to have little relevance.

The nature versus nurture debate is not

conclusive

PART A

Generally well answered with many candidates achieving very high marks. Most were able to explain

trait theory thoroughly and gave interesting and relevant examples in support of their answers.

PART B

A lower standard with few candidates producing the required organisation structures. Some described

Anthony’s hierarchy….strategic/tactical/operational while other wrote about the structure of Public

Limited Companies (PLCs)/Partnerships/Sole traders.



There is strong evidence that certain traits are

flexible and can be learned over time

There was a tendency in earlier versions of

the theory to be gender biased

Marks Allocated

(max 6 description, 3 marks for merits, 3 marks for limitations)

1 marks for overall quality of description 13 Marks

PART B

Managers use a number of ways to group people together to perform their work. The functional, divisional and

matrix approaches are the more traditional approaches that rely on the chain of command to define departmental

groupings and reporting relationships. In recent years, two contemporary approaches, team and network, have

emerged to meet organisational needs in a highly competitive global environment.

Functional Approach

People are grouped together in departments by common skills and work activities, such as in an engineering

department or an accounting department.

Managing Director / CEO

Marketing Production Human Resources Accounting

There is a high degree of division of labour and specialisation in this approach, which can yield economies of

scale. However it requires a high degree of co-ordination between the various departments, which may result in

delays in adapting to changes in the business environment.

Divisional Approach

Departments are grouped together into separate, self-contained divisions based on a common product,

programme or geographic region.


Product Range A Product Range B

Marketing Production Finance Marketing Production Finance

The divisional approach has the advantage that reporting lines and chain of command are directly in line with

the primary activities of the organisation. This structure enhances accountability and provides a clear framework

for channelling strategic effort and focus in accordance with strategic aims.



The main disadvantages are that divisions can become compartmentalised and pursue narrowly focused

divisional goals at the expense of the well-being of the overall organisation. Divisions may also become

disconnected and be unaware of what other sections of the business are doing.

The Matrix Approach

Functional and divisional chains of command are implemented simultaneously and overlay one another in the

same department. Two chains of command exist and two employees report to two bosses.


Marketing Production Personnel Accounting

Product A

Product B

This approach attempts to capture the best of both worlds, functional specialisation and expertise and primary

activity / product grouping focus.

Naturally the approach looks well on paper but implementation in the real world may prove a little more

problematic as individuals experience divided loyalties between individual bosses. It is mainly used in large

manufacturing environments.

Marks Allocated

2 mark for description, 1 for merit, 1 for limitation for each form of organisational structure

12 Marks

Examiner Comments on Question Three

Part A

Students in general were well able to identify and explain the distinguishing features of service

marketing. Many earned high marks for this question because they demonstrated a high degree of

knowledge regarding the topics raised in the question and provided fitting examples that focused on the

hotel sector.

Part B

This part was also well answered. There were a small number of students who attempted Part B but who

were not able to discuss the factors that distinguish services from products. This ranged from students

who could distinguish the various factors but could not explain them to students who did not attempt

Part A at all. The examiner would encourage students to at least attempt every part of a question, it can

mean the difference between a pass and a fail. A small number of students apparently did not read the

question and answered Part A from a marketing mix point of view (product, place, price etc.) which was

the focus of Part B. Some realised their mistake only when they attempted Part B and sought to rectify

their mistake, others did not. Reading the question and re-reading the question is fundamental in

ensuring that such mix ups are not made.



Solution Three

PART A

A large number of businesses offer services – airlines, banks, hotels, insurance companies, consulting firms,

medical and legal practices, entertainment and telecommunications companies, real estate firms and others.

Although services are ‘products’ in a general sense, they have special characteristics that separate them from

manufacturing.

Intangibility

Services are intangible: Unlike physical products they cannot be seen or touched before they are bought.

Services are difficult to describe, to demonstrate to the buying public, or to illustrate in communications and

promotional material. An organisations reputation and that of its sales people are essential to service marketing.

Airline passengers have nothing but a ticket and a promise that they and their luggage will arrive safely at the

intended destinations, hopefully at the same time. To reduce uncertainty, buyers look for signals of service

quality. Many factors influence the experience of a service. This is particularly true of hotels where the

ambiance and décor and overall quality of the surroundings and service levels influence the consumer’s

perceptions and their interpretation of the experience. The service provider’s task is to make the service tangible

in one or more ways and to send the right signals about quality.

Inseparability

Services are purchased and consumed simultaneously. The buyer provider interaction is a special feature of

services marketing. Services cannot be separated from their providers. Customers and service providers

participate in and affect the transaction. It is a once off experience. The impressions created by hotel staff cannot

be inspected like the products at the end of an assembly line.

Perishability

Services cannot be stored or inventoried. The perishability of services is generally not a problem when demand

is steady. When demand fluctuates service firms may experience problems. It is difficult to synchronise supply

and demand. Hotels have to strive to ensure they recognise service experiences as one-off and that damage done

at one point in time may be difficult to rectify later.

Heterogeneity / Variability

Because services depend on who provides them, (as well as when and where they are provided), service quality

is highly variable. Many services cannot be provided by machines and therefore the human factor is of great

importance in the maintenance of service quality.

There can be a great deal of variability in the output of a services organisation. This arises, as it is more difficult

to establish standards for output and even harder to ensure standards are being met each time the service is being

delivered. For example, hotel employee’s reactions to customers may vary with their levels of tiredness and

fatigue. Even the quality of a single hotel employee’s service varies according to his or her energy and frame of

mind at the time of each customer encounter.

Marks Allocated

2 marks for the quality and description of each distinguishing characteristic of services

2 mark for overall quality and presentation

10 Marks



PART B

Most organisations’ define Consumer Benefits Packages within the parameters of the 4P’s, of price, product,

place and promotion. The Services Revolution has added a further three more elements to the marketing mix,

namely, participants, physical evidence and process.

Participants

This refers to the people who actually deliver the service at the point of customer contact. In essence, the other

6P’s only play a support role to participants in a service environment. Whether it be on a one-to-one basis, over

the phone, or via the Internet, the professionalism, politeness and credibility of these participants is critical.

Participants in general require training in personal selling, human interaction skills and customer problem

resolution.

Physical Evidence

This relates to how facilities are designed and managed. Take for example, a cinema, a supermarket or a

restaurant. The design of the interior and the exterior of these establishments are critical in the eyes of the

consumer, as is the appearance and hygiene of the reception, service and recreational areas and facilities etc.

Process

This refers to the efficiency and effectiveness of the service process involved in delivering the product / service

mix. Most successful service providers develop detailed standards of performance for the facility, process,

equipment and the jobs that deliver the consumer benefits package.

Product.

Designing products of high quality and high-perceived value added to the consumer is a vital part of any

business. Marketers must communicate with consumers and constantly adapt the product to changing market

demands. Rather than asking consumers how they wanted computer applications to be designed some engineers

would tend to ask their fellow employees what they thought the customer wanted. (Next bench syndrome).

Many factors have to be considered at the product level

- the range of products to satisfy the different segments of the market

- the intangibles as well as the tangibles consumers consider when buying a product

- Product differentiation – how to promote the product’s distinguishing characteristics

- differences between consumer and industrial markets

- branding

Price.

The main issues to be analysed are how price is to be used as a competitive tool, what are the determinants of

price and what pricing methods and tactics might marketers use.

Price is a critical factor of the marketing mix, that is, it is the only factor that produces revenue. Many firms

base their pricing policy on cost factors alone, and do not take into account the dynamics of the market. In the

market a product may be successful at a certain price but not at another.

There are many factors, which determine the price of a product

- market structure

- economic conditions

- competitive conditions

- type of product – perishable or long lasting

- type of customer – disposable income bracket

- strategic objectives



- legal issues

- distribution channels

Promotion,

Promotion relates to all communications with markets and consumers, including promotional activity, selling

and sales, and marketing research. The design of effective products, pricing and distribution strategies are

redundant if the communication strategy is not well designed or the selling and sales strategy is not integrated.

The key issues to be addressed within Promotion and Communications are as follows:

- Promotion and promotion mix

- The Marketing Communications Process

- Marketing Research

Promotion is defined as “an attempt by marketers to persuade others to participate in an exchange with them”.

The promotional mix is the combination of tools marketers use to promote their products and services and is

made up of the following

- personal selling

- publicity

- public relations

- sales promotion

- advertising

- word of mouth

Place or distribution.

Critical to the marketing process is the ability to physically get the product from where it was produced to a

place where the customer can purchase, view or consume it most conveniently.

This involves setting up the most appropriate distribution channels, modes of transport, storage facilities and the

management of a network of relationships with wholesalers and retailers.

The key issues in distribution from a marketing perspective are

- utility and marketing intermediaries

- physical distribution and logistics

- channels of distribution

Hotels are service organisations. Many of their interactions with their consumers are intangible, perishable (or

uninventoriable), heterogeneous, and consumed at the point of production.

Services are intangible: They are difficult to describe, to demonstrate to the buying public, or to illustrate in

communications and promotional material. An organisation’s reputation and that of its sales people are more

essential to service marketing than to goods marketing. Many factors influence the experience of a stay in a

hotel. Tangible factors such as the quality of the food and facilities have an impact. But many other intangible

factors also come into play. (e.g. these range from the atmosphere created by the décor and the small touches in

the layout of the room to the nature of the welcome at reception).

Services are only of immediate or single use. Most services are purchased and consumed simultaneously. For

example, the experience of a meal in a hotel room cannot be inventoried or held in stock. It is a once off

experience. The impressions created cannot be inspected like the products at the end of an assembly line.

Services provide heterogeneous output. There can be a great deal of variability in the output of a services

organisation. This arises, as it is more difficult to establish standards for output and even harder to ensure

standards are being met each time the service is being delivered. Employee’s reactions to customers may vary

with their levels of tiredness and fatigue.



Services require simultaneous production and consumption. The consumer, such as a tourist listening to a

tour guide, interacts with and participates in the service delivery system.

Marks Allocated

Description and development of each element within the context 3 marks each (max 5 elements )

15 Marks



Examiner Comments on Question Four

Solution Four

PART A

One popular content theory of motivation is Maslow’s Hierarchy of Needs. This theory states that human

motivation is dependent on the desire to satisfy various levels of needs and that the type of behaviour results

from the nature of the particular need to be fulfilled at a given time. According to Maslow, five basic needs exist

in a hierarchy from lower level deficiency needs to higher growth level needs. The five basic needs are;

Physiological needs: These needs relate to the basic survival needs which allow for continued existence, such as

food, water and adequate shelter.

Safety needs: These needs relate to physical and psychological safety from external threats to our well-being,

such as the need for security and protection. These needs take effect when physiological needs have been met.

Social needs: This level of need relates to the need for company and companionship, and for a sense of personal

belonging. These needs for personal contact and interaction with other people are triggered once physiological

and safety needs have been met.

Esteem needs: This is the first level of growth needs, which relates to the need for a sense of self-esteem and a

feeling of personal self-worth. They become salient once the first three levels of deficiency needs have been

satisfied.

Overall is this was a popular question.

PART A

This was exceptionally well answered with the major of students demonstrating a thorough

understanding of Maslow’s Hierarchy of Needs Theory of Motivation. Most students were able to

provide the diagram and provide good examples in support of each element of the model.

PART B

Students again demonstrated a solid understanding of the merits and limitations associated with the

theory in the present business environment. There was clear evidence in this part of students reflecting

deeply on the issue and relating it well to the complexity of their own work environments and life

experiences.

PART C

Answers here were mixed. A number of students clearly had a deep understanding of Tuckman’s theory

of group / team development. Unfortunately a sizable number of students were clearly not familiar at all

the theory and wrote about teams generally.



Self-actualisation needs: The final level in the hierarchy refers to the need for personal growth, and the

development of one’s full potential and capabilities. This need level is different from others in that such needs

can rarely be fully satisfied or fulfilled. The more they are satisfied the stronger the needs become.

Actualisation

Esteem

Social

Safety

Physiological

Marks Allocated

5 marks for the description of theory and stages

2 mark for the overall quality and presentation 7 marks

Part B

Maslow’s theory is a general theory not specifically designed for organizations. However it has relevance to

understanding people’s motives within organizational settings.

The theory is universalistic in nature. It assumes that people move from one level to the next. However in reality

people may have a number of unfulfilled needs at a number of levels concurrently.

The theory does not reflect how the motivational process is played out. Different people may construct or

perceive their needs differently. It does not reflect how expectancy and equity interact with people’s needs and it

makes no mention of the impact of people’s perceptions of power differentials.

In summary the model has the following merits and limitations

Merits of the model Limitations of the model

Allows mangers to identify the motivations

of employees

Allows for the classification of biogenic

versus hedonic needs – i.e. separates

physical and emotional needs

Allows the self-actualization concept to be

applied in workplace scenarios through

career and personal placement

The model is quite simplistic and

generalized

The model looks at basic needs but does

not consider in great depth how other

facets of human experience evolve (i.e.

aesthetics)

Model makes no direct reference to

cultural issues or situational factors (e.g.

parity issues etc.)

Model is overly sequentialised (i.e. one



must satisfy one level before progressing to

the next).

Marks Allocated

2 marks per limitation and 2 marks per merit 8 marks

PART C

Group / Team development is not random, but evolves over definitive stages. The five generic stages of group /

team development are forming, storming, norming, performing and adjourning.

Forming

This stage of team development is characterised by initial orientation and acquaintance. The team is formally

introduced and given its task or brief. Team members typically start “testing the water” with other team

members to understand; what exactly is required from them? What the other team members are like etc.? The

first steps in “jockeying for position” emerge at this stage. The team leader should focus on the facilitation of

social interaction and the clear statement of objectives and roles / requirements.

Storming

This is a stage of team development in which individual personalities and roles emerge, and the potential for

conflict or misunderstanding of individual roles becomes an issue.

At this stage a team may break into factions if not properly managed, and this has a serious effect on the overall

cohesiveness of the group. At this stage a team leader must ensure healthy participation by all members, to

ensure that ideas are proposed, disagreements are minimised, and conflicts are dealt with appropriately.

Norming

This is the stage of team development when many of the conflicts that emerged during the earlier stages are

resolved and team harmony and unity evolves. (e.g. boundaries are clearly established). A team leader at this

stage should focus on the team rather than individual performance and assist in the clarification of team roles,

norms and values if any confusion or conflict still exists.

Performing

The focus moves from the assurance of team cohesion towards problem solving and the accomplishment of the

task at hand, although the socio-emotional roles should not be discarded. The team at this stage is highly co-

ordinated and focused on their individual roles. Team leader activity is heavily focused on the facilitation of

high performance.

Adjourning

In this stage of team development members prepare for the teams disbandment. The brief of the team has been

met and is “put to bed”. Various emotions prevail at this stage from complete satisfaction / elation to depression.

The team leader is focused on task accomplishment and reward where appropriate

Organisations today are re-organising employees into groups or teams sharing out work duties and tasks. Teams

personify groups at their best; team members complement each other and work towards a common objective,

hence the productivity is high. Teams also deliver benefits in terms of flexibility, democratising the

organisation, increased motivation and clarity of purpose. Generally speaking it would be accepted that the

benefits of teamwork far outweigh the limitations.



Marks Allocated

6 marks for a description of the stages

3 marks for contemporary relevance


10 Marks



Examiner Comments on Question Five

Solution Five

PART A

Marketing management deals with how the different elements of marketing are organised, planned and

controlled. It is rare for a company to target a market in full; instead marketers concentrate on segmenting

markets, and then select the best segments to better position products.

A three-step process is crucial in marketing management. This set of activities – Segmentation, Targeting and

Positioning (or STP) – defines a pivotal managerial decision making process in an organisation’s attempts to

meet its objectives in competitive markets.

The process of segmentation, targeting and positioning enables the marketer to:-

Select the most profitable and viable customers to serve.

Reach them with an offering that has a competitive advantage

To communicate a position that is clearly perceived

Market segmentation involves analysing the total market into segments that share common properties, such as

consumer’s stage of life needs, purchasing power, geographical spread, buyer behaviour, attitudes to

environmental issues etc. The ultimate in terms of market segmentation is “customised marketing” where sellers

design a separate product for individual buyers. Typical segmentation variables include;

Part A

This was a popular choice for students and most that attempted it did very well. The question was split

into three parts and gave a nice choice as it focused on segmentation and product packaging. Students

who attempted all three parts (the majority of students) usually earned high marks, however students

should be aware of the marks allocated for each section of the question. A small number of students

covered part (a) well and then went on to write very little on part (b) which had the same number of

marks allocated to it as part (a) and finished off by spending too much time on part (c) which had only

half the marks allocated as parts (a) and (b).

Part B

Most students handled part (b) of this question very well and gave good examples of segmentation in

relation to outward bound holidays. In relation to part (a) of this question, there were quite a number of

students (perhaps as much as 50%) who misspelled psychographic. The variance in misspelling was also

very broad – sciographic, physciotal, for example, some even referred to it as physiographic (physical

geography). Psychographics which encompasses personality, attitudes opinions, values and life-style is

not a difficult word but it is new to the students who should be more aware of its use and spelling.

Part C

The vast number of students who answered part (c) in relation to product packaging did very well and

had no problem in discussing the various functions of packaging, a few however could think of no other

function of packaging other than protection. This is interesting as most of us encounter packaging every

day of our lives in one form or another so we should have a real understanding of its purpose, purely

from our own experiences if nothing else.



Age range – 18 to 30

Gender – male or female

Location – urban, rural, national or international

Family life cycle – single, married no children, married young children, etc.

Socio- economic status – professional, managerial, skilled workers, unskilled etc.

As a general guide, markets are usually segmented along four main variables; demographic, geographic,

psychographic and behavioural variables. Each of these variables is explained below:

Demographic

The intended target audience for a given product or service is divided into categories

based on demographics such as age and life cycle, gender, income, generation and

social class. Demographic variables are easy to measure and obtain.

Geographic

Intended target audience for a given product is divided according to geographic units,

such as nations, states, regions, counties, cities, or neighbourhoods. Products and

services and communication efforts are localised.

Psychographic

Psychographics can be defined as the study of consumer lifestyles. This variable

divides the market on the basis of activities (i.e. sports and entertainment), interests

(i.e. level of social interaction) and opinions (i.e. politics, social and moral issues).

Behavioural

Examines the relationship between the consumer and the product. Buyers in a market

will differ in their wants, locations, buying attitudes, and buying practices and any of

these variables can be used to divide a market. (i.e. gift buying, usage rate, loyalty and

user status).

Market targeting follows market segmentation. It involves evaluating the various segments identified during the

segmentation process and deciding how many and which segments it can serve best.

In explaining the benefits of market segmentation as a strategy candidates were expected to outline how

appropriate modes of segmentation facilitated the development of related targeting and positioning marketing

strategies for a firm / brand.

For example for a company entering the online betting market in Ireland. segmentation would involve selecting

appropriate demographic variables for the target segments – age, gender, stage of life cycle. Added to this will

be relevant psychographic variables such as – activities (sports and entertainment), nature of interests (i.e. level

of social interaction involved) and opinions. Also of relevance would be certain variables concerning the level

of interaction between the customer and the product. (e.g. offering real time online betting odds as games are

progressing etc.)

Segmentation could help with the development of more effective market targeting strategies. This would involve

deciding whether the company wishes to target several market segments simultaneously and designing separate

marketing mix strategies for each. It would involve decisions around the attractiveness (size, potential and scope

for development) of the target market.

Segmentation would also facilitate the development of appropriate market positioning strategies. This would

involve decisions around the perceptions the company wishes to create in consumers’ minds associated with its

offerings. (e.g. ‘best’ company for racing bets etc.)

Segmentation has a significant role to play in the development of marketing strategies in a range of industries

(e.g. insurance, airlines, retailing, cosmetics etc.)



Marks Allocated

Description of market segmentation – 1 mark per valid point (max 2 marks)

Explaining the variables 2 marks with examples (times 4)

10 Marks

PART B

Candidates were expected to demonstrate how the principles of segmentation might be applied to the analysis of

outward bound foreign holiday markets and to identify three categories of holiday maker and how this

information might be used in tailoring marketing effort.

Demographic variables would be particularly relevant. Age and life style variables allow the marketer to

distinguish between young singles, young families with children and older couples. All three groups would have

distinctive holiday requirements and needs.

Young single individuals tend to look for good party locations either in the Sun or in the form of city breaks for

hen or stag parties. Marketing effort would be tailored towards their needs and expectations. (e.g. cheap and

cheerful lively venues that are safe and allow them to mix and mingle and party through the night).

Young families with small children have completely different holiday requirements and needs. Camp sites with

good pool and play areas, access to the sea and child minder facilities etc. have all proved popular with this

group.

Older senior couples are likely to be interested in quieter locations where they can relax in comfort and have

good access to well established restaurants and entrainment etc. Access to good medical facilities in the event of

emergencies would also be a factor with this group. Cruises in particular have proven popular with this type of

holiday maker.

Marketing effort would clearly be emphasising the different elements of the seven part service mix in each case.

Demographics is just one variable that may be used to segment the market. We can think of various other ways

in which segmentation variables might be applied to identify different types of holiday maker. (e.g. honey moon

couples, budget holidays, eco-tourism holidays, those with special interests e.g. angling, cuisine, cycling etc.)

Again marketing efforts would need to be tailored to these distinctive markets.

Marks Allocated

4 marks for discussion of segmentation in context and 4 marks for identifying categories of customers.

2 marks for overall quality and presentation

10 Marks

PART C

Packaging of course has a protective functional role but it clearly is a great marketing opportunity for advertisers

to promote brand image and engage and convince consumers of the merits of their offerings. The nature of the

packaging and the form it takes is also crucial to gaining attention and stimulating consumer interest in the

product.

Considerable attention is given to packaging by marketers. Every effort is made to convey attributes that appeal

to target users. Its relevance and importance can be seen in the resistance shown by cigarette manufacturers to

health authorities’ proposals to change the packaging of their products.

Marks Allocated

2 marks for the quality and relevance of points made in support of the position taken


5 Marks



Examiner Comments on Question Six

Solution Six

PART A

Intentional Threats

There are many ways in which computer systems can be attacked, especially when extensive use is made of e-

commerce. Some of the more common threats include

Theft

stealing physical equipment is difficult because the equipment is likely to be bulky and less valuable.

But laptops, notebooks and disco key storage devices are not. Un-encrypted data on these devices may

be particularly sensitive and vulnerable to theft and misuse.

Hacking

A hacker is a person who tries to gain access to a computer without permission. Usually this would be

done remotely over a network or the internet.

Viruses

A virus is a (usually very small) computer programme that is tacked onto other programmes and is able

to replicate itself (hence the term virus). What the virus does can vary from completely harmless to

extremely destructive (e.g. reformatting the computer hard drive).

Worm

A worm is a self-propagating malware (malicious software) programme that is similar to a virus.

However, worms do not need to be carried by another programme, and are generally more harmful.

Trojan

A Trojan is a programme that appears harmless at first but in time does something illicit without the

user knowing. It is a standalone malicious programme which has the potential to give control of the

infected computer to another computer.

PART A

Very high standard with most candidates correctly identifying the main threats and, in many cases, the

methods of dealing with the threats.

PART B

While most candidates supplied excellent answers some mis-interpreted the question and failed to stay

focused on the analysis of the “buy” option.

PART C

Almost all solutions were correct but a minority confused it with the initial stages of the product life-

cycle



Spyware

Spyware is also a type of malware designed to monitor computer / internet activity. They install

themselves on computers and collect data about the users. For example, some spyware can record

keystrokes (called ‘key logging’) and transfer information over the internet without your knowledge.

Phishing

Phishing is online fraud, usually carried out through e-mail. An e-mail is sent to an unsuspecting user

in order to ‘fish’ for information such as username, password, bank and credit card details by posing as

a trustworthy entity, such as a bank or a well-known website. (Such as EBay or PayPal).

Denial-Of-Service (DOD)

A Denial-Of-Service (DOS) attack is the malicious attempt or attempts by a person or persons to

prevent a website from functioning efficiently, either temporally or indefinitely. If the attack is

successful it generally makes a website or service unavailable to its intended users. DOS attacks tend to

be made against high profile websites.

Trap door (back door)

A trap door (or back door) is a computer algorithm designed to bypass normal authentication. It takes

its name from the fact that it uses a hidden entrance to a computer system to bypass a computer’s

security system.

Anything that causes a loss of data or a corruption of data can be considered a security threat. A number of steps

can be taken within a single site, ranging from limiting physical access to sensitive areas and installing complex,

encrypted codes to deny entry to data to unauthorised personnel etc. Other procedures one would expect are

back up procedures, disaster recovery plans, effective virus protection and password procedures.

Computer security can be considered under two general headings 1) securing the physical assets (i.e. the

machines and associated hardware) and 2) securing the data. Generally data is considered the most valuable

asset, as it is the most difficult to replace and has the most potential value to competitors and fraudsters.

A control is a method or procedure aimed at ensuring that the company’s assets are secure, including data and

other such intangible assets. Effective control procedures (physical controls, access controls, procedural controls

and organisational controls) should be put in place to combat potential intentional threats to the security of

information systems.

Physical Controls

This category of control refers to any control that limits physical access to the system or physically monitors the

system, such as:

- Security guards

- CCTV

- Keypads / swipe card to open doors

- Isolating computers from the network

Access Controls

These are many means of restricting access to authorized users only (and not only through physical means). The

most common means are usernames and passwords; ID cards, and biometrics (e.g. fingerprints, facial

recognition), although the latter is still expensive and not commonly used in business.



Good password practice requires a minimum password length (the longer the better) and regular changes. Also,

passwords should not be easy to ‘guess’ or determine (i.e. don’t use your dog’s name, or something else anyone

could easily find out).

Many companies apply strict password policies that force employees to use letters, numbers and other special

characters (like $ or &). Also some companies will require employees to change their passwords periodically.

This can pose its own problems, and often leads to employees writing down their own passwords and increasing

the risk that it will be discovered.

Firewalls are an access control used to prevent unauthorized users from accessing networks, usually through a

combination of hardware and software. Any message entering your system would pass through the firewall,

allowing it to be filtered (to check for possible threats). For example, some firewalls block / trap any email

containing an attachment as these are often a means of spreading viruses.

Procedural controls

These are procedures put in place as rules/guidelines for users and are sometimes known as ‘company

standards’. Proper back-up procedures are essential to ensure data security. Usually data is backed up (software

can be repurchased if necessary), and this is done on an incremental basis, with ‘master’ back-ups taken

periodically. The incremental back-ups only contain what has changed since the last master-back-up, thus

reducing storage requirements.

Organisational controls

These controls refer to the structures that are in place to ensure there are clear lines of responsibility. Other

items that are relevant at this stage are user training and support. The importance of proper training cannot be

over-emphasised, especially when one considers that user error is one of the most common forms of security

breach.

Marks Allocated

5 marks for the description of threats

3 marks for the description of impacts

2 marks for overall quality& presentation

10 Marks

PART C

The package option is feasible only when the application software required is of a “standard” variety – the kind

of common system likely to be required by a large number of companies.

In the case of specialised systems uniquely required by a single organisation, a package will not be available and

the development of a custom-built system becomes the only option.

Packages are available immediately to use whereas custom-built systems may take months or years to develop.

Packages are generally well established and are proven products, whereas custom-built systems must be

extensively tested and inevitably have ‘teething problems’ when implemented. Packages come complete with

full documentation (user guides etc.) whereas such information must be specially prepared for each custom-built

system.

Packages are generally the result of considerable investment of time, money and professional expertise by

package developers. Training and support can be obtained from the package supplier rather than having to be

provided from internal resources.



The better packages undergo continuous enhancement and improvement by their developers and the purchaser

has access to a sequence of “upgrades” over the life of the package.

Clearly off the shelf packages have may advantages but they also have significant risks – the package may not

meet your specific needs and tailoring may be costly or not an appropriate solution. Dependence on our side

vendors may be a problem and any slight modifications might be costly. Also there is a certain loss of control in

that one may not be able to amend systems as easily as if they were your own.

Buy Versus Build Summary

Buy Build

Relatively cheap because many customers buy the

same package

Expensive, as the system is unique

Available quickly Takes time to develop

Usually tried-and-tested Risky, because there may be many flaws

May not be a perfect fit to your needs Should be built to meet your requirements

Vendor will produce new versions periodically and

stop supporting the version you acquired

You need to drive upgrades and modifications

yourself.

Packages only available for common business

functions

Essential if your company requires something

unique or highly specialised.

Marks Allocated

1 mark per valid argument for and against (3*1*2)

4 marks for overall quality 10 Marks

Part C

Requirements analysis part of the feasibility study phase and involves finding out what is needed (as opposed to

what is wanted). This involves identifying the problems with the current system and identifying requirements to

solve these problems. It is in effect the process of determining user expectations for a new or modified system. It

involves spelling out functional expectations.

Requirement analysis requires frequent communication with system users to determine specific feature

expectations, resolution of conflict or ambiguity in requirements as demanded by users or groups of users,

avoidance of feature creep and documentation of all aspects of the project development from start to finish.

Effort should be devoted to ensuring that the final system meets client needs rather than attempting to mould

user expectations towards the capabilities of the software. Several evidence gathering techniques may be used at

the requirement analysis stage of systems development.



Marks Allocated


Examiner Comments on Question Seven

Solution Seven

PART A

A budget is a quantitative plan of a future course of action. Most people, for example, ‘budget’ for their own

household expenses even if it is only by making a rough comparison between next month’s salary and next

month’s expenditure. Such a budget may not be very detailed but it contains all the main features of what

accountants mean by a budget. These are as follows:

- Policies: a budget is based on policies needed to fulfil the objectives of the entity.

- Data: it is usually expressed in monetary terms.

- Documentation: it is usually written down.

- Period: it relates to a future period of time.

Most entities prepare a number of sub-budgets (e.g. Sales budget, Production budget, Administration budget)

which are then combined into a master budget. (which is typically made up of a budgeted profit and loss

account, balance sheet and cash flow statement).

Budgets are useful because they encourage managers to examine what they have done in relation to what they

could do. However, the full benefits of a budgeting system only become apparent when it is used for control

purposes. This involves making a constant comparison between the actual results and the budgeted results, and

then taking any necessary corrective action. This procedure is called ‘budgetary control’.

A system of budgetary control depends on the effective establishment of sound budgets and the monitoring of

actual results in relation to these budgets as the year progresses.

The stages involved in the budgeting process are as follows:

1. Communicating details of the budget policy

PART A

Once again a very high standard with many candidates producing answers that were well structured and

presented.

PART B

Also, a very high standard with a few strange answers assuming it was a personal situation and

recommending the credit union as a source of finance

PART C

Almost all of the answers explained liquidity well and referred to monitoring it via relevant ratios etc. A

small number of students confused liquidity with liquidation.



Top management must communicate the policy effects of the long-term plan to those responsible for

preparing the current year’s budgets.

2. Determining the key budget factor

The key budget factor is that, which at a particular time or over a period will limit the activities of an

undertaking and which is therefore taken into account in preparing budgets. In most cases it is market

demand.

3. Preparation of the Sales Budget

The importance of this activity stems from the fact that the entire budget will be based on Sales

4. Preparation of Functional Budgets

Once the sales projections are made, the various functional budgets can be prepared.

5. Preparation of the Master Budget

When functional budgets are completed, a projected Cash Flow Statement, Capital Expenditure, and

Projected P&L and Balance Sheet can be prepared.

6. Reviews/ Negotiations and Discussion

This involves a series of meetings and discussions, which may result in some alterations

7. Subsequent Revisions

Once a budget is approved it is rarely changed. This only tends to happen when major developments take

place.

8. Monitoring Variances

The preparation of timely feedback on actual versus budget performance as the year progresses.

It is vitally important that the budgeting system is detailed enough to suit the size and nature of the organisation

If the budget is not prepared in a realistic manner, it can have a negative effect on the attitudes and performance

of managers and staff

The problems of slack and padding can be difficult to eliminate. This occurs when managers overstate their

expected expenses, so that having a larger than necessary budget, they will be unlikely to overspend their budget

allowance

Because the detailed budget focuses on the short term, there is a temptation to make decisions which will benefit

the company in the short term but result in lost profits in the medium/ long term

Budgets are often completed using estimates and opinions. There is therefore a degree of uncertainty involved

e.g. rate of inflation, interest rates. Methods of dealing with these uncertainties must be employed particularly

with the regard to the identification of the principal budget factor.

Marks Allocated

2 marks for the quality of description of stages in the budgeting process (Max of four elements)

2 marks for overall quality and presentation

10 Marks



PART B

Identification of Short and Long Term Sources of Finance

Short term

Bank borrowings

Trade Credit

Long Term

Equity

Debentures

Bank Borrowings

Commercial banks extend short-term facilities mainly in the form of overdraft arrangements. Generally

commercial banks reserve the right to cancel overdraft facilities at short notice. In practice it is probably not to

the banks advantage to pursue this policy to the letter, as they might needlessly force the borrower into financial

difficulties.

Utilising bank facilities in a proper manner will ensure the maintenance of a flexible and comparatively cheap

source of finance. Bank borrowings are flexible in that interest is only payable on the amount outstanding and

not on a fixed advanced sum as is the case with the borrowings from other financial institutions. Bank

borrowings are also comparatively cheaper than long-term loans due to the fact that the risk involved is smaller

given that the lending period is shorter.

The security required by banks differs depending on the risks involved. They might require personal guarantees

in the case of a private company or, alternatively, floating or fixed charges on the assets of the company, or

indeed, both.

Bank lending rates are normally set one to two percent above the bank rate. Bank lending rates can therefore

fluctuate upwards or downwards during the period in which the monies are advanced. This can be an advantage

or a disadvantage depending on the direction of the change when compared to other forms of advances made by

financial institutions at fixed interest rates.

Ordinary Shares

Ordinary shareholders are members of the company holding voting rights. They own a share of the company’s

assets and a share of any profits earned after all prior claims have been met.

Ordinary shares or Equity, as they are termed, are a permanent source of finance. Ordinary shareholders provide

seed capital to allow the business to develop and grow. There are no fixed repayment or interest charges to be

paid in the case of equity. Equity also provides the owners with authority to influence policy and direction.

Equity may be raised through offers for sale, public issues, placing, tender or rights issues. Equity is generally

regarded as an expensive source of finance when compared to loan finance, as the dividends to equity holders

unlike loan interest are not tax deductible. Another disadvantage of equity is the potential for change in the

balance of control between existing and new shareholders.

Marks Allocated

2 marks for identification of sources

3 marks for the quality of description of each source (3*2)




PART C

Cash is the lifeblood of any organisation whether in the not for profit or private sector. Profitability is a close

second. If we are to survive and thrive we need to have mechanisms to monitor these two important dimensions

of our activities.

Decisions made and activities planned are meaningless without the necessary finance to carry them through. The

finance function is concerned with not only ensuring the adequate supply of funds for organisational activities

but also with reporting the results and putting in place procedures to evaluate and examine performance over

periods.

Liquidity refers to the ability of the entity to meet its debts as they fall due. It is measured by the current asset

ratio and the quick asset or acid test ratio.

Liquidity is generally monitored through short term cash budgets and profitability via monthly accounts. It is

vital that we plan our cash requirements and ensure we have funds on hand to meet our needs. Likewise it is

vital that we know the sections of our business that are working (e.g. in a hotel – are each of the following

segments profitable – accommodation, food, bar etc.) and those that are a drain on our resources.

Many of the activities in our business could easily run out of control. Food, for example, could be pilfered or

wasted. A system of budgetary control is a useful way to monitor a firm’s profitability and liquidity.

Budgetary control refers to the analysis, recording and reporting on the activities and financial well-being of the

organisation. It involves forecasting likely outcomes of plans in an attempt to control the future for the

organisation. It is a bread and butter activity for the financial team, in that it ensures effective monitoring of

current activities, and gives invaluable information about performance in relation to plans.

Financial control of activities is vital to all organisations. Many smaller firms, for a variety of reasons, such as

lack of expertise or over-trading, opt for informal rather than formal systems of control. This can be catastrophic

for the small firm as the true performance or liquidity cannot be gauged.

Budgetary control requires that realistic profit and loss and cash flow forecasts are prepared at the beginning of

the period and that they be updated normally on a quarterly basis as the year progresses. Due care and

consideration is required in interpreting variances from budget to ensure managers are held accountable for all

those matters that fall within their sphere of control

The cash flow forecast may be used to determine if company borrowing is required or if surplus funds are likely

to be available for re-investment. Comparing actual performance against forecasted profit and loss account

projections allows management to monitor margins on a regular basis and to take appropriate corrective action

before deviations become too serious.

Marks Allocated

2 marks for the quality of the description of the concept and its monitoring

1 mark for overall quality and presentation 5 marks

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