CIMA E1 Enterprise Operations Kit

This Practice & Revision Kit is one of a suite of products, for use independently
or as part of a package, supporting Operational Paper E1 Enterprise Operations.

This kit helps you focus your revision and practice for the exam in a way that
makes the best use of your time.
Targeted at CIMAs 2014 exams, it provides:
Practice on questions in every syllabus area in the different formats you will
encounter
Feedback on how to approach questions
operational paper e1 enterprise operations
operational paper e1
enterprise operations
practice & revision kit
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Advice on how to obtain easy marks

Rehearsals for your exam day with three mock exams
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For exams in 2014
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CIMA
practice & revision kit
operational paper e1
enterprise operations
FOR exams in 2014
CME1RK14 (POL & HO).indd 1-3
09/12/2013 10:52
OPERATIONAL
PAPER E1
ENTERPRISE OPERATIONS
This Kit is for exams in 2014.

In this Kit we:
Discuss the best strategies for revising and taking your E1 exam
Show you how to be well prepared for the 2014 exams
Give you lots of great guidance on tackling questions
Demonstrate how you can build your own exams
Provide you with three mock exams
Show you how marks are awarded in the exam, using CIMA marking guides
FOR EXAMS IN 2014
P
R
A
C
T
I
C
E
&
R
E
V
I
S
I
O
N
K
I
T
ii
First edition 2010
Fifth edition January 2014
ISBN 9781 4453 7162 7
(Previous ISBN 9781 4453 6614 2)
e-ISBN 9781 4453 7189 4
Marking schemes and quotes from examiner comments

(where provided for past CIMA exam questions) are sourced
from CIMA post exam guides, which can be found in full at
cimaglobal.com.
British Library Cataloguing-in-Publication Data

A catalogue record for this book is available from the British
Library
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2014
iii
Contents
Page
Finding questions and using the Practice and Revision Kit

Question index
Topic index
Using your BPP Learning Media Practice and Revision Kit
iv
viii
ix
Passing E1
Revising E1
Passing the E1 exam
The exam paper
What the examiner means
xi
xii
xiv
xix
Planning your question practice

BPP's question plan
Build your own exams
xx
xxiii
Questions and answers

Questions
Answers
3
75
Exam practice
Mock
exam 1
Questions
Plan of attack
Answers
239
247
249
Mock
exam 2 (September 2013 resit exam)

Questions
Plan of attack
Answers
261
269
271
Mock
exam 3 (November 2013 exam)

Questions
Plan of attack
Answers
283
291
293
Review form
iv
Introduction
Question index
The headings in this checklist/index indicate the main topics of questions, but questions often cover several
different topics.
Questions set under the old syllabuss Organisational Management and Information Systems (OMIS) exam are
included because their style and content are similar to those that appear in the Paper E1 exam.
Marks
Time
allocation
Mins
Page number
Question
Answer
1 Objective test questions: Global business environment
20
36
75
2 Various global business environment topics
30
54
76
3 McBride Gibbon
30
54
78
4 F Food
25
45
81
5 G banking group (5/10)
25
45
83
6 Changeland (11/12)
25
45
86
7 Cranmoor (3/13)
25
45
90
8 Objective test questions: Information systems 1
20
36
93
20
36
94
10 S&C software project (OMIS 5/06 amended)
30
54
95
11 S1K (Specimen paper)
25
45
10
98
12 LD2 (9/11)
25
45
11
101
13 CQ4 (3/12)
25
45
12
104
14 WV8 (5/12)
25
45
12
106
15 Objective test questions: Operations management 1
20
36
13
110
20
36
14
111
17 Capacity, supply and demand
30
54
16
112
18 YO and MX (OMIS 5/07 amended)
25
45
16
114
19 W company (5/10)
25
45
17
116
20 2JN (5/12)
25
45
17
119
21 BC4 (9/12)
25
45
18
122
Part A: The Global Business Environment
Part B: Information Systems
Part C: Operations Management
Introduction
Marks
Time
allocation
Mins
Page number
Question
Answer
22 Objective test questions: Marketing 1
20
36
19
125
20
36
20
125
24 V (OMIS 5/05 - amended)
30
54
21
126
25 CW (Specimen paper)
25
45
22
128
26 DD (11/10)
25
45
22
130
27 99 (5/11)
25
45
23
132
28 iB4e (9/11)
25
45
24
135
29 TT Drinks Company (11/11)
25
45
25
138
30 CXC (3/12)
25
45
26
140
31 H345 (5/13)
25
45
26
143
32 Objective test questions: Managing human capital 1
20
36
27
146
20
36
28
147
34 ARi9 (OMIS 11/08 amended)
30
54
29
148
35 Middleregion (11/10)
25
45
30
151
36 2TW (5/11)
25
45
30
154
37 TB (11/11)
25
45
31
156
38 T42 (9/12)
25
45
31
159
39 CM8 (11/12)
25
45
32
162
40 MM (3/13)
25
45
33
167
41 CR7 (5/13)
25
45
34
169
Part D: Marketing
Part E: Managing Human Capital
vi
Introduction
Marks
Time
allocation
Mins
Page number
Question
Answer
42 Multiple choice questions: General 1
20
36
35
173
20
36
37
174
20
36
39
175
20
36
41
176
46 Multiple choice questions: General 5 (Specimen paper)
20
36
43
177
47 Multiple choice questions: General 6 (5/10)
20
36
45
178
20
36
47
179
20
36
49
180
20
36
51
181
20
36
53
182
20
36
55
183
20
36
57
184
20
36
59
185
20
36
61
186
20
36
63
187
20
36
65
188
58 Hubbles (OMIS - Pilot Paper)
30
54
67
189
59 OK4u (OMIS 11/08 amended)
30
54
68
191
60 Various topics 1 (Specimen paper)
30
54
69
194
61 Various topics 2 (5/10)
30
198
30
54
54
69
69
201
30
54
70
205
30
54
70
208
30
70
212
30
54
54
71
215
30
54
71
218
30
54
71
221
30
54
72
224
30
54
72
228
30
54
72
231
Mixed Section A multiple choice questions
Mixed Section B questions
Introduction
Mock exam 1
Questions 72-75
Mock exam 2
(September 2013 resit exam)
Questions 76-79
Mock exam 3
(November 2013 exam)
Questions 80-83
Our guidance from page xx shows you how to organise your question practice, either by attempting questions
from each syllabus area or by building your own exams tackling questions as a series of practice exams.
vii
viii
Introduction
Topic index
Listed below are the key Paper E1 syllabus topics and the numbers of the questions in this Kit covering those
topics.
If you need to concentrate your practice and revision on certain topics or if you want to attempt all available
questions that refer to a particular subject you will find this index useful.
Syllabus topic
Question numbers
Corporate governance
3, 4, 60
Corporate social responsibility
2, 3, 6, 7, 26, 65, 66
Ethical considerations
19, 24, 25, 26, 59, 66
Global business environment
2, 3, 4, 5, 6, 7, 38, 61, 62, 63, 64, 65, 66, 67, 71
Human resource (HR) role and policies
5, 7, 12, 18, 24, 27, 31, 37, 38, 39, 58, 59, 60, 64, 65
HR and change management
13
HR and motivation
34, 39, 67
HR and recruitment
40, 61
HR and rewards
28, 30, 36, 41
HR and training
10, 11, 20, 34, 35, 68
Information systems and business strategy
2, 10, 11, 12, 13, 14, 17, 41, 62, 63, 64, 68, 69, 70, 71
Marketing
6, 14, 24, 25, 26, 28, 29, 30, 31, 58, 67, 68
Marketing and brands
27, 28, 31
Marketing mix, segmentation and targeting
21, 24, 25, 26, 27, 58, 59, 61, 67, 69, 70
Operations management
17, 19, 58, 59, 65, 66, 67, 68, 69
Quality management
12, 18, 20, 21, 36, 39, 40, 60, 62, 66, 70, 71
Supply chain management
17, 18, 19, 59, 63, 64, 65, 71
Sustainability
29, 66, 71
Introduction
Using your BPP Learning Media Practice and Revision Kit

Tackling revision and the exam
You can significantly improve your chances of passing by tackling revision and the exam in the right ways. Our
advice is based on feedback from CIMA. We focus on Paper E1; we discuss revising the syllabus, what to do
(and what not to do) in the exam, how to approach different types of question and ways of obtaining easy marks.
Selecting questions
We provide signposts to help you plan your revision.
A full question index
A topic index, listing all the questions that cover key topics, so that you can locate the questions that
provide practice on these topics, and see the different ways in which they might be examined
BPP's question plan, highlighting the most important questions
Build your own exams, showing you how you can practise questions in a series of exams
Making the most of question practice

We realise that you need more than questions and model answers to get the most from your question practice.
Our Top tips provide essential advice on tackling questions and presenting answers
We show you how you can pick up Easy marks on questions, as picking up all readily available marks
can make the difference between passing and failing
We include marking guides to show you what the examiner rewards
We refer to the BPP 2013 Study Text for detailed coverage of the topics covered in each question
Marking schemes and quotes from examiner comments (where provided for past CIMA exam
questions) are sourced from CIMA post exam guides, which can be found in full at cimaglobal.com.
ix
Introduction
Attempting mock exams

There are three mock exams that provide practice at coping with the pressures of the exam day. We strongly
recommend that you attempt them under exam conditions, as they reflect the question styles and syllabus
coverage of the exam. To help you get the most out of doing these exams, we provide guidance on how you
should have approached the whole exam.
Our other products

BPP Learning Media also offers these products for practising and revising the E1 exam:
Passcards
Summarising what you should know in visual, easy to remember, form
i-Pass
Providing computer-based testing in a variety of formats, ideal for self-assessment
Interactive
Passcards
Allowing you to learn actively with a clear visual format summarising what you must
know
Case Study Kit
The compulsory question in each Strategic level exam is based on a common preseen case study, issued in April and October each year. The BPP Case Study Kit
provides analysis of this pre-seen Case Study and special practice questions based
on the themes in the Case Study.
You can purchase these products by visiting www.bpp.com/learningmedia
Introduction
Revising E1
The E1 exam
This will be a time-pressured exam that combines a variety of different types of question. It is very important that
you do not spend too long on the objective test and shorter written questions at the expense of understanding
and appreciating the issues involved in the longer written questions that make up half the marks on the paper.
Topics to revise
You need to be comfortable with all areas of the syllabus because any question may span a number of syllabus
areas. Question spotting will absolutely not work on this paper. It is better to go into the exam knowing a
reasonable amount about most of the syllabus rather than concentrating on a few topics.
The global business environment
The major economic systems of the world and the emergence of new economies
The role of government in shaping the business environment and market regulation
The importance of corporate governance and corporate social responsibility
Information systems
The role of information systems and how they are implemented and evaluated
Types of information system and their role in enabling change
The importance of protecting information systems and aligning them with business strategy
Operations management
How to manage inventory, production capacity, demand and supply chains

The importance of quality and methods of quality measurement and management
Information systems used in operations management
Marketing
Marketing orientations, the marketing environment and social responsibility issues of marketing
Targeting market segments with an appropriate marketing mix through various marketing methods
Branding and not-for-profit marketing
Managing human capital
Human resource management theories and HR planning

Good human resource practices from recruitment to dismissal
Training, development and the role of appraisals
Question practice
Question practice under timed conditions is essential in order to get used to answering exam questions in limited
time and to practise the different skills involved in answering each type of question.
xi
xii
Introduction
Passing the E1 exam

Displaying the right qualities
The examiner expects you to display the following qualities.
Qualities required
A good understanding
Questions will often test your grasp of generally accepted management

thinking in the main syllabus areas, there will often be some flexibility
allowed, there may be no single right answer.
Business awareness
You will be tested in different questions on your ability to identify and

understand the management implications of the problems you are faced
with.
Evaluation and recommendation
You must be able to analyse a situation, generate and evaluate a range

of options and be ready to recommend a reasonable course of action.
Communication skills
A challenging aspect of E1 is that you have to adapt to the four types of

question (MCQ, OT, short-answers and scenario questions of unlimited
length).
To answer the short Section A and Section B questions you should
carefully structure your response (use bullets or short sentences) and
only answer the question set.
When answering Section C questions you should remember that
markers assess your overall answer as well as counting points made.
Limited answers that make basic points score poorly, pass answers add
realistic insights, but only strong answers offer clear, purposeful
explanations that earn the big marks. Ensure your answers have enough
depth to score well.
Avoiding weaknesses
You will enhance your chances significantly if you ensure you avoid these mistakes:
Failure to read the question
Lack of application of knowledge to scenario
Failure to pick up scenario details eg size of company, morale of workforce, the business environment
Confusion of scenario details from different questions
Time management spending excessive time on strong areas or too long on areas you struggle with
Poor English, structure and presentation
Poor knowledge of basic concepts and definitions
Exceeding 50 word/one page limits
Repeating the same material in different parts of a question
Brain dumping everything you know about the topic area being tested seeing a familiar word in a
question and going off on a tangent
Using the reading time

We recommend you spend the first ten minutes of reading time scanning the paper and identifying the main
topic areas covered. The second ten minutes, we suggest you spend looking at the compulsory Section A
questions and marking your answers on the question page. Answers can be transferred to your answer booklet
once writing time commences. DO NOT write in you answer booklet until you are given permission to do so.
Introduction
Choosing which questions to answer first

Choosing which questions to answer first is a matter of preference. You should practise different methods during
your revision to decide which one suits you best.
One option is to do Section C questions once you have tackled Section A as these questions are longer and
require more thought and planning. An alternative method is to do the questions in the order they appear on the
exam paper that is, Section A, Section B and then Section C. The most important thing to remember is to spend
no longer than 36 minutes on Section A, 54 minutes on Section B and 90 minutes on Section C!
Discussion questions
Remember that depth of discussion is important. Discussions will often consist of paragraphs containing 2-3
sentences. Each paragraph should have a short header and:
Make a point
Explain the point (you must demonstrate why the point is important)
Illustrate the point (with material or analysis from the scenario, perhaps an example from real-life)
Gaining the easy marks

The first few marks are always the easiest to gain in any question. This applies particularly to Section B. Spend
the same amount of time on each part of the Section B question. This will give you a good chance of passing
each part of the question, and comfortably passing the question overall.
Section C questions carry a lot of marks. Make sure you read the requirement carefully and apply your knowledge
to the situation outlined in the scenario.
xiii
xiv
Introduction
The exam paper

Format of the paper
Section A:
Section B:
Section C:
Expected to be 10 compulsory multiple choice questions worth 2 marks

6 compulsory short-written questions worth 5 marks each
2 compulsory longer written questions worth 25 marks each
Number
of
marks
20
30
50
100
Time allowed: 3 hours plus 20 minutes reading time.

Section A will always contain some multiple choice questions, but other types of objective test question may be
included as well. Short scenarios may be provided to which a group of questions relate.
Section B questions will be short-answer written questions which may or may not be based around a scenario.
This section will require breadth of syllabus knowledge and also good time management skills.
Section C questions will be longer written questions based around a scenario. They will require knowledge, some
application, and discussion surrounding the issues raised.
Breadth of question coverage

Questions in all sections of the paper may cover more than one syllabus area.
Important!
This exam information page sets out what to expect from your E1 exam in terms of exam format and style,
however it is possible for exam papers to vary slightly over time.
For example:
Section A may include just MCQ or OT questions rather than a mix. None or all questions could be based around
a scenario.
Section B questions may be based around a scenario, or may not.
By practising a range of question styles you will be prepared to take anything which comes up.
November 2013
Section A
1
Ten compulsory multiple choice questions drawn from all areas of the syllabus.
Section B
2
Total Productive Maintenance, information systems and information technology, employee productivity,
quality circles and quality inspection, F.W. Taylor, systems review
Section C
3
Corporate governance, Hofstede and national culture, CIMAs Code of Ethics
Customer-led marketing, marketing plans, CRM systems
The November 2013 paper is Mock Exam 3 in this Kit.
Introduction
September 2013 (resit exam)

Section A
1
Section B
2
Investment losses, WAN and LAN, systems development, Just-In-Time, international trade, resistance to
change
Section C
3
Performance appraisal systems, sustainability
Marketing, CRM software
The September 2013 paper is Mock Exam 2 in this Kit.
May 2013
Section A
1
Section B
2
Supplier relationships, sustainability, Just-In-Time, free trade, installing IT system, risk of overseas
investment
Section C
3
Centralised IS activities, pay structures, flexible employment practices
Branding, marketing, HR activities
March 2013
Section A
1
Section B
2
System testing, Total Productive Maintenance, Electronic Data Interchange, merit goods, place mix, IT
investment
Section C
3
Lean philosophy, recruitment and selection
Economic issues, Corporate Social Responsibility
November 2012
Section A
1
Section B
2
Process mapping, forecasting additional staff, online trading, IS/IT and furniture making, variable pricing,
resistance to change.
Section C
3
Taxation policy, social marketing, corporate social responsibility.
Role of HR department and managers, lean management, Maslow/Herzberg and modular teams.
xv
xvi
Introduction

Section A
1
Section B
2
IS function, CAD and CAM, Materials Requirements Planning (MRP), consumer purchasing behaviour,
queuing theory, new system training and support
Section C
3
Market segmentation, ISO 9000, quality control systems
Offshoring, job rotation, training
May 2012
Section A
1
Section B
2
Government policy, transformational process, non-marketing orientation, purchasing decisions, Herzberg

and job enrichment, marketing
Section C
3
Decentralisation, outsourcing, marketing principles and practices
TQM approach, TQM training, quality costs and revenue
March 2012
Section A
1
Section B
2
Global business environment, business ethics and CSR, political risk and FDI, 5-S practice, responding to
demand, sustainability and operations management
Section C
3
Marketing threats and weaknesses, strategic marketing plan, bonus scheme
EPoS and operations, overcoming resistance to change, HR issues
November 2011
Section A
1
Section B
2
Protectionism, corporate social responsibility, political risk, Cousins strategic supply wheel, inventory
management, workforce flexibility
Section C
3
Strategic marketing plans, marketing models, sustainability
Managing dispersed teams, homeworking, role of HR
Introduction

Section A
1
Section B
2
Supply and purchasing, FDI and MNEs, system changeover, outsourcing, HR succession planning, free
trade.
Section C
3
Brand management, total reward package, internal marketing.
HR information system benefits, quality, corporate website features.
The September 2011 paper is Mock Exam 2 in this Kit.
May 2011
Section A
1
Section B
2
Outsourcing, assessing information systems, Hofstede, IS/IT controls, globalisation, Reck and Long's
purchasing development model.
Section C
3
ISO 9000, remuneration and reward, features of performance measures.
Branding, product and place mix, review of HR activities.
November 2010
Section A
1
Section B
2
Outsourcing, emerging economies and multinationals, ICT transformation, lean processes, TQM.
Section C
3
HR practices, planning HR strategy, e-HR.
Ethics and CSR, marketing mix and branding, Internet marketing.
May 2010
Section A
1
Section B
2
IS outsourcing, IS/IT and HR, promotions and distribution channels, marketing mix, internal recruitment
options, non-financial motivators.
Section C
3
BRIC economies, offshoring, redundancies.
Strategic supply chain management, BPR and process maps, code of ethics.
xvii
xviii
Introduction
Specimen paper
Section A
1
Section B
2
HR planning, quality costs, SERVQUAL, Six Sigma, stakeholders, political risk.
Section C
3
Marketing, segmentation, ethical concerns.
Information systems and operations, system implementation problems, training.
Introduction
What the examiner means

The table below has been prepared by CIMA to help you interpret exam questions.
Learning objective
Verbs used
Definition
Examples in
the Kit
1 Knowledge
What you are expected
to know
List
State
Define
Describe
Distinguish
Explain
Identify
Illustrate
Apply
Calculate/compute
Demonstrate
Prepare
Reconcile
Solve
Tabulate
Analyse
Categorise
Compare and contrast
Construct
Discuss
Interpret
Prioritise
Produce
Advise
Evaluate
Recommend
Make a list of
Express, fully or clearly, the
details of/facts of
Give the exact meaning of
16.5
33.5
Communicate the key features of

Highlight the differences between
Make clear or intelligible/state
the meaning or purpose of
Recognise, establish or select
after consideration
Use an example to describe or
explain something
2(c)
32.5
2 Comprehension
What you are expected
to understand
2(a)
32.7
71(e)
3 Application
How you are expected
to apply your
knowledge
Put to practical use

Ascertain or reckon
mathematically
Prove the certainty or
exhibit by practical means
Make or get ready for use
Make or prove consistent/
compatible
Find an answer to
Arrange in a table
4 Analysis
to analyse the detail of
what you have learned
61(d)
2(e)
Examine in detail the structure of

Place into a defined class or
division
Show the similarities and/or
differences between
Build up or complete
Examine in detail by argument
Translate into intelligible or
familiar terms
Place in order of priority or
sequence for action
Create or bring into existence
Counsel, inform or notify

Appraise or assess the value of
Propose a course of action
18(a)
5 Evaluation
to use your learning to
evaluate, make
decisions or
recommendations
xix
xx
Introduction

We have already stressed that question practice should be right at the centre of your revision. Whilst you will
spend some time looking at your notes and the Paper E1 Passcards, you should spend the majority of your
revision time practising questions.
We recommend two ways in which you can practise questions.
Use BPP Learning Media's question plan to work systematically through the syllabus and attempt key
and other questions on a section-by-section basis
Build your own exams attempt the questions as a series of practice exams
These ways are suggestions and simply following them is no guarantee of success. You or your college may
prefer an alternative but equally valid approach.
BPP's question plan

The plan below requires you to devote a minimum of 46 hours to revision of Paper E1. Any time you can spend
over and above this should only increase your chances of success.
Review your notes and the chapter summaries in the Paper E1 Passcards for each section
of the syllabus.
Answer the key questions for that section. These questions have boxes round the question
number in the table below and you should answer them in full. Even if you are short of time
you must attempt these questions if you want to pass the exam. You should complete your
answers without referring to our solutions.
Attempt the other questions in that section. For some questions we have suggested that
you prepare answer plans or do the calculations rather than full solutions. Planning an
answer means that you should spend about 40% of the time allowance for the questions
brainstorming the question and drawing up a list of points to be included in the answer.
Attempt Mock exams 1, 2 and 3 under strict exam conditions.
Introduction
Syllabus
section
The global
business
environment
2013
Passcards Questions
chapters in this Kit Comments
1, 2
Answer in full.
These objective test questions are focussed on specific parts
of the syllabus and enable you to build up speed in
answering this type of question.
Answer in full.
This question, taken from the May 2010 exam, tests your
knowledge of the BRIC economies and offshoring.
Identify the main issues in part (a) and the advantages of

using local and expatriate staff in part (c).
Answer in full.
This is a tricky question from December 2012 that requires
you to think about government policy, marketing and CSR.
Answer in full.
A good general question from the March 2013 exam on
government regulation, economics and CSR.
Information
systems
3, 4
Answer in full.
10
Answer in full.
This question covers many aspects of systems
implementation and the importance of aligning systems
with business strategy.
14
Answer in full.
This question from May 2012 covers decentralisation and
outsourcing an IS function.
Operations
management
5, 6, 7
11
Produce an answer plan for the three parts, listing each

point that you need to make.
12
Produce an answer plan for each part, listing each point

that you need to make.
13
This question, from March 2012 requires you to think

about some issues concerning the implementation of a new
system and staff resistance to change.
15
20
Answer in full.
Answer in full.
This question from May 2012 covers much of the detail
you need to know on TQM and quality costs.
Done
xxi
xxii
Introduction
Syllabus
section
2013
Passcards Questions
chapters in this Kit Comments
18
Answer part (a) in full. Prepare answer plans for (b) and (c).
21
Answer in full.
This question from September 2012 requires you to apply
your knowledge of quality management.
Marketing
8, 9, 10
22
Answer in full.
24
Answer in full.
A number of marketing issues are examined in this
question. In particular, the use of the internet, the
marketing mix and ethical issues.
25
Answer in full.
This Specimen paper question includes aspects of the
marketing mix and also tests your knowledge of
segmentation and targeting.
31
Answer in full.
In this question from May 2013 you are faced with a range
of marketing issues in connection with a scenario.
Managing
human capital
11, 12
32
Answer in full.
34
Answer in full.
A cunning question that warms you up with simple
advantages and disadvantages of questions and then
delivers a tricky final part requiring an explanation of
Maslows theory by reference to the scenario!
Avoid theories such as this at your peril!
35
Produce an answer plan for the three parts, listing each

point that you need to make.
36
Answer in full.
A very full question that examines the detail that you are
expected to know concerning reward schemes and
measures of performance.
Mixed multiple
choice
questions
42 to 57
Answer in full.
These questions cover a range of syllabus areas very
quickly. You will practise switching your mind between
them, enabling you build up speed in answering this type of
question.
Mixed Section
B questions
58 to 71
Answer in full.
As with the mixed multiple choice questions, you will
practise switching your mind between different syllabus
areas. However these questions will also hone your skill in
keeping your answers short and focussed exactly what
you need to cope with time pressure in the actual exam.
Done
xxiii
Introduction
Build your own exams

Having revised your notes and the BPP E1 Passcards, you can attempt the questions in the Kit as a series of
practice exams, making them up yourself or using the mock exams that we have listed below.
Spec
paper
May
2010
Nov
2010
May
2011
Sept
2011
Nov
2011
Mar
2012
May
2012
Sept
2012
Nov
2012
Mar
2013
May
2013
46
47
48
49
50
51
52
53
54
55
56
57
60
61
62
63
64
65
66
67
68
68
70
71
11
26
27
12
29
13
14
21
31
25
19
35
36
28
37
30
20
38
39
40
41
Section A
1
Section B
2
Section C
Practice exams
42
43
44
45
46
53
61
63
65
67
69
71
12
13
19
21
30
38
26
14
35
Section A
1
Section B
2
Section C
Whichever practice exams you use, you must attempt Mock exams 1, 2 and 3 at the end of your revision.
xxiv
Introduction
la
QUESTIONS
Questions
THE GLOBAL BUSINESS ENVIRONMENT

Questions 1 to 7 cover The Global Business Environment, the subject of Part A of the BPP Study Text for Paper
E1.

1.1
What is the main financial objective of public sector organisations?

A
B
C
D
1.2
(2 marks)
Import tariffs and import quotas

Import quotas and currency devaluation
Import tariffs and industry subsidies
Currency devaluation and industry subsidies
(2 marks)
The European Union (EU) is an example of:

A
B
C
D
1.4
Profitability
Efficient use of resources
Avoidance of loss
Maximisation of charitable donations
Which two government policies support an emerging nations import-substitution strategy?

A
B
C
D
1.3
36 mins
A
A
A
A
free trade area

customs union
common market
transition economy
(2 marks)
According to monetarist theory, the primary effect of increasing the money supply is to:
A
B
C
D
Increase prices
Increase reserve requirements
Increase the volume of exports
Increase demand for imports
(2 marks)
Each of the sub-questions numbered 1.5 to 1.7 below require a brief written response. Each sub-question is
worth 4 marks. The response should be in note form and should not exceed 50 words.
1.5
Explain the differences between economic liberalisation and economic nationalism.
(4 marks)
The following scenario is related to sub-questions 1.6 and 1.7.

Emerland is an undeveloped nation. The government wishes to develop the economy and industry but is
concerned that by doing so its markets may become dominated by foreign monopolies.
As an adviser to Emerlands government:
(4 marks)
1.6
Explain in general terms how the government may influence Emerlands economy.
1.7
Explain how the government may prevent foreign monopolies taking over Emerlands industries.
(4 marks)
(Total = 20 marks)
If you struggled with the MCQ and OT questions in Q1, go back to your BPP Study Text for Paper E1 and revise
Chapters 1 and 2 before you tackle the longer questions on the Global Business Environment.
Questions
54 mins
Required
(a)
Explain how factor conditions in Porters diamond contribute to the competitive advantage of a nation.
(5 marks)
(b)
Identify and discuss the arguments in favour of free trade.
(c)
Describe the main issues an organisation needs to consider when deciding whether to outsource its
information technology (IT) function.
(5 marks)
(d)
Explain how macroeconomic factors can affect a nations balance of trade.
(5 marks)
(e)
Discuss the effects that deregulation may have on a nations manufacturing industry.
(5 marks)
(f)
Describe the key drivers for corporate social responsibility within a developing economy.
(5 marks)
(5 marks)
(Total = 30 marks)
3 McBride Gibbon
54 mins
McBride Gibbon (MG) is a successful, large manufacturing company which designs and manufactures childrens
toys. The companys activities all take place in its home country of Blueland which is one of the worlds most
developed industrial nations. A key reason for MGs success is its ethical stance. All of its products are made
from environmentally friendly and sustainable materials a point that is well advertised on its products and
marketing documents. All of its suppliers have to conform to MGs ethical standards before they can trade with
it.
The company also considers itself socially responsible and will quickly recall any products that are found to have
defects or that are dangerous. This is because it recognises the need of parents to be sure that the toys they give
to their children are completely safe.
MG recently published a social responsibility policy which highlighted the company's excellent treatment of its
employees and the fact that it supports community based activities in the locations where it has factories.
As a consequence of its ethical stance, MGs cost base is considerably higher than other toy manufacturers.
Shareholders are increasingly demanding that the companys cost base is reduced so that it can generate more
profit and pay them greater dividends. This has led the Chief Executive Officer, Graham McBride, to find a
cheaper location to manufacture the toys.
The country of Redland has been identified as a possible location to establish a new manufacturing base. It is a
newly emerging industrial nation which has a large number of its citizens unemployed and historically low labour
costs. The country is run by a military government which overthrew a democratically elected parliament a year
ago. The country has a very high inflation rate and the value of the national currency is currently unstable, but it
is rich in the natural resources MG needs to manufacture its products.
Graham McBride is unsure what the best course of action for MG is, however he has heard of outsourcing and
offshoring as possibilities. As a consultant, he now looks to you for advice.
Required
(a)
Explain how the interests of MGs shareholders conflict with other groups of stakeholder.
(5 marks)
(b)
Explain the drivers of social responsibility in developing nations.
(5 marks)
(c)
Explain the concept of political risk and identify the main political risks of Redland.
(5 marks)
(d)
Explain the term transnational vertical integration and how MG could use outsourcing or offshoring as
part of a cost reduction plan.
(5 marks)
(e)
Explain the term corporate culture and the cultural constraints on organisations which operate globally.
(5 marks)
Explain the actions MG could take in order protect itself from the risks involved in relocating its
manufacturing operations to Redland.
(5 marks)
(f)
(Total = 30 marks)
Questions
4 F food
45 mins
F Food is a listed company that operates a successful chain of fast food restaurants in North America. It is
currently looking to expand its operations into Asia, believing that there is significant growth potential.
F Food plans to use existing expatriate management staff in the new management roles in the Asian operations,
but it will introduce a new management programme for local employees once the operations are established.
F Food currently operates a bonus scheme to senior management and directors, based on achieving a specified
level of profit in the previous quarter. The CEO is a dominant figure and controls all board decision making.
Required
(a)
Identify and explain the main organisational (including cultural considerations) and management issues
that F Food must consider as part of its plans to expand into the Asian market. (Note: your answer to part
(a) should not refer to the issue of whether management staff are local or expatriate.)
(10 marks)
(b)
Following a spate of recent corporate scandals, F Food wishes to improve its corporate governance.
Explain why the CEO and the bonus scheme present a risk to corporate governance. Also explain how an
audit committee and an appropriate remuneration policy can help corporate governance.
(10 marks)
(c)
Discuss the relative advantages to F Food of using local staff and of using expatriate staff in the new
management roles.
(5 marks)
(Total = 25 marks)
5 G banking group (5/10)
45 mins
The G Banking Group recently reported that it was offshoring (moving) its back-office operations from European
country D to India where it already has some significant operations. Centralising most back-office operations in
India is part of the Groups plan to grow its international banking business. (India is one of the fast emerging
economies in the so-called BRIC group of Brazil, Russia, India and China).
According to a G Banking Group spokesperson, the move would involve cutting about 500 jobs from its
operations in country D but generating a similar number of new jobs in India where it already employs 3,000
people. The spokesperson was, however, quick to add that some call centres would still remain in country D.
One banking analyst commented that the Groups current Chief Executive Officer (CEO) was more aggressive
and less sentimental about moving back-office jobs than his predecessors. The National Secretary of the
Banking Union described the cuts as disgraceful and argued that it showed a lack of concern for the difficult
employment situation faced by many young people in country D.
In response to such criticism, the CEO explained that banking was becoming increasingly global and that unless
the Group responded to the global challenges facing it, it would be unable to survive into the future. The CEO
went on to assure employees that it would assist those affected by the relocation of its operations in every way
possible.
Required
(10 marks)
(a)
Describe the key factors involved in the emergence of the BRIC economies.
(b)
Explain the advantages and the associated problems for the G Banking Group of offshoring its back-office
operations to an emerging country.
(10 marks)
(c)
Identify the role that the Groups Human Resources Division can play when dealing with employees who
cannot be redeployed following the offshoring of its back-office operations.
(5 marks)
(Total = 25 marks)
Questions
6 Changeland (11/12)
45 mins
The country of Changeland has, for many years, operated as a military dictatorship. Last year, however, a
people's revolution brought a democratic election for the first time in living memory. The newly elected
Government has pledged to improve housing, healthcare and levels of education. It has also promised a 'fair'
system of taxation which should be quite a contrast from the corrupt means of raising revenue that had
previously operated under the military dictatorship.
Since the revolution, Changeland has benefited from some inward investment from other countries. Several large
multinational companies have also begun to import into Changeland for the first time in many years and have
engaged in some aggressive marketing of their products with expensive advertising campaigns, promotional
pricing and targeting of young people. The Government is pleased by the economic benefit of this activity but is
worried by excess consumption and the purchase of certain goods it sees as undesirable. The Government does
not want to ban the sale and consumption of these goods but does want to curb consumption. The Government
is also concerned by a lack of corporate social responsibility amongst certain companies.
As the Government is very inexperienced, it has established a policy direction team to advise it on a number of
issues including devising an appropriate taxation policy and formulating ways of discouraging undesirable
consumption without banning some product sales. You serve as a member of that team, having been seconded
from a similar position in another country that is friendly towards Changeland.
Required
(a)
Explain the key policy decisions to be made and the main options available to the new Government when
establishing a suitable tax regime in Changeland.
(10 marks)
(b)
Explain how marketing techniques and thinking might help Changeland's Government shape consumers'
buying behaviour in a way that it sees as more desirable.
(10 marks)
(c)
Discuss briefly, with reference to corporate social responsibility (CSR) and ethics, the sorts of issue a
company operating in Changeland should consider.
(5 marks)
(Total = 25 marks)
7 Cranmoor (3/13)
45 mins
There is currently a global recession and the country of Cranmoor is facing mounting difficulties including a
substantial balance of trade deficit and a weakening economy. The new Government has promised to be
'financially prudent, ethical, prepared to listen to and be protective of all stakeholder groups in society'.
The Government recently met with some leaders of business and commerce where a number of issues were
discussed. Business leaders expressed the view that there needs to be less Government regulation and a greater
focus instead on dealing with the economy. The Government in return responded by saying that business needs
to act more responsibly and that 'good corporate social responsibility (CSR) is good for society, good for business
and good for the human resource policies of individual businesses. The Government claimed that without good
CSR a number of stakeholder groups within society may feel isolated and vulnerable.
Required
(a)
Discuss the validity of the view expressed by the business leaders that Cranmoor's Government should
regulate less and concentrate on dealing with economic matters.
(10 marks)
(b)
Explain the benefits an organisation might derive from adhering to good Corporate Social Responsibility
(CSR) principles in its business activities.
(10 marks)
(c)
Explain the relationship between Corporate Social Responsibility (CSR) and an organisation's human
resource policies.
(5 marks)
(Total = 25 marks)
Questions
INFORMATION SYSTEMS
Questions 8 to 14 cover Information Systems, the subject of Part B of the BPP Study Text for Paper E1.

8.1
Many large organisations have established a computer intranet for the purpose of
A
B
C
D
8.2
quick,
quick,
quick,
quick,
effective
effective
effective
effective
and
and
and
and
improved communication amongst staff using chat rooms

improved communication to staff
improved communication to customers
improved ordering procedures in real time
(2 marks)
A database built upon past knowledge and experience

A powerful off the shelf software solution
An on-line library of operating advice and handy hints
An electronic version of working papers assembled by the Research and Development department
(2 marks)
'Corrective' refers to a type of systems maintenance performed to:

A
B
C
D
8.4
Providing
Providing
Providing
Providing
An expert system describes

A
B
C
D
8.3
36 mins
Remedy software defects

Allow executive level unstructured decision-making
Adjust applications to user preferences
Prevent future operation delays
(2 marks)
Data redundancy arises as a result of:

A
B
C
D
Viruses and computer misuse

Downsizing the organisation
A lack of password controls
Duplication of data held
(2 marks)
The following scenario is related to sub-questions 8.5, 8.6 and 8.7.
Quickbuild is an organisation which hires out architects to the construction industry. The architects work on the
clients premises using a laptop because of a lack of office space at Quickbuilds headquarters. They can use
whatever design software they prefer. However as a consequence of this none of the architects use software
which is compatible. Therefore a team of architects must work in the same location to share ideas as files cannot
be shared electronically.
To improve its services, Quickbuild intends to invest in a suite of compatible software products that all architects
will use in their work. However, this will mean the workers having to switch over from their existing software to
the new system. Senior management of Quickbuild are concerned that this will be unpopular with architects who
are used to working with their own familiar software.
8.5
Explain how the new system will transform Quickbuild as an organisation.
(4 marks)
8.6
Explain the concept of the virtual team.
(4 marks)
8.7
Explain the reasons why an organisation such as Quickbuild might choose a direct approach to system
changeover.
(4 marks)
(Total = 20 marks)
Questions

9.1
Which approach to system changeover has the highest risk?

A
B
C
D
9.2
(2 marks)
Disabling part of the telecoms technology to prevent unauthorised intrusions

Scrambling and unscrambling data transmissions
Requiring users to identify themselves before a connection to the system is provided
Providing the user with a private key
(2 marks)
Which type of security risk involves overloading an Internet site with traffic?
A
B
C
D
9.4
Parallel
Direct
Pilot
Phased
Dial-back security protects an information system by:

A
B
C
D
9.3
36 mins
Worms
Trojan horses
Denial of service attacks
Hacking
(2 marks)
Which type of information system outsourcing involves third parties managing and distributing services
and solutions to clients over a wide area network?
A
B
C
D
Multiple sourcing
Incremental outsourcing
Joint venture sourcing
Application service provision
(2 marks)
The following scenario is related to sub-questions 9.5, 9.6 and 9.7.
Comseek is a manufacturing company which currently uses a number of unrelated software applications in each
of its processes - design, procurement, inventory control, production, sales and accounts. It is now considering
whether an enterprise-wide system is a suitable replacement.
9.5
Identify four roles the new information system may play in Comseek.
(4 marks)
9.6
Explain the features of an enterprise-wide system.
(4 marks)
9.7
Describe the types of test that should be conducted before the new information system goes 'live'.
(4 marks)
(Total = 20 marks)
If you struggled with the MCQ and OT questions in Q8 and Q9, go back to your BPP Study Text for Paper E1
and revise Chapters 3 and 4 before you tackle the longer questions on Information Systems.
Questions
10 S&C software project (OMIS 5/06 - amended)
54 mins
S & C is a medium sized firm that is experiencing rapid growth evidenced by increased turnover. It has been able
to develop a range of new consultancy and specialist business advisory services that it offers to its growing
customer base. To cope with these developments several organisation-wide initiatives have been launched over
the past two years.
The existing financial systems are struggling to cope with these developments, but replacement software is due
to be installed within the next six months. The new system was justified because it could reduce costs and
subsequently improve productivity, although precise details have not been given. The application software does
not fit existing business processes exactly. However, it has the clear advantage of giving S & C access to a state
of the art system which is not yet available to its competitors.
A three-person project steering group has recommended that a phased approach to introduction should be used
and has undertaken most of the project planning. A programme of events for implementing the system has been
agreed but is not yet fully operational. This group has not met for a while because the designated project
manager has been absent from work through illness.
You are Head of S & C's Central Support Unit. You also serve on the project steering group.
A partners' meeting is due to take place soon. The firm's senior partner has asked you to prepare a PowerPoint
presentation to other partners on implementation issues. You understand that partners are conscious that system
implementation represents a form of further organisational change. They are asking questions about the
approach that will be taken to the introduction of the new system, likely changes to practices, critical areas for
success, system testing, support after implementation, system effectiveness, etc.
Required
You are required to produce outline notes that will support your eventual PowerPoint presentation. These notes
should:
(a)
Explain the importance of ensuring the system is aligned with the firms business strategy, including the
options to overcome the fact that the software does not fit existing business processes exactly. (5 marks)
(b)
Explain why a phased approach to introducing the system is, in this case, more suitable than a direct 'big
bang' approach.
(5 marks)
(c)
Discuss the ways in which particular individuals and groups within S & C are important for
implementation to succeed.
(5 marks)
(d)
Explain how users should be involved in the implementation phase of the project.
(5 marks)
(e)
Describe the training that should be given to targeted groups within S & C.
(5 marks)
(f)
Explain how the success or failure of the system could be evaluated.
(5 marks)
Note. Your notes should not exceed one page per topic.
(Total = 30 marks)
10
Questions
11 S1K (Specimen paper)
45 mins
The S1K group has grown from a single opticians shop in a provincial town into (what it describes as) a lifestyle
retail group. S1Ks policy is to buy existing shops in fashionable city centre shopping malls which it believes are
underperforming. In addition to traditional services offered by opticians, S1K offers eye correction (laser)
treatment, designer sunglasses, cosmetic tinted contact lenses and, for certain spectacle frames, a range of
complementary jewellery.
S1K also plans to sell own-brand augmented products and treatments such as eye creams and drops, make-up,
etc. at premium prices from its premises. S1K is due to expand from thirty to thirty five geographically diverse
shops in the south of the country within the next year.
The Board of S1K recognises the challenges ahead and has recently appointed a new Chief Executive who has a
background in both retail operations and information solutions. He has just completed an initial review of
systems and technology within S1K. His main findings are highlighted below.
The opportunities for the use of information technology (IT) need to be grasped, particularly in the
implementation and running of the information system network in support of management operations
both in shops and in the main functional areas of S1Ks headquarters.
Systems are generally weak and the benefits of modern software applications lacking. The accuracy and
completeness of information received by headquarters from shops needs to improve and there needs to be
better coordination of activities. Through its acquisition policy S1K has inherited a series of shops
operating independent systems of varying sophistication and effectiveness. Several different systems are
used and some are very inefficient. (For example, the equivalent of over 40% of a full time workers time
is spent manually analysing and searching for information in shops.)
Internet possibilities are being missed and there is no virtual network.
Common computerised stock records will also be required when new products and treatments are sold.
Some shops still use manual systems, others use basic stand-alone computers, but none take full
advantage of software capabilities and most only use basic software functions. The financial system is the
only shared system.
The existing financial system is struggling to cope with the rapid growth of the group. Replacement
software is due to go ahead within the next six months. Although the software does not fit existing
business processes exactly, it has the clear advantage of giving S1K access to an industry best practice
system and is identical to that used by all its main competitors. As such, it is a good choice. The least
problematic implementation approach is a phased approach, and a programme of events for
implementing was drawn up by the previous project manager who has now left S1K. A replacement
project manager from within S1K needs to be appointed to oversee the introduction of the project as a
matter of priority.
Required
(a)
Identify the ways in which information technology and information systems might improve S1Ks
operations.
(10 marks)
(b)
Discuss the Chief Executives analysis of ways of overcoming potential problems in the implementation of
the new financial system.
(10 marks)
(c)
Identify the main individuals and groups S1Ks Human Resources Department should target first for
training and whether training provision should be made in-house or not.
(5 marks)
(Total = 25 marks)
Questions
12 LD2 (9/11)
45 mins
The LD2 group has grown rapidly over the past five years through acquiring a number of smaller kitchen
accessory manufacturers and kitchen suppliers and fitters. As a consequence of this strategy LD2 has 'inherited'
many different systems which it has continued to operate. LD2's technology now lags far behind that of its
competitors, many of whom are experimenting with online trading. A number of quality and other problems
within the group have now become apparent including:
Incompatibility of software
Complex reconciliation of systems output being performed
Stock shortages leading to contract delays
Late management reports, and
Payroll and invoicing errors due to faulty data entry and calculation.
LD2 now wants to consolidate its business by simplifying and improving the quality of its operations. A budget
has been established to introduce a quality approach, renew equipment and standardise systems. LD2 has
established two working groups to develop solutions and bring about improvements.
Working Group 1 is required to advise on the replacement of the existing administrative and management
systems with the most advanced available. The group has already had its recommendations approved to:
Introduce a single People and Payroll system for the whole group. Within this system a web browser
would allow managers to have immediate access to information on diaries, overtime, holidays and
sickness, as well as being able to submit accurate timesheet entries directly into a central payroll system;
Engage a specialist to develop a corporate website comparable to the best in the industry.
Working Group 2 has been tasked with advising on the implementation across the group of the most appropriate
approach to improving quality.
Required
(a)
Explain how the People and Payroll system could benefit LD2.
(10 marks)
(b)
Describe the main approaches to quality that are available to LD2.
(10 marks)
(c)
Briefly describe the likely features of the proposed corporate website if it is to be comparable to the best
in the industry.
(5 marks)
(Total = 25 marks)
11
12
Questions
13 CQ4 (3/12)
45 mins
CQ4 began as a single grocery store operating in a provincial town. It has since grown into a regional group of
stores through a policy of buying and then developing previously less successful grocery and general stores.
CQ4s success has been down to buying small stores in strategically important geographical areas and then
refitting the stores and introducing a greater range of products. CQ4 has a policy of re-employing staff of acquired
stores and (up until now) continuing to operate existing systems and equipment in the stores. Currently staff
spend several hours after the close of trading every day cashing up, checking inventory and placing orders for the
next days trading. Store managers report weekly to head office, both generally and on the performance of certain
product lines.
CQ4s Managing Director now wishes to consolidate the group by introducing greater centralisation of control and
decision-making and standardisation of equipment and procedures. As part of this initiative he has decided to
introduce an electronic point-of-sale (EPoS) system on checkouts. This will involve using touchscreen terminals
to speed up transactions in stores and transmit valuable data to head office in real time.
The Managing Director has been warned that there may be some resistance to these changes as staff in some
stores are set in their ways and fearful of new technology, whilst others may be suspicious of the motives behind
the initiative.
Required
(a)
Discuss the ways in which CQ4's operations might be transformed through the implementation of the
EPoS system.
(10 marks)
(b)
Discuss the ways by which the Managing Director might overcome potential staff resistance to the
introduction of the EPoS system.
(10 marks)
(c)
Describe the human resource management issues associated with the Managing Director's new policy.
(5 marks)
(Total = 25 marks)
14 WV8 (5/12)
45 mins
WV8 is a large not for profit (NFP) public sector organisation responsible for organising the operation of publicly
financed schools within its region. WV8 receives its income solely from government grants but, because of
funding cuts, is under pressure to maintain existing services whilst operating more cost effectively. Recently, a
government spokesperson publicly criticised public sector organisations claiming that they are expensive, lack
skills found in the private sector, such as marketing and business acumen, and have a lack of understanding of
the customers they are meant to serve.
In order to meet these challenges, WV8's Chief Executive has created a policy review team comprising experts
from all areas of WV8's operations. Phase 1 of the review involves looking at central support services which
includes Corporate Information Systems (CIS) services. In the past there have been difficulties in recruiting
specialist staff in Information Systems (the Head of CIS services claims that this is because of WV8's relatively
unattractive rates of pay). In addition, service users have complained that CIS is expensive and unresponsive to
their needs. Various options are currently being discussed, for example a complete decentralisation of the CIS
function to its main users and continuing centralised provision through a total outsourced service to a single
specialist supplier.
Phase 2 of the review will involve investigating ways in which WV8 can become more business-like and the
ways in which it might adopt marketing principles.
Required
(a)
Discuss the potential advantages for WV8 of decentralising the CIS function.
(10 marks)
(b)
Discuss the issues associated with a total outsourcing of CIS for WV8.
(10 marks)
(c)
Describe the lessons WV8 could learn from marketing principles and practices.
(5 marks)
(Total = 25 marks)
Questions
OPERATIONS MANAGEMENT
Questions 15 to 21 cover Operations Management, the subject of Part C of the BPP Study Text for Paper E1.
36 mins
15.1 Which one of the following is the best indicator of quality?

A
B
C
D
Cost
Price
Fitness for purpose
Number of complaints
(2 marks)
15.2 Which of the following measures customer, operational and financial aspects of quality?
A
B
C
D
SERVQUAL
Balanced scorecards
Value for money audits
Total quality management
(2 marks)
15.3 Gaining International Standards (ISO) in quality is mainly dependent upon:

A
B
C
D
Effective processes for documentation and control

A shared quality philosophy
Commitment from middle managers
Benchmarking customer related performance against competitors
(2 marks)
15.4 Optimised production technologies (OPT) is an operations management system which aims to:
A
B
C
D
Improve distribution networks

Improve supply sourcing alternatives
Integrate operations and quality assurance
Reduce production bottlenecks
(2 marks)
15.5 An ABC system refers to:

A
B
C
D
A Japanese style problem solving device that is particularly helpful in inventory management
An inventory management method that concentrates effort on the most important items
Accuracy, brevity and clarity in the quality of system reporting
A manual solution to managing inventory
(2 marks)
15.6 Kaizen is a quality improvement technique that involves:

A
B
C
D
Continuous improvement by small incremental steps

A complete revision of all organisational processes and structures
Immediate, often radical 'right first time' changes to practice
A problem solving fishbone technique to identify cause and effect
(2 marks)
13
14
Questions
Required
Each of the sub-questions numbered 15.7 and 15.8 below require a brief written response. Each sub-question is
The following scenario is related to sub-questions 15.7 and 15.8.
Forlan is a well established, family run organisation which has been in business for the past forty years. It
purchases and assembles a range of electronic components from a large number of suppliers.
The Managing Director, who has run the company for the last twenty-five years, explained that using a large
number of suppliers is necessary so that the company does not become too reliant on them. However in recent
times the quality of the components supplied has been variable and delivery times unreliable.
In a recent industry shortage, Forlan failed to source a number of vital components. However, during this time
the Managing Director found out that its suppliers continued to supply its competitors.
The Managing Director now believes that the organisations supply chain is underperforming and that the
company should follow a strategic approach to supply.
As a consultant to Forlans Managing Director:
15.7 Identify the reasons why the company should form closer relationships with its suppliers.
(4 marks)
15.8 If the company follows a strategic approach to supply, describe the organisational factors ('spokes in a
wheel') that need to be integrated, co-ordinated and developed.
(4 marks)
(Total = 20 marks)
36 mins
16.1 Sustainability in operations management is primarily concerned with

A
B
C
D
Making charitable donations to environmental protection groups

Sourcing raw materials from developing nations
Improving the productivity of employees
(2 marks)
16.2 Which of the following is the main characteristic of a demand network?

A
B
C
D
Products are pushed onto the market by the manufacturer

Products are developed in response to market signals
Businesses in the network operate relatively independently
Interdependence of channel members is reduced
(2 marks)
16.3 A manufacturer concerned mainly with developing new product features is known as:
A
B
C
D
Production orientated
Product orientated
Market orientated
A learning organisation
(2 marks)
16.4 According to Porter's value chain, the final primary activity is referred to as:
A
B
C
D
Marketing and sales

Outbound logistics
Procurement
Service
(2 marks)
Questions
Required
The following scenario is related to sub-questions 16.5 to 16.7.
Goldseek manufactures jewellery from gold and precious stones which it sells to jewellers in the worlds most
exclusive locations. Goldseeks products are sold for very high prices to extremely wealthy and demanding
customers.
Recently a number of customers have reported poor workmanship to Goldseeks customer services department.
A reoccurring problem seems to be precious stones missing from rings and earrings. As a consequence, the
customer services department have been busy sending out replacement products, organising repairs and
providing refunds.
The cause of the problem has been traced to a number of machines involved in the manufacturing process.
Whilst they are not old, they have not been serviced for some time and often breakdown. These breakdowns
have affected the production schedule and the company has missed a number of delivery dates.
Goldseek's board of directors are extremely concerned with these issues and have asked you as a quality
consultant to provide them with information they can use to address the problem. In particular they have asked
you to explain the types of failure cost and how introducing Total Productive Maintenance (TPM) may help
reduce instances of quality failure.
16.5 List four types of internal failure cost that might arise for a manufacturing organisation such as Goldseek.
(4 marks)
16.6 Identify examples of Goldseeks external failure costs, and state their significance.
(4 marks)
16.7 Briefly describe how Total Productive Maintenance (TPM) might improve the quality of Goldseeks
products.
(4 marks)
(Total = 20 marks)
and revise Chapters 5, 6 and 7 before you tackle the longer questions on Operations Management.
15
16
Questions
54 mins
Required
(a)
Explain why a level capacity strategy is incompatible with an organisation adopting a just-in-time (JIT)
philosophy.
(5 marks)
(b)
Explain the impact of demand strategies on an organisation's marketing practices.
(5 marks)
(c)
Explain the relationship between chase strategies and the flexible organisation.
(5 marks)
(d)
Identify the differences between service and manufacturing organisations in relation to capacity
management.
(5 marks)
(e)
Explain how supply portfolios are of benefit to an organisation.
(5 marks)
(f)
By reference to an industry of your choice, describe the types of assistance information and
communications technology could provide to those wanting to improve sales.
(5 marks)
Note. (a) to (d) should have particular regard to quality, capacity and other organisational issues.
(Total = 30 marks)
18 YO and MX (OMIS 5/07 amended)
45 mins
YO employs buyers, designers, machinists, tailors and sales people to produce and sell its coats, jackets,
trousers, dresses and skirts. YO has a long standing relationship with MX which sells directly to the public from a
chain of out of town stores. Over 80% of YO's sales are to MX whose approach has been to sell clothing in great
volumes at lower prices than the high street stores. It expects its suppliers (including YO) to take account of new
fashion designs and to manufacture its clothes at competitive prices.
MX is rethinking its strategy and wishes to move more 'upmarket' by introducing a better quality clothing range,
which it believes its customers will be prepared to pay a little more for. Already YO has noticed that MX has
started to be more demanding by sending back any batches it feels are in the slightest way unsuitable.
MX wants to work with fewer suppliers but develop a better relationship with each of them. MX wants to
renegotiate its contract with YO (which expires soon in any case). MX is prepared to talk with YO about the need
to improve the quality of its products and has indicated that if it receives the right assurances, it would be
prepared to pay a slightly higher unit price per item. It also proposes to work more closely with YO's designers to
maximise production of the type of clothing that it feels its customers want.
If these talks are unsuccessful, MX will use one of its other suppliers when the existing contract expires. YO is
aware that MX has experimented by using a few trusted overseas suppliers who have managed to achieve both
relatively low prices and superior quality through the adoption of total quality management (TQM) techniques.
Anxious to maintain its relationship with MX, YO recognises that it must change from its present focus on price
to one that includes quality considerations.
Required
(a)
Evaluate the way in which MX is proposing to manage its suppliers as part of a value system. (10 marks)
(b)
Discuss the requirements for achieving total quality within YO.
(c)
Describe how YO's human resource practices must change in order to meet MX's new requirements.
(10 marks)
(5 marks)
(Total = 25 marks)
Questions
19 W company (5/10)
45 mins
W Company is a white goods manufacturer that has been particularly hard hit by the recent recession. Faced
with a dramatic fall in orders and two years of losses, shareholder pressure has resulted in the early retirement of
the Chief Executive and his replacement by JH, who has a track record of turning companies around. JH has, in
the past, led different process design improvement initiatives including Business Process Re-engineering (BPR)
and has used tools such as process maps (or charts).
In an initial review, JH finds that Ws operations require urgent attention. A benchmarking exercise reveals that
Ws costs of production are much higher than those of its competitors. In addition, innovations in operations
theory and techniques such as those in supply chain management and process design have not been seized.
Clearly this needs addressing.
An added area of concern is the way that some line managers are reported to have behaved under the previous
management regime. The misappropriation of funds by some line managers has come to light, as have a number
of unethical practices and JH is concerned that such things should not occur in the future.
Required
(a)
Describe the developments in strategic supply chain management in recent years and explain how the
adoption of the new approaches could assist W Company to improve its competitive performance.
(10 marks)
(b)
With reference to BPR and process maps (or charts), explain how process design could contribute to a
more effective and efficient system of operations in W Company.
(10 marks)
(c)
Explain briefly how a code of ethics could help W Company to limit future incidents of unethical
behaviour.
(5 marks)
(Total = 25 marks)
20 2JN (5/12)
45 mins
2JN is a large manufacturing organisation which is structured with a number of supervisors each responsible for
their own work production unit. Supervisors report to a team of senior managers who in turn are accountable to a
Managing Director (MD). Operations are supported by 2JN's own finance, sales, distribution and human resource
units.
Within the past two years, 2JN has implemented a series of initiatives aimed at reducing product defects and
customer complaints. The initiatives have included the appointment of a few quality control inspectors to support
supervisors. Despite these efforts, 2JN has lost some of its major customers to its competitors and its profits are
declining.
After discussions with customers and suppliers, the MD has discovered that other companies within the same
industry have successfully adopted a Total Quality Management (TQM) approach. At a recent senior
management meeting he announced that a TQM programme would be introduced within 2JN as a matter of
priority. To support this, a Quality Committee will be established to oversee the programme's introduction and
operation. He has tasked the human resource unit to establish Quality Circles to meet on a regular basis and
arrange training in TQM for all staff. The MD concluded by saying that TQM was vital to 2JN and that high
quality 'will both put costs down and revenue up'.
Required
(a)
Explain the requirements for achieving a Total Quality Management (TQM) approach within 2JN.
(10 marks)
(b)
Identify the important issues and work groups that need to be considered when organising the TQM
training in 2JN.
(10 marks)
(c)
Discuss the claim that high quality 'will both put costs down and revenue up'.
(5 marks)
(Total = 25 marks)
17
18
Questions
21 BC4 (9/12)
45 mins
BC4 is a manufacturer of bedroom furniture with four factories in the south of the country. As a result of
declining company financial performance, the Managing Director (MD) engaged a management consultant to
conduct an overall review of BC4s activities and highlight the issues of greatest concern.
The management consultants main findings are as follows:
No systematic Quality Control exists and differing operating efficiencies exist both within and between
BC4s factories;
There is an increasing incidence of furniture being returned which requires replacement or reworking.
There are also a substantial number of items returned as part of extended guarantee arrangements;
Currently BC4 tries to sell its full product range to all potential customers, even though it is geographically
difficult to fulfil obligations to customers in the north of the country. BC4 needs to rethink this marketing
approach and should undertake careful market segmentation.
Having considered the consultants report, the MD has decided that BC4 will conduct a detailed exercise in
market segmentation and, furthermore, will put in place measures to improve product quality. He thinks that
obtaining certification under international quality standard ISO 9000 should deliver significant benefits to BC4,
even though the company has no immediate plans to sell globally. The Production Manager has, however,
previously suggested to him that the way forward is to employ dedicated Quality Control (QC) inspectors as part
of a Quality Control (QC) system.
Required
(a)
Describe the advantages of market segmentation to BC4.
(10 marks)
(b)
Describe the advantages of quality standard ISO 9000 certification to BC4.
(10 marks)
(c)
Discuss briefly how the Production Manager's suggestion could benefit BC4 as part of an alternative
Quality Control (QC) system.
(5 marks)
(Total = 25 marks)
Questions
MARKETING
Questions 22 to 31 cover Marketing, the subject of Part D of the BPP Study Text for Paper E1.
36 mins
22.1 Which one of the following statements best represents 'a marketing orientation'?
A
B
C
D
Support for the marketing department from top management

A large marketing budget
High profile advertising campaigns
A focus on customer needs
(2 marks)
22.2 PESTEL analysis can be used to analyse an organisations environment. What does the P stand for?
A
B
C
D
Political
Prices
People
Products
(2 marks)
22.3 Which of the following can be considered to be customers of a charity?

(i)
Beneficiaries
(ii)
Trustees
(iii)
Regulators
(iv)
The government
A
B
C
D
(i), (ii) and (iii) only

(i) and (iii) only
(ii) and (iii) only
All of the above
(2 marks)
22.4 'Market shakeout' involves the weakest producers exiting a particular market and occurs in a period
between
A
B
C
D
Growth through creativity and growth through direction

Introduction and market growth
Market growth and market maturity
Market maturity and decline
(2 marks)
Required
22.5 Explain the concepts of viral and guerrilla marketing.
(4 marks)
22.6 Explain how experiential marketing differs from traditional marketing.
(4 marks)
22.7 Explain the importance of a brand to an organisation.
(4 marks)
(Total = 20 marks)
19
20
Questions
36 mins
23.1 Undifferentiated market positioning involves the targeting of:

A
B
C
D
A single market segment with a single marketing mix

A single market segment ignoring the concept of the marketing mix
An entire market with a different marketing mix for each segment
An entire market with a single marketing mix
(2 marks)
23.2 The use of 'skim pricing' as a marketing technique will result in:
A
B
C
D
Non-recovery of promotional costs

Enticing new customers to buy a product or service
High prices, normally at an early stage of the product lifecycle
Low prices so denying competitors opportunities to gain market share
(2 marks)
23.3 Which method of market research would be most appropriate to use where the objective is to explore
customers unconscious attitudes and motives for behaviour?
A
B
C
D
Focus groups
Depth interviews
Questionnaires
Observation
(2 marks)
23.4 Why is the characteristic of a service known as 'perishability' significant in a marketing context?
A
B
C
D
Because
Because
Because
Because
perishability
perishability
perishability
perishability
makes it likely that refrigerated facilities will be required

increases ethical concerns
makes anticipating and responding to levels of demand crucial
means demand fluctuates wildly
(2 marks)
Required
23.5 Explain what an organisations promotion mix consists of.
(4 marks)
23.6 Explain the importance of internal marketing to an organisations external marketing activities. (4 marks)
23.7 MNA produces four products.
Jupiter - a product which has high market growth and high market share.
Mars a product which has high market growth and low market share.
Pluto a product which has low market share and low market growth.
Neptune a product which has low market growth and high market share.
Classify each product according to the BCG matrix.
(4 marks)
(Total = 20 marks)
and revise Chapters 8, 9 and 10 before you tackle the longer questions on Marketing.
Questions
24 V (OMIS 5/05 - amended)
54 mins
V is an innovative company run according to the principles of its entrepreneurial owner. V operates a package
distribution service, a train service, and sells holidays, bridal outfits, clothing, mobile telephones, and soft drinks.
V is well known for challenging the norm and 'giving customers quality products and services at affordable prices
and doing it all with a sense of fun'. V spends little on advertising but has great brand awareness thanks to the
'visibility' of its inspirational owner.
V has just announced the launch of 'V-cosmetics' to exploit a gap in the market. The cosmetic range will be
competitively priced against high street brands and have the distinctive V logo.
You work for a market analyst who is about to appear on a radio discussion of V's business interests. You have
been asked to provide a clear, short briefing for the market analyst on the thinking behind V-cosmetics. Your
research of the V-cosmetics range identifies innovative marketing proposals. V-cosmetics will not be on sale in
shops, instead it will use two approaches to promotion and selling, namely:
The use of 'cosmetic associates'. Individuals may apply to become an associate and, if accepted, will be
required to buy a basic stock of every V-cosmetic product. The associate will then use these products as
samples and 'testers'. After initial training, associates organise parties in the homes of friends and their
friends where they take orders for products at a listed price. Associates receive commission based on
sales.
The Internet and mobile telephone technology will also be heavily used to offer V cosmetic products to the
public.
Required
Prepare brief notes containing bullet points and no more than two to three sentences for each of the key points
identified below. Do not exceed one page per question part.
(a)
Explain how the proposed approach can be understood within the context of the marketing mix.
(5 marks)
(b)
Explain the human resource implications of using 'cosmetic associates'.
(5 marks)
(c)
Explain the concept of direct marketing.
(5 marks)
(d)
Explain the advantages of the Internet as a marketing channel.
(5 marks)
(e)
Describe how V might use the Internet as part of its marketing approach.
(5 marks)
(f)
Identify the main ethical issues associated with the proposal to market V cosmetics.
(5 marks)
(Total = 30 marks)
21
22
Questions
25 CW (Specimen paper)
45 mins
CW is an established charity based in the capital city of the developed country of Statesland. It raises funds
locally to finance clean water and sustainable agricultural projects in some of the poorest areas of the world. CW
relies heavily on the work of unpaid volunteers and prides itself on low operating overheads and directing a large
proportion of its income to on the ground projects. CWs sources of income involve donations from the public
and the operation of charity shops in the north of the country selling unwanted clothes and household items.
Recently however, a downturn in the economy, charity fatigue and competition from other causes has made
fund-raising more difficult. It is clear that CW needs to either reduce the level of projects it currently funds or
increase income.
The Chief Executive of the charity has convinced her Board of Trustees that the charity needs to professionalise
its operations, be more outward facing and employ modern marketing practices. Consequently, an independent
consultancy firm with expertise in this area has been engaged to advise the charity. Trustees are supportive of
the Chief Executive but are worried that certain marketing practices, particularly promotional activities, might be
seen as unethical and damage the good reputation of the charity.
In the first meeting between a partner of the consultancy firm and the Board of Trustees, a number of areas were
covered including.
A discussion of the application of the marketing mix to the charity
Market research options for CW
A second meeting has been arranged. You work for the consultancy firm and have been asked to produce some
briefing notes for the partner to help him with this second meeting
Required
(a)
Explain what aspects of marketing could be helpful to CW. (Do not include matters covered in the first
meeting or segmentation and targeting.).
(10 marks)
(b)
Explain the processes and implications of market segmentation and targeting to CW.
(10 marks)
(c)
Identify two types of promotional activity and for each explain the ethical concerns that might arise for
CW using them.
(5 marks)
(Total = 25 marks)
26 DD (11/10)
45 mins
The DD drinks company was founded over one hundred years ago by a deeply religious family and has been
recognised as being a good employer ever since. The company has a long history of supporting sporting events as
part of its stated commitment to help promote healthy lifestyles. DD has a corporate social responsibility (CSR)
commitment to behave ethically while helping improve the quality of life of society generally. A percentage of
DDs profits are also allocated to a number of local charitable causes every year.
Using secret natural ingredients, DD has grown to become the world's leading manufacturer and distributor of
non-alcoholic drinks. The company has an extremely strong brand and its drinks are sometimes sold alongside
own brand alternatives which it manufactures and packages on behalf of a few large supermarket chains. Own
brand drinks sell more cheaply than DD branded products, are less costly to produce (they avoid expensive
labelling and promotion) but sales remain low. DD spends heavily on displaying some of its ever-expanding
product lines on television, normally before and after popular programmes aimed at children and teenagers. For
the first time this year, DD is also spending an equal amount on online advertising. Following the pattern of its
major rivals, DD has recently sought celebrity endorsements for its products. Focus group research indicated that
the endorsement by a controversial rapper Mr TT would appeal to its target market segment. When this was
announced there was criticism from religious and political groups because of the musics association with
exploitation of females, violence and bad language. One newspaper editorial accused DD of endorsing
immorality. In response, DD decided not to use Mr TT in its campaigns and admitted that it had made an error
of judgement in a press statement.
Questions
Now a further problem has arisen. An international health watchdog body has reported that DDs products
contain high levels of sugar and, if drunk excessively by children, they can lead to long term gum and tooth
decay. DD has yet to respond to the report.
Required
(10 marks)
(a)
Discuss the implications of DDs activities on its ethical stance and CSR position.
(b)
Explain the role that the basic marketing mix and branding have in DDs positioning to appeal to its target
market segment.
(10 marks)
(c)
Discuss the likely benefits of DDs increased use of the internet for marketing purposes.
(5 marks)
(Total = 25 marks)
27 99 (5/11)
45 mins
Four years ago, E retired as Financial Director of an airport company to become an ethical entrepreneur. He now
employs ten people producing natural spring water and selling it in both still and sparkling varieties in
individually sized plastic bottles. There has been no staff turnover whatsoever. The company, called 99, uses
'green' electricity and all profits go to a charity that installs pumps to provide clean water to some of the poorest
communities in the world. Thanks to E's business contacts, 99's water is sold in a few garages, on airplane
flights and in airport shops. He has, however, found it impossible to get its water stocked by supermarkets
because they want to charge a standard 'joining fee' for small suppliers, even though they know that 99 exists for
charitable purposes. Despite this, and the fact that competition in the industry is intense, 99 has achieved rapid
growth and significant profits (E receives no salary and the wages of employees are modest). Every time 99 sells
enough bottles to build a new pump, it sends two employees abroad to help with the installation and pictures
are published on the company website.
A recent national survey indicates that customers want products supplied and marketed responsibly and blame
large retailers for not providing more environmentally and socially friendly products. Three quarters of
respondents in the survey say that they 'completely agree' that they would choose a socially and environmentally
responsible product over one that was not, and two thirds say that they would work for an ethical employer even
if it meant being paid less.
Last year E turned down a financially lucrative offer to sell 99 to a leading drinks company, believing that it did
not really share his vision and was merely attempting to buy credibility with the growing number of consumers
with ethical concerns. Now Z, a large food and drinks company has made a similar offer. Z sees the acquisition
of 99 as a way of complementing its product portfolio and furthering its marketing strategy of addressing
consumers concerned about green and ethical issues. Z, which began as a workers' cooperative, makes
charitable donations annually, has carbon labelling on all of its products and has plans to make all packaging
biodegradable or recyclable. Z's distribution also involves the use of low-carbon vehicles. Should the takeover go
through, Z promises to operate at a distance, allowing 99 to run in a similar way and promises to increase the
current level of water pumps financed incrementally every year to double the numbers within the next five years.
Z is also reviewing its HR activities and feels it could learn from aspects of 99's operation which it believes
exhibits best practice and societal trends.
E believes that, by agreeing a deal with Z, there would be a number of benefits for 99 which would include.
financing more clean water pumps

an improved distribution network and environmentally cleaner transport
the opportunity to ensure bottles and packaging become 100% biodegradable or recyclable
expertise to develop the 99 brand still further
an ability to get 99's water onto supermarket shelves
Required
(10 marks)
(a)
Explain the reasons why a strong brand is so important to companies such as 99.
(b)
Describe the key aspects of the product and place mix involved in a deal between Z and 99. (10 marks)
(c)
Discuss the positive features of 99's past success which could help inform Z's review of its own HR
activities.
(5 marks)
(Total = 25 marks)
23
24
Questions
28 iB4e (9/11)
45 mins
Over the past few years, the company iB4e has underperformed compared with its competitors which enjoy
stronger brand recognition. In addition, many experienced staff responsible for key customer accounts have left
the company. Even though it pays comparable salaries to its rivals, iB4e has had difficulty replacing these staff
with outside appointments. This has led to some existing employees temporarily taking on customer relationship
management in return for small one-off payments. This has been good for staff morale but the effectiveness of
this measure as a long term alternative to appointing suitably experienced new staff is questionable given that
some of these staff have been more successful than others.
The Chief Executive has responded decisively to these events by creating a new senior post of Director of
Branding and launching a new initiative which he calls 'sharpening the focus' which is centred on:
improved corporate performance;
connecting more closely with customers, and
improving marketing practices.
The new Director of Branding is highly experienced in brand management and promised at her interview to
'revitalise the iB4e brand'. In addition to leading the 'sharpening the focus' initiative, she has been tasked to
review a number of issues including internal marketing and employer branding.
The new Director believes that employer branding can be enhanced by developing a stronger corporate brand
and making employee benefits more explicit. As someone new to the organisation, she is struck by the fact that
iB4e offers a number of benefits beyond basic pay. Although she was previously aware of iB4e's good pension
scheme, she was unaware of the flexitime scheme, training and development opportunities and a subsidised
canteen and social club until she took up her position. She believes that a 'total reward package' approach which
draws together all financial and non-financial benefits (including working practices, development opportunities
and the challenge of working for iB4e itself) should be combined into an integrated scheme which would be
available to all employees and be visible to potential employees. In addition, she feels bonuses for good
performance could be awarded that involve an employee choosing from a range of benefits to a maximum value
from a 'menu' offered by the company
Required
(10 marks)
(a)
Explain how effective brand management can assist iB4e's 'sharpening the focus' initiative.
(b)
Describe the advantages and disadvantages of iB4e developing a 'total reward package' approach.
(10 marks)
(c)
Explain the value of internal marketing for iB4e.
(5 marks)
(Total = 25 marks)
Questions
29 TT Drinks Company (11/11)
45 mins
TT Drinks Company was established a hundred years ago and currently employs over 300 people. The company
produces and sells a range of black, green and flavoured teas and fruit infusions. TT's last Director of Marketing
was away from work with illness for most of last year and has now retired. Recently TT appointed a new Director
of Marketing who had previously been working for a rival drinks company.
The new director's analysis of TT's marketing approach is that the company adopts too many 'me too' strategies
by simply copying the actions of its competitors. She believes that TT needs to become more strategic in its
approach with more systematic planning processes. In addition, she notes the increasing cost of using
contractors to dispose of waste from the production process for flavoured teas and fruit infusions. (Her previous
company recycled such waste to make a soil enrichment treatment. This was used by both the company and its
suppliers and still there was too much for their needs.)
The new director has announced a series of initiatives including:
Developing an effective strategic marketing plan in conjunction with key stakeholders. Such a strategy
would need the approval of TT's Executive board.
Using a more strategic approach to product investment utilising models and frameworks such as the
product lifecycle and the Boston Consulting Group (BCG) matrix.
Adopting more sustainable practices which she feels would 'make good business sense'.
Required
(a)
Describe the features of TT's new strategic marketing plan which would be necessary for it to be
considered effective.
(10 marks)
(b)
Explain how the marketing models and frameworks identified by the new director might help TT manage
its product portfolio.
(10 marks)
(c)
Explain the potential benefits of sustainability to TT.
(5 marks)
(Total = 25 marks)
25
26
Questions
30 CXC (3/12)
45 mins
CXC is a long established company supplying a variety of general, wholesale and personal insurances. CXCs
headquarters occupies a large traditional building in the countrys capital city where the activities of the company
are monitored and company policies and procedures formulated. CXC has a traditional organisational structure of
a General Manager and six Regional Managers, who are responsible for all the activities in their region. There are
also Assistant Managers, Supervisors, and Team Leaders but it is the Sales Associates who deal directly with the
customers. Although the Sales Associates receive referrals from CXCs headquarters, most business is generated
by them working independently and using their own initiative, (for instance by getting further business from
existing customers and developing links with local private medical companies, automobile traders, and travel
companies, etc.). The Sales Associates are paid a flat-rate monthly salary but the General Manager is looking
into the idea of implementing a bonus scheme to increase sales.
CXCs most popular line is annual life insurance policies but a growing part of its business is mortgage protection
and other mortgage linked insurances. The company does not feel that online trading is the way forward but,
following a successful pilot scheme, a direct selling service by telephone was introduced for a number of its key
products. First feedback is that whilst customers felt that the service was initially excellent in dealing with their
enquiries, after the purchase had been made there was a generally poor service.
Two years ago the company enjoyed 12% of the home market for all insurances but this has since declined to
10%. The company is now facing a new challenge in that it has lost a lucrative business with a pension fund. By
way of compensation, it has some very profitable business in neighbouring countries A, B and C. The General
Manager knows that CXC faces some difficult challenges and that strategic weaknesses and threats must be
addressed. As a result, a working party has been formed from CXCs Regional and Assistant Managers to
examine CXCs current situation in order to develop a new strategic marketing plan. It is also tasked with giving
some guidance to the General Manager before any bonus scheme for Sales Associates is implemented.
Required
(a)
Discuss the strategic weaknesses and threats in marketing that CXC currently faces.
(10 marks)
(b)
Describe how the working party should go about developing a new strategic marketing plan.
(10 marks)
(c)
Explain the factors that CXC should take account of when devising a bonus scheme for its Sales
Associates.
(5 marks)
(Total = 25 marks)
31
H345 (5/13)
45 mins
H345 is a large high street clothing retailer that was, until recently, associated with quality clothing at affordable
prices. Over the past two years new competitors in the market have rapidly gained market share, mainly at
H345's expense. One marketing analyst has commented that H345 needs to reconnect with its traditional
customers before it can win them back. H345's owners are naturally worried by this situation and have
appointed a new Chief Executive with a brief to 'transform H345's approach and thinking'.
In his first meeting with H345's senior management team the new Chief Executive explained that the retailer has
'taken its brand for granted' and that the H345 brand needs serious consideration if the company's fortunes are
to be revived. He has promised a re-launch of the brand and a fundamental review of the company based upon
sound marketing principles. Privately, he is also critical of the attitude and abilities of some of H345's workforce
and has promised to 'get the people issues right'.
Required
(10 marks)
(a)
Explain the reasons for the new Chief Executive attaching such importance to H345's brand.
(b)
Explain FIVE important aspects of H345's marketing operations, apart from branding issues, that might
be most worthwhile for the Chief Executive to review.
(10 marks)
(c)
Describe the Human Resource activities that could be strengthened in order to overcome the apparent
difficulties relating to the attitude and abilities of some of H345's workforce.
(5 marks)
(Total = 25 marks)
Questions
MANAGING HUMAN CAPITAL

Questions 32 to 41 cover Managing Human Capital, the subject of Part E of the BPP Study Text for Paper E1.
36 mins
32.1 F W Taylor's thinking on motivation in the workplace involved a belief that:

A
B
C
D
Social groups and individuals as part of a culture should be key considerations

Reward for effort and workplace efficiency should be key considerations
Managers had two different sets of assumptions about their subordinates
'Motivators' and 'hygiene factors' should be key considerations
(2 marks)
32.2 The so-called 'psychological contract' is a notion that is based on:

A
B
C
D
Segmenting then accessing a market

The buyer/supplier relationship
A distinctive style of testing used in selection procedures
The expectations the organisation and employee have of one another
(2 marks)
32.3 In terms of employment CIMA's ethical guidelines require members to:

A
B
C
D
Act responsibly in the way that all other professionals do

Act responsibly but in a way that satisfies organisational demands and pressures
Act responsibly but in a way that satisfies the individual's own ethical code
Act responsibly, honour any legal contract of employment and conform to employment legislation
(2 marks)
32.4 An assessment centre:

A
B
C
D
Helps selection by assessing job candidates by using a comprehensive and interrelated series of
techniques
Is the training headquarters where job interviews take place
Is a desk based process of reviewing job application forms for suitability
Is the place where job applicants are subjected to psychological testing
(2 marks)
Required
The following scenario is related to sub-questions 32.5 to 32.7.
DES Insurance is a company which provides specialist insurance for professional athletes who often need advice
in tailoring insurance products to meet their needs. DES provides access to such insurance products through its
call centre which is staffed by highly trained and knowledgeable employees.
The call centre is open twenty-four hours a day and staff work on shifts which are allocated to them each month.
There is little flexibility in the system and shifts cannot be changed once they are allocated.
In recent months the company has experienced recruitment problems as fewer high quality potential employees
are looking to DES for employment. Additionally, the company is finding it difficult to retain the staff that it does
employ, many feel undervalued and do not enjoy working anti-social hours. Consequently, employee motivation
is falling and staff turnover rates and absenteeism levels are rising a recent survey found that employee job
satisfaction is at an all time low.
The Managing Director of DES has heard that hygiene factors and flexible working are important factors that
the company should consider when looking to reverse its employment problems and has come to you for advice.
27
28
Questions
32.5 Distinguish between recruitment and selection.
(4 marks)
32.6 Explain what a 'hygiene factor' is in relation to employment and provide an example.
(4 marks)
32.7 Identify and explain the potential benefits of flexible working to DES and its employees.
(4 marks)
(Total = 20 marks)
36 mins
33.1 The set of activities designed to familiarise a new employee with an organisation is called:
A
B
C
D
Job analysis
Induction
Selection
Manipulation and co-optation
(2 marks)
33.2 The main weakness of performance related pay is:

A
B
C
D
There is no attempt to link profits with the pay structure of individuals

If targets are not met then employees may become demotivated
Employees rarely work harder for additional remuneration
It is almost impossible to set appropriate performance targets for manual workers
(2 marks)
33.3 An effective appraisal system involves:

A
B
C
D
Assessing the personality of the appraisee

A process initiated by the manager who needs an update from the appraisee
Advising on the faults of the appraisee
A participative, problem-solving process between the manager and appraisee
(2 marks)
33.4 Charles Handy's vision of a 'shamrock' organisation suggests a workforce that comprises three different
types of worker, namely:
A
B
C
D
Strategic, operational and support

Qualified, trainee and unskilled
'White collar', 'blue collar' and e-worker
Core, contractual and flexible labour
(2 marks)
Required
33.5 Briefly state two advantages and two disadvantages of in-house training.
(4 marks)
33.6 Briefly explain the four main elements of the human resource cycle.
(4 marks)
33.7 Briefly explain three general purposes of appraisal and the overall purpose of appraisal.
(4 marks)
(Total = 20 marks)
and revise Chapters 11 and 12 before you tackle the longer questions on Managing Human Capital.
Questions
34 ARi9 (OMIS 11/08 amended)
54 mins
ARi9 is an information systems solution company employing 250 staff. When staff are not at clients' premises
they work from a corporate headquarters (HQ) in the country's capital city. The premises, which are owned by
the company, are spacious and modern but have extremely limited car parking.
A senior staff meeting takes place every month. The agenda for last month's meeting included a number of
significant issues. Unfortunately, the start of this meeting was delayed because of a public transport strike which
led to gridlocked roads during rush hour. Those travelling by car found public parking spaces scarce, and parking
charges high. When the meeting eventually started, a report by the Director of Human Resourcing identified a
number of difficulties:
ARi9 is losing talented staff when they take career breaks or maternity leave and never return.
Competition amongst firms in the industry for talented individuals who live within a reasonable
commuting distance is intense.
Recruitment is becoming more difficult as local property prices are very expensive.
ARi9 employs significantly fewer people with disabilities than the Government's suggested quota.
Clients are making demands on staff outside normal working hours resulting in staff dissatisfaction and
increasing claims for overtime payments.
Staff productivity is declining, in part due to interruptions to work caused by the office environment
(which is 'open plan' and has crowded workstations where conversations can be easily overheard).
At the same meeting, a review by the Finance Director of the company's cost structure showed the high cost of
office space, which was contributing to reduced profitability. Someone joked that ARi9 is in the technology not
the property business!
In the debate that followed, the option of relocating the HQ to somewhere outside the capital was suggested.
The Chief Executive tasked both directors to collaborate and produce some 'radical solutions' for the future.
At this month's meeting their joint report outlined a number of ideas:
ARi9 should sell its HQ and relocate to much smaller accommodation outside the capital. When they are
not at clients' premises, staff would be expected to work mainly from home. On the occasions when they
were required to be at the HQ, the new building should contain a flexible area where staff can 'hot desk'.
There should also be some meeting rooms that could be booked in advance, if needed.
In future, staff working from home would be expected to stay in touch with colleagues and clients through
email, webcams and teleconferencing (so-called 'teleworking' or 'telecommuting'). Full on-the-job training
will be given to all staff who will use these applications.
New equipment purchased for staff would be financed from anticipated improved productivity gains.
The report concluded with the claims that the proposals were 'win/win/win'. The company would produce
significant HR and financial gains, society would benefit environmentally through reduced travel, and the
employees would be given greater autonomy to structure their own working arrangements.
Required
(a)
Identify the advantages and disadvantages of on-the-job training.
(5 marks)
(b)
Explain the likely benefits of the proposals to the company.
(5 marks)
(c)
Explain the likely costs of the proposals to the company.
(5 marks)
(d)
Explain the benefits of the proposals from the employees' perspective.
(5 marks)
(e)
Explain the problems of the proposals from the employees' perspective.
(5 marks)
(f)
Explain Maslow's motivation theory in the context of the potential impact of the move to teleworking by
ARi9.
(5 marks)
(Total = 30 marks)
29
30
Questions
35 Middleregion (11/10)
45 mins
The country of Bigland has a democratically elected government which determines broad national policies. Local
services such as education, social care and environmental services are the responsibility of the elected local
government for the regions. These regions are funded by a combination of local taxes and government grants.
The largest region is Middleregion, which is about to develop a new workforce strategy for its many local
government employees. Recently it has received a report from its external auditor into its overall arrangements
for achieving value for money. The external auditor has made three recommendations relevant to human
resources (HR):
There needs to be greater clarity over the distinctive roles carried out by both Middleregions Human
Resources Department and line managers in developing and implementing HR practices.
A new workforce strategy is a good initiative but planning will need to take account of a changing
environment and be relevant to local conditions.
Middleregion should consider moving to more electronically-based HR processes and systems (e-HR). eHR includes using technology to improve HR services, such as recording and monitoring systems,
automating administrative tasks like recruitment, and communicating HR information on the intranet.
Required
(a)
Discuss the contributions of both Middleregions Human Resources Department and line managers in
developing and then implementing HR practices.
(10 marks)
(b)
Explain, with examples, how Middleregion should plan a new workforce strategy that takes account of a
changing environment and is relevant to local conditions.
(10 marks)
(c)
Explain the costs Middleregion should take account of when considering moving to e-HR.
(5 marks)
(Total = 25 marks)
36 2TW (5/11)
45 mins
The company 2TW manufactures and sells products throughout Europe and is organised into dozens of strategic
business units (SBUs). SBU managers, who report to regional directors, have for many years been paid bonuses
on total SBU sales generated. This has led to a rapid growth in overall turnover but 2TW has experienced
declining profitability over the past few years, and the Chief Executive fears a loss of control over SBU
operations. As a result, six months ago 2TW's Chief Executive used management consultants to conduct a
complete organisational review. The management consultants have now reported that:
inadequate quality control systems exist within the company, which has led to differing operating
efficiencies between SBUs
there are significant numbers of returned goods which require replacement or reworking
current incentives for SBU managers are inappropriate given 2TW's declining profitability
In an open letter to all SBU managers, the Chief Executive announced two new initiatives
A company-wide introduction of international quality standard ISO 9000 certification which should deliver
significant organisational benefits
2TW's HR department will redesign the remuneration and reward package for SBU managers including the
existing bonus scheme. Performance related pay for achievement of individual 'performance targets' will
replace existing bonuses. Suitable performance-based measures of profitability and quality will be designed
as part of this approach and SBU managers will need to agree targets as part of the normal appraisal
processes.
Informal discussions amongst SBU managers confirm that the Chief Executive was right to take action over
declining profitability but some are doubtful that ISO certification will deliver the benefits the Chief Executive
hopes for. Others are eager to see details of the new reward scheme and whether it has taken account of all
relevant factors.
Questions
Required
(10 marks)
(a)
Describe the potential benefits of quality standard ISO 9000 certification to 2TW.
(b)
Discuss the factors that should be taken into account by the HR department when redesigning the
remuneration and reward package for SBU managers.
(10 marks)
(c)
Suitable measures of performance for SBU managers will be designed as part of the redesigned
remuneration and rewards package. Describe the desirable features of such measures.
(5 marks)
(Total = 25 marks)
37 TB (11/11)
45 mins
TB is a successful international telecommunication company with over 100,000 employees and a headquarters
in its base country's capital city, U. A recent report concluded that TB has been successful because it has seized
the opportunities of globalisation through a series of initiatives including using virtual work teams spread across
continents, cultures and time zones. These initiatives helped to improve staff productivity and maximised TB's
use of technology. Key features of TB's operation include:
Achieving fast communication and saving some travel costs through email, videoconferencing technology
and Voip (voice over internet protocol) combined with webcam equipment;
Working hard to improve communication through its own social networking sites with blogs, wikis,
podcasts, RSS feeds and the use of instant messaging software;
Offering a scheme of flexible working practices and home-working to its headquarters staff (10,000
employees have opted to work from home including accountants, Information Systems (IS) and Human
Resource (HR) staff). Those switching to home working 'give back' 50% of the time they previously spent
commuting in the form of extra working hours. (TB estimates that home-workers get 20% more work
done than those based in the headquarters building and have comparatively lower absence and staff
turnover levels.)
Required
(a)
Explain the ways in which managers with responsibility for teams might meet the challenges of teams
being geographically dispersed.
(10 marks)
(b)
Describe the advantages AND disadvantages of home-working for TB's headquarters staff.
(c)
Describe the role that the HR department of TB can play given TB's current working practices.
(10 marks)
(5 marks)
(Total = 25 marks)
38 T42 (9/12)
45 mins
T42 Communication Services is a leading business solutions provider that was founded by two friends who
studied at university together 30 years ago. T42s webpage explains its business approach as follows:
While many changes have occurred in the industry over the past 30 years, our belief in the need for the best
customised communication system and high level of commitment has remained. T42s highly trained staff
ensure customers always receive excellent reliability and technology. Should a problem arise, T42s own
technicians are available 24 hours a day, 7 days a week.
T42 employs 200 technicians who each have detailed specialist knowledge of different systems and a sales
team which stays up to date on the different solutions available. T42s call centre staff forward most queries
from existing customers to the relevant technician and enquiries from potential new business clients to the sales
team.
One of T42s founders has retired but the other acts as Chief Executive. He meets monthly with the companys
Chief Operations Officer to review company strategy and performance (including budgetary position and
comparative ratio analysis from the competitive benchmarking that T42 undertakes).
31
32
Questions
At the last meeting they noted that
staffing costs as a proportion of sales are higher than its competitors;
several competitors are now offshoring some of their activities;
T42s technicians are highly skilled and knowledgeable but in only a few systems.
The Chief Executive drew reference to the training budget and has asked if economies could be made.
For their next scheduled meeting the Chief Operations Officer has agreed to investigate the potential for
offshoring part of T42s operations and introducing job rotation amongst technicians. She has also agreed to
review current training provision.
Required
(a)
Describe the issues T42 should take account of as part of its consideration of the potential for offshoring.
(10 marks)
(b)
Explain the benefits of introducing job rotation amongst technicians for T42.
(c)
Discuss briefly the factors that should be taken into account when deciding upon T42's training provision
and budget.
(5 marks)
(10 marks)
(Total = 25 marks)
39 CM8 (11/12)
45 mins
X began his engineering apprenticeship with CM8 manufacturing ten years ago before moving abroad to work for
other companies. He has now returned to work for CM8 as Operations Manager of one of its factories. He is now
reflecting with his mentor on his first week in post.
Much has changed since X last worked for the company. The company has grown significantly and now has
many more factories. The mass production techniques he once remembered have now been replaced by lean
operations and cellular manufacturing. The workplace itself is uncluttered and clean and has been redesigned so
that machines are grouped according to what is being produced. Multi-skilled workers are formed into semiautonomous modular work teams to manufacture complete products or complex components.
When X last worked for CM8, managers did their own 'hiring and firing'. He is surprised by the existence of a
Human Resource strategy for CM8 and significant central provision in his budget for the operation of a Corporate
Human Resource Department. His mentor commented that both the Human Resource Department and line
managers such as X have distinct and valuable roles to play.
Required
(a)
Discuss the respective roles that the Human Resource Department and line managers, such as X, can
play in the management of CM8's workforce.
(10 marks)
(b)
Explain what is meant by lean management and how CM8's modular teams might contribute to its
operation.
(10 marks)
(c)
Explain how the thinking of either Maslow or Herzberg relates to CM8's modular teams.
(5 marks)
(Total = 25 marks)
Questions
40 MM (3/13)
45 mins
MM is a market leader in the design, supply and support of power and propulsion systems in aerospace, marine,
energy and nuclear industries. There are currently 100 apprentices undertaking their training across MM's many
sites countrywide. The company's recruitment literature explains:
'Our apprentice scheme is seen as a route into the workforce and lays the foundation for an exciting career. We
offer many different types of apprenticeships. Our apprentices gain outstanding technical, personal and
employment skills through classroom training and 'on the job' experience. The facilities and talent that
apprentices encounter are world-class. Apprentices gain qualifications more demanding than those attained in
full-time education.'
MM's Human Resource (HR) function is heavily involved in the scheme:
Provision is made within the HR budget to fund the entire scheme and the HR Director decides annually
how many new apprentices can be employed each year.
A recruitment team from the HR department tours schools with promotional literature explaining the
benefits and talks to interested pupils. The team invites pupils with potential to open days that
periodically run at a number of MM's sites.
At open days HR arranges tours of MM's premises and encourages potential recruits to ask questions and
talk to current apprentices. If candidates are still interested, HR officers conduct interviews and draw up a
short list of potential apprentices.
The HR Director makes formal offers of apprenticeships. Once appointed the new recruits identify the
areas of the business in which they wish to train. Senior Site Managers are informed of these choices and
arrange for workplace mentors to be allocated to the new recruits.
For the last three years there have been fewer potential apprentices attending open days despite a similar
number of invitations being issued. In addition, a growing number of pupils have declined offers of
apprenticeships deciding instead to continue in full-time education.
MM has a new HR Director and during her first month in post she met Senior Site Managers throughout the
company. She was surprised by unfavourable comments about the operation of the apprenticeship scheme. One
manager told her that 'HR would do well to learn from the lean philosophy that operates in all other areas of the
company'. Another explained that although capable apprentices had been placed at his site in the past he 'had to
let them go' when their training was completed because there were no suitable permanent jobs at the site. Other
managers complained that they had no say over the number of apprentices placed at their site and that finding
suitable workplace mentors was sometimes a problem.
Required
(10 marks)
(a)
Explain how the lean philosophy might help improve the operation of MM's HR department.
(b)
Explain how the involvement of MM's Senior Site Managers might overcome shortcomings in current
processes of recruitment and selection of apprentices.
(10 marks)
(c)
Identify the options available to MM to resolve the current problem of no suitable full-time posts being
available at the site when an apprentice completes his or her training.
(5 marks)
(Total = 25 marks)
33
34
Questions
41 CR7 (5/13)
45 mins
CR7 has ten operating units and currently employs 250 people but has not replaced any employees that have
left over the past six months. Until recently, CR7 was part of M013, a much larger group of diverse companies.
CR7 is now independent following a management buy-out. In a statement about the future of the new company,
the buy-out team explains that CR7 will operate profitably in the future but will need to adopt flexible
employment practices and make more use of casual labour and contractors in order to become a more flexible
firm.
One consequence of the buy-out is that CR7 no longer receives the specialist support of M013 functions such as
payroll, finance, human resources (HR) and information systems (IS) services, etc. These central M013 services
were recognised as being of a good quality but were relatively expensive.
The buy-out team has so far:
Devolved responsibility for some central services such as cleaning services and grounds maintenance to
CR7's units to organise for themselves;
Engaged outside providers for both its payroll and finance requirements;
Established in-house HR and IS central service departments.
One of the first tasks for the HR department is to develop a new pay structure for CR7's workforce.
Required
(10 marks)
(a)
Discuss the advantages for CR7 of organising and managing its IS activities centrally.
(b)
Explain the main issues CR7's new HR department should take into account when developing a pay
structure.
(10 marks)
(c)
Explain how flexible employment practices might contribute to the future success of CR7.
(5 marks)
(Total = 25 marks)
Questions
MIXED SECTION A MULTIPLE CHOICE QUESTIONS

Questions 42 to 57 are Section A questions covering the whole syllabus. None of the questions are related to a
scenario.
36 mins
42.1 Which of the BRIC economies is the largest?

A
B
C
D
Brazil
Russia
India
China
(2 marks)
42.2 Herzberg's contribution to understanding people in the workforce included

A
B
C
D
Personality testing
Explaining factors associated with job satisfaction as 'motivators'
Problem-solving processes that encourage team spirit and cooperation
An integrated framework involving appraisal, training and motivation
(2 marks)
42.3 The unwritten expectations that the organisation and the individual have of each other is referred to as
A
B
C
D
A valence
Work/life balance
The psychological contract
Expectation management
(2 marks)
42.4 A duplication of data held by an organisation is called

A
B
C
D
Data
Data
Data
Data
synthesis
redundancy
integrity
archiving
(2 marks)
42.5 Aptitude testing is most commonly used in

A
B
C
D
Staff appraisal processes

Exit interviews
Staff selection
Market research and testing
(2 marks)
42.6 Direct mailing, branding activities and public relations campaigns are all examples of
A
B
C
D
Market process
Product placement
Promotion
Market research
(2 marks)
42.7 Economies of scale and manufacturing experience might help a firm to compete successfully by
A
B
C
D
Pricing its products more cheaply than its competitors

Introducing value adding features to its products
Better understanding buyer behaviour
Offering a broader product range
(2 marks)
35
36
Questions
42.8 To be of use for marketing research purposes a segmentation variable must define a market segment that
has three characteristics. What are they?
A
B
C
D
Measurability, stability, accessibility

Stability, substantiality, measurability
Substantiality, measurability, accessibility
Stability, accessibility, substantiality
(2 marks)
42.9 Selling at a low price with the intention of damaging weaker competitors is referred to as
A
B
C
D
Price skimming
Opportunistic pricing
Penetration pricing
Predatory pricing
(2 marks)
42.10 The product life cycle is depicted on a chart or diagram as a line against the variables of
A
B
C
D
Cash flow and market share

Number of customers and sales value
Sales volume and time
Relative market share and market growth rate
(2 marks)
(Total = 20 marks)
Questions
36 mins
43.1 Kurt Lewin's ideas on change are based on the view that change is:
A
B
C
D
Capable of being planned

Emergent
Inevitable and uncontrollable
Transformational
(2 marks)
43.2 The US, Canada and Mexico are the three members of which trade organisation?
A
B
C
D
EFTA
AFTA
NAFTA
APEC
(2 marks)
43.3 Charging a very low price on one item in order to generate customer loyalty and increased sales of other
items is called:
A
B
C
D
Market penetration
Loss leader pricing
Product penetration
Skim pricing
(2 marks)
43.4 In the expectancy theory of motivation 'valence' refers to:

A
B
C
D
A belief that an outcome will satisfy organisational tasks

A person's own preference for achieving a particular outcome
A belief that the outcome will be shared by others equally
An understanding of the probability of an event happening
(2 marks)
43.5 In the context of information systems, a widget is:

A
B
C
D
A web 2.0 application

A component of a customer relationship management system
An expert system
An element of a management information system
(2 marks)
43.6 The TQMEX model is a framework that integrates processes associated with:
A
B
C
D
Total quality management and ISO accreditation

Both operations and quality management
Organisational development
(2 marks)
43.7 Approval of documentation, procedures manuals and work instructions is associated with:
A
B
C
D
Registration under the standards required for quality certification

Total quality management (TQM)
Lean production methods
Job evaluation
(2 marks)
43.8 Rodger's seven-point plan refers to:

A
B
C
D
Quality targets for world class operations

Implementation guidelines for introducing new hardware
The likely headings to be found as part of a person specification
Lean production processes
(2 marks)
37
38
Questions
43.9 Activities aimed at attracting a number of suitable candidates interested in joining an organisation are
called:
A
B
C
D
Human relationship marketing

Recruitment
Selection
Human capital harvesting
(2 marks)
43.10 The expectations that the individual and the organisation have of one another is referred to as:
A
B
C
D
A hygiene factor
A psychological contract
Dual theory motivation
A person specification
(2 marks)
(Total = 20 marks)
Questions
36 mins
44.1 An approach of producing goods or purchasing inventory only when required is known as:
A
B
C
D
Just-in-time
Ad hoc
Level capacity strategy
Plan-do-check-act (PDCA) quality
(2 marks)
44.2 Intelligence, aptitudes and disposition are often factors identified in:
A
B
C
D
A job description
Appraisal targets
A person specification
360 degree documentation
(2 marks)
44.3 The evaluation of candidates for a job using a comprehensive and interrelated series of selection
techniques is known as:
A
B
C
D
Psychometric testing
Developing a balanced scorecard
Job evaluation
An assessment centre
(2 marks)
44.4 Shareholders are an example of which type of stakeholder?

A
B
C
D
Connected
Internal
External
Coalition
(2 marks)
44.5 The concept of 'reliability' of staff selection techniques means:

A
B
C
D
Effective testing of a candidate's desire for the job and natural abilities
Overcoming poor performance in the interview due to nervousness
The techniques produce consistent results if repeated
Choosing the most reliable candidate every time
(2 marks)
44.6 In purchasing, the 'Reck and Long' positioning tool is by nature:

A
B
C
D
Strategic
Independent
Supportive
Passive
(2 marks)
44.7 The technique PDCA represents:

A
B
C
D
A programme development control activity used in information management

A framework for bringing about continuous improvement in quality management
A software inventory system used in warehouse management
People, developments, controls and appraisal in strategic human resourcing
(2 marks)
44.8 System testing before software production is known as:

A
B
C
D
On-line testing
Off-line testing
Logic testing
User acceptance testing
(2 marks)
39
40
Questions
44.9 The 5-S model refers to

A
B
C
D
Internal analysis involving structure, sub-structure, systems, sub-systems and strategy

Internal analysis involving style, shared values, skills, staffing and 'soft' information
Operations management practices of structurise, systematise, sanitise, standardise and selfdiscipline
The Japanese six-sigma model adapted to Western practice
(2 marks)
44.10 Corrective work, the cost of scrap and materials lost are:
A
B
C
D
Examples
Examples
Examples
Examples
of
of
of
of
internal failure costs

external failure costs
appraisal costs
preventative costs
(2 marks)
(Total = 20 marks)
Questions
36 mins
45.1 Which one of the following statements represents the ultimate aim of Total Quality Management (TQM)?
A
B
C
D
Eliminate the costs of poor quality

Eliminate all quality-related costs
Reduce costs of poor quality
Reduce the workforce
(2 marks)
45.2 Which one of the following statements relating to Quality Management is true?
A
B
C
D
Internal failure due to poor quality has no effect on delivery time

Reducing internal failure reduces losses of capacity
As the quality level of a process increases, appraisal costs will go up due to increased testing effort
The cheapest way to improve quality is to increase post-production inspection
(2 marks)
45.3 Marketing strategy will normally:

A
B
C
D
Provide priorities for the overall corporate strategy

Drive the productive capacity of the company
Meet the objectives of the company in terms of price and product features
Be consistent with other organisational business planning processes
(2 marks)
45.4 Improvements to a system aimed at extending its facilities is an example of:

A
B
C
D
Perfective maintenance
Adaptive maintenance
User maintenance
Corrective maintenance
(2 marks)
45.5 Which one of the following is the factor that Taylor believed would be most effective in motivating
workers?
A
B
C
D
Remuneration levels
Job security
Good working conditions
Minimal supervision
(2 marks)
45.6 Which of the following is sometimes used to refer to the process of 'continuous improvement'?
A
B
C
D
Kaizen
Six Sigma
Lean principles
Kanban
(2 marks)
45.7 To reduce inflation a government may decide to:

A
B
C
D
Raise interest rates

Reduce interest rates
Weaken the national currency
Strengthen the national currency
(2 marks)
45.8 Which one of the following options represents possible supply sourcing strategies?
A
B
C
D
Internal, external and combined

Local, regional, national and international
On-line, off-line, domestic and overseas
Single, multiple, parallel and delegated
(2 marks)
41
42
Questions
45.9 Who developed the concept of 'social man'?

A
B
C
D
Mullins
Lawrence and Lorsch
Weber
Schein
(2 marks)
45.10 Which one of the following statements best represents the principle of 'integrity' as explained in CIMA's
Ethical Guidelines?
A
B
C
D
Professional accountants must not tell lies

Professional accountants must not be party to anything which is deceptive or misleading
Professional accountants cannot be expected to resign over a matter of principle
Integrity is almost as important as technical competence
(2 marks)
(Total = 20 marks)
Questions
46 Multiple choice questions: General 5 (Specimen paper) 36 mins

46.1 A deliberate addition of new, stimulating requirements to a persons job normally carried out by someone
more senior is called
A
B
C
D
Job enrichment
Job enlargement
Responsibility creep
Multi-skilling
(2 marks)
46.2 Employers wishing to attract and retain talented employees by bringing together pay and non pay
elements and emphasising a positive organisational culture are said to operate a
A
B
C
D
Benefit scoping strategy

Total reward package
Talent strategy package
A consolidated remuneration package
(2 marks)
46.3 Which of the following does NOT represent a spoke in Cousins strategic supply wheel?
A
B
C
D
Performance measures
Organisational structure
Organisational culture
Cost/benefit analysis
(2 marks)
46.4 Customers direct participation in the delivery process is a feature of

A
B
C
D
Cellular production
The value chain
The service industry
Lean product manufacture
(2 marks)
46.5 An operations management programme involving a series of long term continuous development practices
is referred to as
A
B
C
D
Queuing theory
A sustainability programme
Optimised production technologies improvement
Stakeholder engagement strategy
(2 marks)
46.6 The acronym/phrase/term BRIC is normally associated with

A
B
C
D
A Japanese quality development technique

A stock control method
Supplier development through buying, relating, investing and collaborating
The emerging combined economies of Brazil, Russia, India and China
(2 marks)
46.7 Organisations engaged in off-shoring

A
B
C
D
Have some operations carried out in a different country

Diversify their operations
Brand themselves as global
Maximise competitive advantage by being based in a particular country
(2 marks)
46.8 Which of an organisations competences should NOT be outsourced?

A
B
C
D
Allied competences
Core competences
Complementary competences
Residual competences
(2 marks)
43
44
Questions
46.9 A formal definition of a level of service to be provided is usually found in

A
B
C
D
Documented quality assurance arrangements

A marketing plan
A corporate strategy
A service level agreement
(2 marks)
46.10 A countrys earnings from investment abroad is included in its

A
B
C
D
Gross Domestic Product

Gross National Product
Relative Trade Balance Index
Quality of Life Index
(2 marks)
(Total = 20 marks)
Questions
36 mins
47.1 Electronic Executive Information Systems (EIS) and Expert Systems (ES) are examples of
A
B
C
D
Customer relationship management software

Database management systems
Computer networking
Decision based software
(2 marks)
47.2 Technology which encourages user contributions and interactivity is known as

A
B
C
D
Web 2.0
Business 2 Consumer (B2C)
E-commerce
Teleworking
(2 marks)
47.3 Dispersed and virtual teams are normally a result of

A
B
C
D
An economic downturn
Developments in technology and information systems
Poor staff morale and motivation within the workforce
Ineffective human resourcing practices
(2 marks)
47.4 Integrated solutions in product design and control of machinery are based on
A
B
C
D
A shared customer focused outlook

A JIT philosophy
CAD and CAM technologies
Decision support systems
(2 marks)
47.5 A main outcome of electronic data interchange (EDI) is

A
B
C
D
User independence
To save paperwork by using structured electronically transmitted data
Home working
Improved internal communication
(2 marks)
47.6 A manufacturer concerned mainly with production efficiencies and reducing unit costs is known as
A
B
C
D
Product oriented
Production oriented
Operationally strategic
(2 marks)
47.7 The influence an organisation will normally have over its macro environment will be
A
B
C
D
Limited or non existent

High
Extremely high
Continual
(2 marks)
47.8 Non-political, not-for-profit, cause-orientated organisations drawn from more than one country are known
as
A
B
C
D
Strategic business units

Non-governmental organisations (NGOs)
Conglomerates
Globalised networks
(2 marks)
45
46
Questions
47.9 Merit goods are commodities that

A
B
C
D
Comply with stringent international quality standards

Society believes individuals should have for their wellbeing
Are produced using expensive and highly valued ingredients
Are earned through belonging to company loyalty schemes
(2 marks)
47.10 The cognitive paradigm theory explains consumer behaviour through

A
B
C
D
Product branding
Rational problem solving and decision making
Past experience and levels of satisfaction
Inertia or a lack of time
(2 marks)
(Total = 20 marks)
Questions
36 mins
48.1 Which one of the following is NOT a benefit of corporate governance?

A
B
C
D
Improved access to capital markets

Stimulation of performance
Enhanced marketability of goods and services
Prevention of fraudulent claims by contractors
(2 marks)
48.2 Corporate political activity is normally undertaken in order to

A
B
C
D
Secure policy preferences

Make the world a better place
Further an environmental agenda
Understand the external drivers on an organisation
(2 marks)
48.3 Political risk analysis is conducted by a company considering international operations and normally
focuses on the
A
B
C
D
World economy generally

Relations between the USA, Japan and Europe
Political and cultural differences between the home and target country
Industrialisation of the target country
(2 marks)
48.4 Efficient regulation of companies is said to exist if

A
B
C
D
The total benefit to the nation is greater than the total cost
There is greater integration of the worlds economies
Greater innovation takes place by all businesses
The effect on businesses is neutral
(2 marks)
48.5 The basis of the stakeholder view is that

A
B
C
D
Only shareholders are legitimate stakeholders

Only creditors and shareholders are legitimate stakeholders
Persons, groups and organisations with an interest in the organisation are stakeholders
Only members that an organisation officially recognises are stakeholders
(2 marks)
48.6 Which ONE of the following is not an approach to systems implementation?

A
B
C
D
Parallel running
Phased changeover
Matrix operation
Pilot testing
(2 marks)
48.7 Which ONE of the following is not normally associated with outsourced IS solutions?
A
B
C
D
Ensuring contract compliance

Assembly and maintenance of a suitably skilled workforce
Preparing formal tendering documents
Invoicing, processing and payment
(2 marks)
48.8 A necessary product/service requirement to meet the Japanese interpretation of quality is

A
B
C
D
To comply with all safety standards

To cost no more than necessary
To meet a design brief
To meet customer expectations
(2 marks)
47
48
Questions
48.9 Process design can best be improved by

A
B
C
D
An organisational restructure to reflect functions not processes

Improved checks on suppliers
Adopting a strategy of continuous improvement
Improved quality control
(2 marks)
48.10 Collaborating with its suppliers may bring a company added value because it can
A
B
C
D
Strike a harder bargain with its suppliers

Work with a supplier to improve quality and reduce costs
Avoid transaction costs
Introduce price competition amongst suppliers
(2 marks)
(Total = 20 marks)
Questions
36 mins
49.1 Transferring some part of an organisation's activities to a subsidiary in another country is an example of
A
B
C
D
Free trade
Outsourcing
Offshoring
Delegation
(2 marks)
49.2 'Servqual' relies on feedback from

A
B
C
D
Customers
Managers
Careful business process re-engineering
A 360 degree appraisal
(2 marks)
49.3 Attempts by a country to help local producers by restricting international trade is known as
A
B
C
D
Factor conditions
Enterprise management
Governance
Protectionism
(2 marks)
49.4 Total productive maintenance involves

A
B
C
D
Maintaining worker satisfaction and high productivity

A cycle of PDCA
A prevention of quality failures through equipment faults
Eliminating non-value adding activities from a process
(2 marks)
49.5 The ABC system is a method of

A
B
C
D
Managing inventory
Selection criteria
Production improvement
Quality compliance
(2 marks)
49.6 A computerised payroll package is an example of a

A
B
C
D
Data processing system

Management information system
Decision support system
Web dependent application
(2 marks)
49.7 The acronym SDLC normally relates to

A
B
C
D
Skills, deliverables, limitations and capability

Collaborative quality orientated activities
Standard data listed code
A system (or software) development cycle
(2 marks)
49.8 Electronic data interchange relies on

A
B
C
D
Structured data and standard business documents

Networking and creativity
Social networking and intelligence sharing
A system (or software) development cycle
(2 marks)
49
50
Questions
49.9 Corrective, adaptive and perfective are forms of

A
B
C
D
Rewards and punishments used in people management

Performance management variables
Systems maintenance
Stock control methods
(2 marks)
49.10 Data integrity and elimination of duplication are key features of

A
B
C
D
Effective databases.
End user flexibility and autonomy
Autonomous (independent) working by different functions
All Web 2.0 tools
(2 marks)
(Total = 20 marks)
Questions
36 mins
50.1 Small groups of employees that meet to identify work problems and their solution are known as
A
B
C
D
Quality circles
Peer counsellors
Cellular production teams
Teleworkers
(2 marks)
50.2 The extended marketing mix does NOT include which ONE of the following:
A
B
C
D
People
Processes
Physical evidence
Positioning
(2 marks)
50.3 According to Hertzberg's dual factor theory of motivation, one set of factors is known as
A
B
C
D
Demotivation factors
Disposition factors
Self actualisation factors
Hygiene factors
(2 marks)
50.4 Porter's value system shows the organisation in terms of

A
B
C
D
The value chains of suppliers, channels and the customer

Primary activities, support activities and margin
The technostructure, strategic apex and operating core
Passive, independent, supportive and integrative approaches to supply
(2 marks)
50.5 Which ONE of the following is NOT associated with quality management?
A
B
C
D
5-S practice
180 degree feedback
Six Sigma methodology
Five-why process
(2 marks)
50.6 Intrinsic satisfaction is said to be derived from which ONE of the following issues:
A
B
C
D
Perks of the job

Job content
Job rewards
Group cohesiveness and belongingness
(2 marks)
50.7 Which ONE of the following is an example of direct marketing?

A
B
C
D
Writing an article for a trade journal

Targeting individual customers with promotional material
Posting 'blogs' to draw attention to the organisation
Public relations activities
(2 marks)
50.8 Motivation theories and reward systems derived from F W Taylor's thinking are by nature best described
as
A
B
C
D
Behavioural
Human relations
Content
Scientific
(2 marks)
51
52
Questions
50.9 Service Level Agreements are normally associated with

A
B
C
D
Job reductions negotiated with staff groups

Deskilling
Agreed appraisal outcomes
Outsourcing
(2 marks)
50.10 Which ONE of the following is NOT associated with a government's fiscal policy?
A
B
C
D
Levels of taxation
Level of spending by the government
Revenue raising
Interest rates
(2 marks)
(Total = 20 marks)
Questions
36 mins
51.1 Balanced trade is

A
B
C
D
A national economic alternative to free trade.

An example of free trade.
A form of supply chain agreement.
A form of alliance with other companies.
(2 marks)
51.2 Hofstede's cultural dimensions do NOT include which ONE of the following:
A
B
C
D
Individualism versus collectivism

Masculinity versus femininity
Weak versus strong uncertainty avoidance
Corrective versus perfective approaches
(2 marks)
51.3 EOQ represents a form of

A
B
C
D
Inventory system based on economic order quantities.

European observance quality certification.
Equal opportunity quantification index used in HRM.
Japanese inspired technique aimed at continuous improvement.
(2 marks)
51.4 5S and 6 Sigma are examples of

A
B
C
D
Portfolio analysis frameworks.

Marketing communication.
Quality improvement practices.
Human Resource Development models.
(2 marks)
51.5 The use of assessment centres and psychometric tests is normally associated with processes of
A
B
C
D
Recruitment.
Selection.
Induction.
Appraisal.
(2 marks)
51.6 CIMA's Code of Ethics for professional accountants is based upon

A
B
C
D
A framework of fundamental principles.

A framework of strict rules.
A scale of penalties for non compliance.
Sustainability principles and best practice.
(2 marks)
51.7 According to Herzberg's motivation theory, which ONE of the following is the cause of dissatisfaction?
A
B
C
D
Demotivators.
Motivation detractors.
Hygiene factors.
Process theories.
(2 marks)
51.8 David Kolb identified a four stage model representing

A
B
C
D
A quality evaluation framework.

A cycle of learning from experience.
A career planning and development framework.
A way of assessing the value of training events.
(2 marks)
53
54
Questions
51.9 The headings found in a person specification are likely to be based upon
A
B
C
D
Rodger's 7 point plan.

Job enrichment principles.
Employment best practice guidelines.
The main tasks within the job role.
(2 marks)
51.10 A key feature of a lean philosophy within operations is

A
B
C
D
Removal of waste.
Incremental change.
Official accreditation.
Continuous improvement.
(2 marks)
(Total = 20 marks)
Questions
36 mins
52.1 Which ONE of the following is NOT a feature normally associated with a Non-Governmental Organisation
(NGO)?
A
B
C
D
Government funded
Independent
Non-profit making
Explicit social mission
(2 marks)
52.2 Gross National Product (GNP) represents

A
B
C
D
Another term for Gross Domestic Product (GDP).

Gross Domestic Product (GDP) adjusted for foreign earnings.
The total intellectual and social capital of a country.
Aggregated 'bottom-line' performance of a country's top 100 companies.
(2 marks)
52.3 Cattell's 16PF test is normally associated with which ONE of the following?
A
B
C
D
IS feasibility studies
The process of market segmentation
Auditing existing supply arrangements
Employee selection
(2 marks)
52.4 Supplier relationships in a supply network are categorised in which ONE of the following ways?
A
B
C
D
Single, multiple, delegated and parallel

Primary, secondary and post-purchase
Phased, pilot and integrated
One-to-one, several to one, 180 degrees and 360 degrees
(2 marks)
52.5 Results and enablers are features of which ONE of the following?
A
B
C
D
Servqual
Total Quality Management (TQM)
The European Foundation for Quality Management (EFQM) excellence model
Competitive benchmarking
(2 marks)
52.6 The desirable features of a candidate for a job are best contained in which ONE of the following?
A
B
C
D
A
A
A
A
person specification
job description
job advertisement
verbal briefing at the interview
(2 marks)
52.7 Enlargement, enrichment and rotation are terms associated with which ONE of the following?
A
B
C
D
Adjustments to an individual's job content and role

Improvements brought about by competitive benchmarking
Market and product development strategies
Customer approval ratings
(2 marks)
52.8 Which ONE of the following is NOT associated with Maslow's Hierarchy of Needs?
A
B
C
D
Self-actualisation
Affiliation
Hygiene
Safety
(2 marks)
55
56
Questions
52.9 Which ONE of the following is NOT a cost of quality?

A
B
C
D
Internal failure
Appraisal
Prevention
Transaction
(2 marks)
52.10 Which ONE of the following is associated with recruitment rather than selection?
A
B
C
D
Assessment centres
Interviews
Advertising copy
Psychometric testing
(2 marks)
(Total = 20 marks)
Questions
36 mins
53.1 A transition economy is one that is

A
B
C
D
About to be controlled by a different political regime.

Still introducing the benefits of e-commerce.
Moving from a planned to a mixed or free market economy.
Retrenching due to adverse economic circumstances.
(2 marks)
53.2 Corporate governance is best described as

A
B
C
D
A code for organisational direction, administration and control.

Stakeholder guidelines.
A system of penalties for unethical behaviour.
The relationship between an organisation and the government.
(2 marks)
53.3 Which ONE of the following is a program that impairs data and software?
A
B
C
D
A virus
Corrective maintenance
Electronic Data Interchange (EDI)
Cyber bullying
(2 marks)
53.4 Background and circumstances, special attributes and disposition are all factors often identified in which
ONE of the following?
A
B
C
D
Service level agreements

Key performance indicators
Person specifications
Job descriptions
(2 marks)
53.5 IS client-vendor relationship is a feature of which ONE of the following?

A
B
C
D
An outsourced IS function
Enterprise-wide systems
Social networking
Virtual team working
(2 marks)
53.6 If an employee who is opposing the introduction of a new system is given a key role in its implementation,
this is an example of which ONE of the following?
A
B
C
D
Co-optation
Career planning
Succession planning
Networking
(2 marks)
53.7 Contrived, volume and realistic are examples of which ONE of the following?
A
B
C
D
System testing methods

Supply relationship categories
Ways of classifying inventory
Ways of estimating market potential
(2 marks)
53.8 A psychological contract refers to which ONE of the following?

A
B
C
D
Intangible costs arising from outsourcing

The mutual expectations of an employer and employee
The responsibilities of citizens to their nation
The use of contracted experts in psychometric staff testing
(2 marks)
57
58
Questions
53.9 According to Douglas McGregor, managers believe Theory X people

A
B
C
D
Naturally dislike work and avoid responsibility.

Naturally enjoy work and seek the challenge of responsibility.
Are a younger generation which is comfortable with new technology.
Are an older generation unlikely to engage in e-commerce.
(2 marks)
53.10 Which ONE of the following is most likely to lead to an organisation accessing a larger market for its
goods or services?
A
B
C
D
Electronic Data Interchange (EDI)

Teleworking
E-trading
Penetration marketing
(2 marks)
(Total = 20 marks)
Questions
54
Multiple choice questions: General 13 (9/12)
36 mins
54.1 The most significant emerging global economies, in terms of growing power and influence, are normally
referred to as which ONE of the following categories?
A
B
C
D
Developed economies
BRIC economies
Northern hemisphere economies
G14 economies
(2 marks)
54.2 According to Herzberg, pay, status and working conditions are examples of which ONE of the following?
A
B
C
D
The preference of Theory Y workers

Self actualisation
Motivators
Hygiene factors
(2 marks)
54.3 An assessment centre commonly refers to which ONE of the following?

A
B
C
D
A building where testing occurs

An approach to selection
An approach to recruitment
Online supplier vetting procedure
(2 marks)
54.4 The system of policies by which an organisation is directed and controlled is known as which ONE of the
following?
A
B
C
D
54.5
(2 marks)
In social marketing, goods that society discourages because of their negative social effects are known as
which ONE of the following?
A
B
C
D
54.6
Corporate infrastructure
Corporate strategic apex
Demerit goods
Durable goods
International embargoes
Imports
(2 marks)
Organisational costs associated with contracted out activities are known as which ONE of the following?
A
B
C
D
Transaction costs
Offshoring costs
Transfer costs
Social costs
(2 marks)
54.7 For organisations failing to adopt the marketing philosophy, which ONE of the following is NOT
recognised as an alternative?
A
B
C
D
Sales orientation
Product orientation
Lean orientation
Production orientation
(2 marks)
54.8 Corporate political activity often involves which ONE of the following?
A
B
C
D
Clarifying corporate social responsibility

Scanning the microenvironment
Lobbying and political campaign contributions
Internal marketing
(2 marks)
59
60
Questions
54.9 The basis of a psychological contract is

A
B
C
D
an understanding of mutual obligations between a worker and the organisation.

a corporate responsibility to act in a way that does not harm the environment.
an emotional affinity for a particular product brand.
an organisation-wide commitment to listen to customer views.
(2 marks)
54.10 Which ONE of the following is the most complete measure of national economic growth?
A
B
C
D
Inflation levels
Unemployment levels
The overall level of the FTSE 100 index
(2 marks)
(Total = 20 marks)
Questions
36 mins
55.1 Organisations that move part of their activities to another country are said to do which ONE of the
following?
A
B
C
D
Downsize
Divest
Offshore
Outsource
(2 marks)
55.2 The so called BRIC economies do NOT include which ONE of the following?
A
B
C
D
Britain
Russia
India
China
(2 marks)
55.3 The advantages of a database management system (DBMS) include

A
B
C
D
end-user flexibility and power.

open communication and social networking.
data sources compiled by the user.
data integrity and elimination of duplication.
(2 marks)
55.4 Certified approval of documented work procedures including procedure manuals and work
instructions are associated with which ONE of the following?

A
B
C
D
Workforce skills audits

Appraisal costs
ISO 9000 accreditation
(2 marks)
55.5 Which ONE of the following is NOT associated with quality improvement?
A
B
C
D
Fishbone diagrams
Pareto analysis
Why/why analysis
Political lobbying
(2 marks)
55.6 Which ONE of the following is NOT an inventory management system?

A
B
C
D
Periodic
EOQ
ABC
5S
(2 marks)
55.7 Which ONE of the following should logically precede market segmentation?
A
B
C
D
Market research
Targeting
Positioning
Promotional activity
(2 marks)
61
62
Questions
55.8 In marketing the concept of 'physical evidence' refers to

A
B
C
D
seeing the product before it is purchased.

a physical meeting between vendor and buyer.
some form of reassurance of service quality before purchase.
proof that market research has actually been conducted.
(2 marks)
55.9 Which ONE of the following is an example of a durable good?

A
B
C
D
Hand made shoes

Long life milk
Long lasting deodorant
A jar of instant coffee
(2 marks)
55.10 Computer to computer transmission of structured data using standardised documentation is known
as
A
B
C
D
electronic data interchange (EDI).

online networking.
systems compatibility testing.
a 'cookie'.
(2 marks)
(Total = 20 marks)
Questions
36 mins
56.1 Which ONE of the following is an example of secondary market research?

A
B
C
D
Telephone surveys to identify purchasing intentions

Focus group meetings to identify product preferences
Online questionnaires to identify buying habits
Use of search engines to identify market growth trends
(2 marks)
56.2 Which ONE of the following is NOT normally associated with operations management?
A
B
C
D

Enterprise Resource Planning systems
Liberalisation
Continuous inventory
(2 marks)
56.3 An approach that encourages individuals to pass on a marketing message through existing social
networks is known as
A
B
C
D
guerrilla marketing.
viral marketing.
experiential marketing.
cause marketing.
(2 marks)
56.4 An organisational approach that involves targeting an entire market with a single marketing mix is
known as which ONE of the following?

A
B
C
D
Undifferentiated
Differentiated
Saturated
Blanket
(2 marks)
56.5 Forecasting production and inventory levels needed to meet estimated customer purchases leads to
which ONE of the following?

A
B
C
D
A push based system

A pull based system
Cohesive supply chain management
Scientific management
(2 marks)
56.6 A software management system combining all of a globally diverse organisation's sales, marketing
and customer support information is known as

A
B
C
D
distributed data processing (DDP).

customer relationship management (CRM).
a database management system (DBMS).
a wide area network (WAN).
(2 marks)
56.7 Information that takes the form of a list of debtors and creditors is by nature said to be
A
B
C
D
strategic.
tactical.
operational.
executive.
(2 marks)
63
64
Questions
56.8 The building of a prototype model is normally associated with which ONE of the following?
A
B
C
D
Process design
Reverse engineering
Concept screening
Positioning
(2 marks)
56.9 The process of ensuring employees support an organisation's marketing activities is known as
A
B
C
D
performance management marketing.

social marketing.
autocratic management.
internal marketing.
(2 marks)
56.10 Which ONE of the following is NOT normally associated with an organisation's pricing mix?
A
B
C
D
Payment terms
Credit policy
Discounts for bulk purchase
Commission for a sales team
(2 marks)
(Total = 20 marks)
Questions
36 mins
57.1 The phrase 'uncertainty avoidance' refers to which ONE of the following?
A
B
C
D
A dimension of national culture

Country risk
Political risk
Disaster recovery planning
(2 marks)
57.2 Corrective systems maintenance refers to which ONE of the following?

A
B
C
D
A process undertaken prior to systems implementation

A remedy of defects after systems implementation
A process of upgrading both hardware and software
A means of ensuring that machines and equipment do not hold up production
(2 marks)
57.3 Transaction costs are associated with which ONE of the following?
A
B
C
D
Materials procurement
Flexible working arrangements
Outsourcing
Lobbying
(2 marks)
57.4 The aim of total productive maintenance is which ONE of the following?
A
B
C
D
Inclusivity and empowerment

Motivation and teamwork
Engagement and commitment
Prevention and continuity
(2 marks)
57.5 The term BRIC refers to which ONE of the following?
A
B
C
D
Certain national economies

Bringing about real continuous improvement
A ranking index used in aptitude testing
A system for business resource and information capture
(2 marks)
57.6 Foreign earnings are included in which ONE of the following?

A
B
C
D
Gross Domestic Product

Government fiscal policy
Consumption tax
(2 marks)
57.7 Lobbying by a business is an example of which ONE of the following?
A
B
C
D
Focus group research

Country and political risk analysis
Political activity
(2 marks)
65
66
Questions
57.8 Which ONE of the following does NOT represent a control in a computer network?
A
B
C
D
A firewall
Data encryption
Passwords
A cookie
(2 marks)
57.9 Which ONE of the following does NOT represent a spoke in Cousins' supply wheel?
A
B
C
D
Cost benefit analysis

Portfolio of relationships
Performance measures
A firm's infrastructure
(2 marks)
57.10 SERVQUAL is a technique for the service sector to do which ONE of the following?
A
B
C
D
Eliminate waste and unnecessary effort

Map work and document flows
Measure quality of life for employees
Measure the scale of quality in service provision
(2 marks)
(Total = 20 marks)
Questions
MIXED SECTION B QUESTIONS

Questions 58 to 71 are Section B questions covering a range of syllabus areas. CIMA have stated that Section B
questions may be based around a scenario, or may not. Therefore, this Kit includes some question-sets that are
based on a scenario, and some that arent.
58 Hubbles (OMIS - Pilot Paper)
54 mins
Hubbles, a national high-street clothing retailer has recently appointed a new Chief Executive. The company is
well established and relatively financially secure. It has a reputation for stability and traditional, quality clothing
at an affordable price. Lately, however, it has suffered from intense competition leading to a loss of market share
and an erosion of customer loyalty.
Hubbles has all the major business functions provided by 'in house' departments, including finance, human
resources, purchasing, strategy and marketing. The Strategy and Marketing Department has identified a need for
a comprehensive review of the company's effectiveness. In response, the new Chief Executive has commissioned
a review by management consultants.
Their initial findings include the following:.
Hubbles has never moved from being sales-oriented to being marketing-oriented and this is why it has
lost touch with its customers;
Hubbles now needs to get closer to its customers and operate a more effective marketing mix;
Additional investment in its purchasing department can add significantly to improving Hubbles'
competitive position.
The Chief Executive feels that a presentation of interim findings to senior managers would be helpful at this
point. You are a member of the management consultancy team and have been asked to draft a slide presentation
of some of the key points. The Chief Executive has identified six such points.
Required
Prepare a slide outline, and brief accompanying notes of two to three sentences, for each of the Chief Executive's
key points identified below. Do not exceed one page per question part.
(a)
Describe the difference between a company that concentrates on 'selling' its products and one that has
adopted a marketing approach.
(5 marks)
(b)
Explain how Hubbles might develop itself into an organisation that is driven by customer needs.
(5 marks)
(c)
Explain what is meant by the 'marketing mix' (include the 4 traditional elements and 'people' as the fifth
part of the mix).
(5 marks)
(d)
Identify examples of ways in which the management of Hubbles could make use of the marketing mix to
help regain its competitive position.
(5 marks)
(e)
Describe the main areas in which Hubbles' Human Resources Department might reasonably contribute to
assist the Purchasing Department.
(5 marks)
(f)
Explain how an efficient Purchasing Department might contribute to effective organisational performance.
(5 marks)
(Total = 30 marks)
67
68
Questions
59 OK4u (OMIS 11/08 amended)
54 mins
OK4u is a national leisure and sports chain selling specialist equipment and clothing for 'every sport'. A relatively
young organisation, all OK4u's growth has been internally generated and has been led by its entrepreneurial
founder and Chief Executive Officer (CEO) who is known for his creativity and person centred approach. Store
managers are given discretion to display items in imaginative ways and use promotions to generate sales locally.
All store managers report directly to the CEO who tries to oversee all aspects of the organisation's functioning
without the help of a management team.
In its advertising, OK4u makes a feature of the creative way in which it is reducing non- recyclable packaging. It
also claims to follow ethical policies. It has a few trusted long term suppliers of sports equipment and clothing.
All suppliers are personally known to OK4u's CEO, and some are close friends. Good logistics mean that valuable
floor area is not taken up by excessive in-shop storage. Known for good design, broad appeal and no 'stock outs',
OK4u has established itself over the past five years as one of the country's favourite high street brands.
Unfortunately, all that changed last year.
A year ago, OK4u expanded its product range by introducing fashion clothing into its stores. This was
manufactured by a number of new suppliers. Initially sales were disappointing, until OK4u decided to discount
prices. Thanks to tightly negotiated contracts, OK4u was able to pass the costs of the campaign on to its many
new suppliers. As sales improved, these same suppliers were pressurised by threats of financial penalties into
meeting late orders to tight deadlines.
Six months ago, a national newspaper ran a story under the front page headline 'The Shame of Sweatshop
OK4u'. The article claimed that the chain was using workers from third world countries and paying them a
fraction of the selling price. Further, it had discovered cases of children as young as eight years old working long
hours. This was television news for two days and sales fell by 40% within a week. The CEO's investigation of the
newspaper's claims found that:
The incidents related to a few of the new fashion range items.
None of the workers featured in the story were OK4u employees. The fault lay with its new clothing
suppliers, some of whom OK4u knew little about.
In some cases, these new clothing suppliers had sub-contracted work in order to keep costs low and meet
delivery deadlines. In doing this, they had exploited vulnerable workers.
OK4u immediately withdrew its new fashion range and issued a public apology. In it, it explained that the fault
had been with its suppliers and that it would be more careful in developing new supplier relationships in future.
Although sales have recovered over the past six months, they are nowhere near their previous levels. The brand
was also voted one of the most poorly regarded in a recent independent survey. The events have also affected
morale and staff turnover has increased.
Last week, OK4u's CEO reviewed the situation and acknowledged a need to combat the negative public
perception. He sent a personal letter to all employees in which he explained that OK4u intended restoring
confidence with the public that OK4u is still following ethical policies. He explained that 'the key to becoming
one of the country's favourite high street brands again is to deliver excellent customer satisfaction. This can only
be achieved through a superb combination of marketing, HRM and operations'.
Required
For (a) (f), do not exceed one page per question part.
(a)
(b)
(c)
(d)
Explain OK4u's ethical and management failings associated with its expansion into selling fashion
clothing.
(5 marks)
Describe appropriate measures OK4u might take in order to restore public confidence that it is following
ethical policies.
(5 marks)
Explain how marketing, HRM and operations in OK4u could deliver 'excellent customer satisfaction'.
(5 marks)
Evaluate OK4u's strategic relationship with the two sets of suppliers those supplying sports equipment
and clothing and those who supplied fashion clothing.
(5 marks)
(5 marks)
(e)
Explain the past year for OK4u using the basic marketing mix variables as a framework.
(f)
OK4u is considering introducing a performance appraisal system to improve employee performance.

Explain the purpose and objectives of such a system.
(5 marks)
(Total = 30 marks)
Questions
60 Various topics 1 (Specimen paper)
54 mins
(a)
Explain the benefits a collaborative process of Human Resource planning might bring to an organisation.
(5 marks)
(b)
Explain what types of costs are associated with internal failure costs and the significance of these for an
organisation with a reputation for quality.
(5 marks)
(c)
Describe the features and benefits of SERVQUAL to organisations where it might be relevant.
(d)
Identify the key issues for a manufacturing organisation considering adopting Six Sigma philosophy.
(5 marks)
(e)
Explain why a business with shareholders might take into account the interests of a wider group of
stakeholders when considering a policy decision.
(5 marks)
(f)
Identify the nature and effects of risks for an organisation considering doing business in a country that has
a government and political system that it is unfamiliar with.
(5 marks)
(5 marks)
(Total = 30 marks)
54 mins
(a)
An organisation has decided to outsource its IS function. Explain the main issues it needs to address.
(5 marks)
(b)
Describe the ways in which IS and IT might help an organisations human resource function perform its
role effectively.
(5 marks)
(c)
Explain how a manufacturers promotional activity might vary depending upon the sort of distribution
channel that operates.
(5 marks)
(d)
Construct a basic marketing mix for an online company selling branded sportswear.
(e)
Describe the range of internal possibilities that exist for an organisation wishing to fill a job vacancy.
(5 marks)
(f)
Discuss what an organisation could do to motivate its workforce without offering financial incentives.
(5 marks)
(5 marks)
(Total = 30 marks)
54 mins
(5 marks)
(a)
Briefly explain FIVE reasons for the growth in outsourcing by organisations.
(b)
Describe FIVE ways in which emerging economies have benefited as a result of foreign direct investment
in their countries by multinational enterprises.
(5 marks)
(c)
Certain organisations have been transformed by information and communication technology (ICT). Briefly
explain FIVE significant ICT changes using retail organisations as an example.
(5 marks)
(d)
Describe FIVE forms of waste within manufacturing organisations that lean process improvement aims to
eliminate.
(5 marks)
(e)
Lean thinking was first developed with manufacturing organisations in mind. Describe FIVE examples of
ways in which these waste elimination principles might be applied to improve efficiency in service
organisations (such as hospitals and offices).
(5 marks)
(f)
Describe the key aspects of a programme to implement Total Quality Management (TQM) within a
manufacturing organisation.
(5 marks)
(Total = 30 marks)
69
70
Questions
54 mins
(a)
Explain the relationship between organisational competences and decisions relating to the contracting out
of activities.
(5 marks)
(b)
An organisation is reviewing its decision-making information systems and has asked you to identify
suitable assessment criteria for this review.
(5 marks)
(c)
Briefly describe Hofstede's dimensions of national culture.
(d)
Describe, with examples, the TWO forms of IT/IS controls that exist to ensure complete, accurate
processing of data and safeguarding of privacy and security.
(5 marks)
(e)
Describe briefly FIVE major developments over the past twenty years or so that have led to globalisation.
(5 marks)
(f)
Describe Reck and Long's purchasing development model.
(5 marks)
(5 marks)
(Total = 30 marks)
54 mins
(a)
Explain why 'Supply' has been described as being more significant than 'Purchasing' for an organisation.
(5 marks)
(b)
Economies in Asia and Latin America have been a target for two main forms of Foreign Direct Investment
(FDI) by Multi National Enterprises (MNEs). Briefly describe the two main forms of FDI and the likely
benefits of these to the host economies.
(5 marks)
(c)
Explain the reasons why management might choose a direct approach to a system changeover in
preference to other alternatives (such as phased, parallel running or pilot schemes).
(5 marks)
(d)
Explain FIVE main disadvantages of outsourcing for an organisation.
(5 marks)
(e)
Explain FIVE main disadvantages of an organisational policy of HR succession planning.
(5 marks)
(f)
Briefly explain the main arguments for a country wishing to restrict free trade.
(5 marks)
(Total = 30 marks)
54 mins
(a)
Describe briefly FIVE forms of protectionism a government could engage in to discourage imports.
(5 marks)
(b)
Explain, with examples, the meaning and nature (dimensions) of corporate social responsibility (CSR).
(5 marks)
(c)
Explain the importance of assessing political risk for organisations engaging in Foreign Direct Investment
(F.D.I.).
(5 marks)
(d)
Explain how Cousins' strategic supply wheel can help an organisation which is considering moving away
from price-based procurement and policies.
(5 marks)
(e)
Describe the main types of inventory management systems.
(5 marks)
(f)
Explain the different types of workforce flexibility that an organisation could use.
(5 marks)
(Total = 30 marks)
Questions
54 mins
(a)
Describe briefly, FIVE main opportunities for an organisation operating in a modern global business
environment.
(5 marks)
(b)
Explain the relationship between 'Business Ethics' and 'Corporate Social Responsibility'.
(c)
Identify, with examples, groups that may represent a significant political risk for an organisation that is
considering engaging in Foreign Direct Investment.
(5 marks)
(d)
Describe the 5-S practice for improving both the physical and thinking environment of an organisation.
(5 marks)
(e)
Describe briefly, FIVE ways in which an organisation might respond to variations in demand for its
products.
(5 marks)
(f)
Explain how operations management might contribute towards achieving an organisation's sustainability
targets.
(5 marks)
(5 marks)
(Total = 30 marks)
54 mins
(a)
Explain FIVE ways in which businesses might try to influence government policy in a way that might
benefit them.
(5 marks)
(b)
Product manufacturing operations can be explained as a three stage transformation model of inputs,
processes and outputs.
Distinguish how a service differs from a product using this model as a framework.
(5 marks)
(c)
Explain the main features of organisations that do NOT adopt a market or marketing orientation. (5 marks)
(d)
Describe FIVE factors that can influence an individual when deciding whether or not to purchase a
product.
(5 marks)
(e)
Explain the relationship between Frederick Herzberg's dual (two) factor motivation theory and job
enrichment.
(5 marks)
(f)
Describe the marketing processes that are necessary before an organisation can properly target the most
lucrative part of a market.
(5 marks)
(Total = 30 marks)
54 mins
(5 marks)
(a)
Identify FIVE main advantages of keeping an in-house IS function.
(b)
Explain the benefits of Computer Aided Design (CAD) and Computer Aided Manufacturing (CAM) to an
organisation.
(5 marks)
(c)
Explain how Material Requirements Planning (MRP) might improve operations.
(d)
Describe briefly the FIVE main stages involved in the (rational) process of consumer behaviour when
making a purchase.
(5 marks)
(e)
Explain queuing theory and give examples of the ways in which it might benefit a hospital providing
services to the public.
(5 marks)
(f)
Identify FIVE potential difficulties that might arise for an organisation following the introduction of a new
system if support and training are inadequate.
(5 marks)
(5 marks)
(Total = 30 marks)
71
72
Questions
54 mins
(5 marks)
(a)
Describe FIVE benefits of process mapping.
(b)
Identify FIVE factors that should be taken into account when forecasting an organisation's need for
(5 marks)
additional staff.
(c)
Technology has transformed organisations, industries and ways of doing business.

Explain the reasons for the growth of business-to-consumer (B2C) trading through online trading.
(5 marks)
(d)
Describe the ways in which a furniture making firm could use IS and IT to transform its manufacturing
operations.
(5 marks)
(e)
Explain, with examples, the idea of a variable pricing policy.
(f)
Explain the reasons why a department of an organisation might continue to use manual records rather
than a new, recently installed and fully operational computer system.
(5 marks)
(5 marks)
(Total = 30 marks)
54 mins
(a)
Explain the purpose of realistic and contrived tests as part of the installation of a new system.
(5 marks)
(b)
Identify the ways in which Total Productive Maintenance (TPM) could be applied as part of a
manufacturing organisation's quality programme.
(5 marks)
(c)
Describe how Electronic Data Interchange (EDI) has helped transform Business to Business (B2B)
operations.
(5 marks)
(d)
Explain the concept of merit goods with reference to the formal provision of education in a country.
(5 marks)
(e)
Explain the components of an organisation's place mix.
(f)
Cost savings is often given as a reason for an organisation investing in new information systems (IS) and
information technology (IT).
(5 marks)
(5 marks)
Identify another FIVE main reasons for making such an investment.
(Total = 30 marks)
54 mins
(a)
Explain the disadvantages of a firm developing relationships with suppliers based on price alone.
(5 marks)
(b)
Explain the benefits of sustainable practices to an individual firm.
(c)
Explain how a just-in-time (JIT) approach might contribute to the competitiveness of a firm.
(5 marks)
(5 marks)
(5 marks)
(d)
Describe the main alternatives to a Free Trade policy.
(e)
Illustrate FOUR different types of test that might be used by an organisation when installing a new
information system.
(5 marks)
(f)
There are risks associated with investing in another country, yet many companies continue to do so.
Explain why this might be so.
(5 marks)
(Total = 30 marks)
73
ANSWERS
74
Answers

1.1
Public sector organisations aim to use their resources efficiently.
1.2
Import tariffs and import quotas support importsubstitution. Currency devaluations and industry
subsidies are used to develop an emerging nations industry as part of a strategy of export-led
industrialisation.
1.3
The EU is an example of a common market, (it developed out of a customs union the EEC).
Transition economies are former Soviet Union states which are moving away from a communist
system towards that of a free market.
1.4
According to monetarist theory, increasing the money supply will increase prices.
1.5
Economic nationalism is a nation's view that it should protect its own economy and industries.
Economic liberalisation involves nations moving away from economic nationalism towards working with
others in a group to benefit all member economies and industries.
1.6
Emerlands government can influence a number of factors that may create competitive advantages for the
nation and encourage foreign investment.
The three main areas that Emerlands government can influence are:
1.7
The macroeconomic environment
Legal and market regulation
Corporate governance and social responsibility
Emerlands government could introduce:

Legislation. A law could be introduced that requires monopolies to be broken down into individual
businesses.
Regulation. Market regulation could be introduced which is enforceable by a regulator. For example,
mergers would have to be approved by the regulator which acts in the interests of competition.
75
76
Answers

Text reference. Chapters 1, 2 and 3.
Top tips. In section B questions, read each requirement carefully and answer it directly. Try to make five concise
but explained points to pick up five marks for each part.
(a)
Porters factor conditions relate to those factors used as inputs in the production of goods and services.
These factors include human resources, physical resources, knowledge, capital and infrastructure.
Porter distinguished between basic and advanced factors.
Basic factors are natural resources, climate, semiskilled and unskilled labour. They are inherent within a
nation, or can be created with minimal investment. They cannot be sustained as a source of national
competitive advantage, since they are widely available. For example, the wages of unskilled workers in
industrial countries are undermined by even lower wages elsewhere.
Advanced factors are associated with a well-developed scientific and technological infrastructure and
include modern digital communications networks, highly educated people (eg computer scientists),
university research laboratories and so on. They are necessary to achieve high order competitive
advantages such as differentiated products and proprietary production technology.
An abundance of factors is not enough. It is the efficiency with which they are deployed that will create a
competitive advantage for a nation.
Porter also stated that generalised factors, such as transport infrastructure are not significant in
establishing competitive advantage as specialised factors. Specialised factors are relevant to a limited
range of industries, such as knowledge bases in particular fields and logistic systems developed for
particular goods or raw materials. Such factors are integral to innovation and very difficult to move to
other countries.
(b)
One argument in favour of free trade is that conflict is less likely between countries that trade and
communicate with each other, but this is unlikely to be a crucial factor in deciding to adopt free trade.
Free trade facilitates specialisation by countries in the production of the goods and services they are best
suited to producing. However this could lead to a nation becoming dependent upon a single product.
This is particularly seen to be the case with some oil exporting countries in the Middle East.
Free trade also enables countries to develop and invest in resources leading to more efficient production.
It is argued that it can also create inefficiencies, particularly as a result of increased consumer
expectation, such as long distance transport costs for food products to satisfy demand when the product
is out of season in a particular country.
Free trade should encourage entrepreneurship and economic growth, but this may be limited to areas in
which a competitive advantage exists. It is also argued that free trade can prevent the development of
new industries and that some form of protection may be required for these types of industries.
Free trade encourages all countries to export, but less developed countries will become dependent on
more developed countries for certain products, particularly technologically advanced products.
Some people argue that it leads to better quality goods and a better quality of life although it has also
been argued that free trade undermines local cultures especially with many countries becoming
increasingly Americanised.
(c)
The information technology function is outsourced by many organisations, but before making the decision
to outsource or not, the following factors should be considered.
An important issue to consider as part of outsourcing is the potential for competitive advantage. The
lower the potential for competitive advantage, the more suitable an activity is for outsourcing. In some
organisations, information technology, often combined with branding, is a source of comparative
advantage (for example Google, Amazon, Facebook). In other organisations IT is used to help efficiency,
but isnt core to what the organisation does.
Answers
If IT is considered to be a residual competence of the organisation, ie it is not core to the organisation or

essential to a core competence, then it will be suitable for outsourcing. If the organisation relies on IT in
an area that creates a competitive advantage then it is less likely to be suitable for outsourcing.
Whether outsourcing IT will impact the organisations ability to deliver its goods or services to market
will also need to be considered. Increasingly though organisations are utilising IT to help deliver its goods
or services and to provide customer service. Some relatively self contained IT services, for example payroll
processing, may still be suitable for outsourcing.
If cost uncertainty is an issue, then outsourcing can be used to remove this. Costs are set in the contract
where services are specified in advance for a fixed price.
If the current level of IT expertise is low within the organisation, then a specialist company will increase
the level of expertise.
It is also important that the outsourcing company provides a service that matches the needs of the
organisation. It should be possible to negotiate a Service Level Agreement that achieves this.
(d)
Macroeconomic factors can affect the balance of payments as follows.

Availability, price and quality of goods produced by local producers
If local producers are able to supply their home market with high-quality, competitively priced goods, then
overseas producers will find it difficult to export to that market.
Inflation
Where a nation's inflation rate is higher than its competitors, producers in that country will face higher
costs which will cause the price of their products to rise. This will make them less competitive and
demand for their products is likely to fall.
Exchange rates
If a nation's currency weakens against those which export to it, then the goods it imports become more
expensive. These imported goods will therefore be less competitive.
Trade agreements
Trade agreements affect the volume of imports and exports between nations. Nations are more likely to be
able to export competitively to nations they are on an even playing field with.
Taxes, tariffs and trade measures
Taxes and tariffs increase the price of imports, making them less attractive to buy. Governments may
attempt to help home producers with subsidies or import quotas, although free trade agreements mean
this may be difficult (or lead to tit-for-tat retaliation).
The business cycle
Nations looking for export-led growth require sufficient demand in overseas markets for their products.
This is more likely to occur when overseas countries are experiencing a period of growth.
(e)
Deregulation measures may affect a manufacturing industry in the following ways.

There will be improved incentives for internal/cost efficiency. Greater competition means the most
efficient manufacturers should be the most successful.
Allocative efficiency should also improve. This is because competition keeps prices closer to marginal
cost, and organisations therefore produce closer to the socially optimal output level.
In some industries, liberalisation of regulations could have certain disadvantages. There may be a loss of
economies of scale. If increased competition means that each manufacturer produces less output on a
smaller scale, then the unit costs will be higher.
Deregulation can also lead to lower quality of products. The need to reduce costs may lead
manufacturers to reduce quality or eliminate unprofitable but socially valuable services.
Regulation may be required within an industry in order to protect competition. It may be necessary to
implement a regulatory regime to protect competition where inherent forces have a tendency to eliminate
it. This would typically be in an industry with high barriers to entry which would otherwise be controlled
by a few large suppliers.
77
78
Answers
(f)
Developing economies face different challenges to corporate social responsibility (CSR) than developed
nations.
Key drivers for CSR in developing economies include:
Culture
Many developing nations already have in their culture a tradition of ethics and community. Often this has
come about through religion. As businesses are part of a nation's culture it is natural for such traditions to
be followed.
Politics
Political reform and the introduction of democracy is common in developing countries as this is often the
spark which drives economic development. Countries undergoing development often follow examples of
good practice, such as CSR, in developed nations.
Socio-economic priorities
Developing countries often face a conflict of priorities. For example, reducing pollution may be desirable to
preserve the environment, but cleaner production methods may be more expensive and hinder economic
progress.
Governance gaps
CSR can be used as a form of governance to 'plug the gaps' that result from poor government services. For
example, organisations can be used to provide healthcare or education where the government cannot
afford to.
Market access
As developed nations have high public pressure for CSR, companies in developing nations must follow the
same principles if they are to sell in the same market.
Multinational companies
Multinational companies strive for consistency across all their international subsidiaries and production
units. Where these are located in developing countries, they will adopt the same policies as those in
developed countries. Countries (or companies) that do not adopt CSR are less likely to receive investment
(or orders) from multinational companies.
3 McBride Gibbon
Text reference. Chapters 1 and 2.
Top tips. Break up your answers into small paragraphs with headers to help the marker spot the points you are
making. As with most other answers in this kit, you may have points which are not mentioned. As long as your
points are relevant and correct you will still earn marks for them.
Note: When considering 'political risk', you should not just focus on political factors but other elements that make
up political risk as well.
Easy marks. Using PEST in part (c) for your political risk analysis.
(a)
MGs shareholders clearly want the company to cut costs and increase profits so that they receive a better
return on their investment. This is conflicts with a number of other stakeholder viewpoints.
Customers
Many customers purchase MGs products because they are ethically made and the company is socially
responsible. Cutting costs might result in lower ethical standards and less socially responsible behaviour.
Therefore products may no longer fulfil the needs of the customer and the company might even stop
recalling defective products if it does not have to legally.
Answers
Suppliers
MGs current suppliers are selected because they conform to its ethical requirements. Cutting costs may
mean they have to supply the same product at a lower cost or face losing business to a company with
lower standards.
Banks
Banks are usually in favour of cost cutting measures to increase profitability. However, if this involves
relocating operations to a country which is unstable, this may put the company at significant risk
affecting its ability to repay loans or overdrafts.
Employees
MGs employees currently enjoy excellent working conditions. This is one area which could be
dramatically affected by cost cutting measures. If the business remains in Blueland, employees may have
to put up with poorer working conditions. However, employees may lose their jobs if manufacturing
relocates overseas.
Community
MG supports community based activities. This is another area which could be reduced or stopped
altogether in a cost cutting exercise since it represents expenditure that the company does not have to
make. If the company relocates overseas then existing projects may stop.
(b)
Social responsibility in developing nations

The following are drivers of social responsibility in developing nations.
Culture
Many developing nations already have in their culture a tradition of ethics and community. As businesses
are part of a nation's culture it is natural for such traditions to be followed.
Politics
Political reform and the introduction of democracy is common in developing countries as this is often the
spark which drives economic development. Countries undergoing development often look for examples of
good practice in developed nations to make their development a success.
Governance gaps
Social responsibility can be used as a form of governance to 'plug the gaps' that result from poor
government services. For example, organisations can be used to provide healthcare or education where
the government cannot afford to.
Market access
Developing nations must follow the same socially responsible principles if they are to sell in the same
market as developed nations.
Multinational companies
Multinational companies strive for consistency across all their foreign subsidiaries and production units.
Where these are located in developing countries, they will adopt the same policies as those in developed
countries.
(c)
Political risk
Political risk is the risk of an organisation incurring losses due to non-market factors within a particular
country. It is also related to financial factors, such as currency controls and the economy, and stability
factors, such as rioting and civil war.
Political risks of Redland
The following are identified political risks of Redland:
Political
The military government recently overthrew a democratically elected parliament. Therefore the country is
still likely to be unstable and subject to future political upheaval. For example, there may be pressure for
the military government to be replaced.
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Economic
Redland has high inflation which means that the cost of raw materials and labour will be rapidly rising.
The fluctuating exchange rate will mean that businesses will not be able to forecast costs and revenues
with any degree of certainty.
Social
There is likely to be a high degree of civil unrest, partly due to the recent change in government and partly
due to the high levels of unemployment. Civil war may be a distinct possibility.
Technological
Redland is an undeveloped country and therefore it may not be technologically advanced enough to
support a multi-national companys manufacturing operations.
(d)
Transnational vertical integration

Transnational vertical integration is the process of locating production facilities in countries where
production costs are low and then moving completed goods around the world for sale.
Outsourcing
Outsourcing involves an organisation sub-contracting business activities to third party providers. These
providers can be in the same country as the main business, but increasingly foreign outsource providers
are used.
MG
MG could outsource aspects of its business such as design or manufacture and move parts or completed
products around the world to where they are needed. For example, a toy may be designed in Country A,
its components manufactured in Country B and assembled in Country C.
Offshoring
Offshoring involves an organisation relocating its operations from one country to another. The whole
business does not have to be moved, just the parts which would benefit the most from the conditions in
the new location.
MG
MG could move its manufacturing operations to a country such as Redland where costs are low. The
business would probably keep its design function in Blueland if the technological demands of the design
process are high. Completed products would be sent back to Blueland where they are sold.
(e)
Corporate culture
Corporate culture refers to the common set of values that an organisation and its employees embody. It
can be referred to as 'the way things are done around here'.
Cultural constraints on organisations which operate globally
Farmer and Richman identify four categories of constraint:
Educational constraints
The level of literacy and the availability of secondary education, vocational training and higher education
in the countries an organisation operates will affect the quality of employees. Poor educational facilities
will inevitably result in poor management.
Sociological constraints
These are social factors that will affect relations within the organisation. For example, some countries
have a tradition of antagonism between trade unions and management. Therefore in such countries, an
organisation will have to be careful when management deals with trade unions.
Legal and political constraints
Some countries have higher levels of legislation and regulation than others. For example in some countries
it is easier to reduce headcount than others. Such rules restrict how organisations can operate.
Answers
Economic constraints
Countries have different economic variables. For example, some countries have high inflation and some
have favourable exchange rates. Others may have restrictions on the availability of credit. These factors
will affect demand for products within the country and the possibility of an organisation expanding its
operations.
(f)
Risk management
If MG relocates its manufacturing operations to Redland it could take the following steps to minimise the
probability and impact of risk.
Abandon or postpone the relocation
MG could postpone the relocation until the political uncertainty is reduced and the country is more stable.
If this is not expected for some time then it may consider abandoning the project altogether.
Corporate political activity
MG could open negotiations with Redland's government in order to gain assurance that the project will be
safe if there is civil unrest. The government may be persuaded to offer large tax breaks or other
investment incentives that would minimise any losses to MG if the company has to cease its operations.
Monitor the environment
If the project goes ahead, the company should continually monitor the political environment to ensure it
can react without delay should it appear that the operation is in danger.
Prepare contingency plans
The company should have detailed contingency plans prepared that it can turn to quickly if the need
arises. As well as steps to safeguard its investment, MG should also source alternative methods of
production (for example outsourcing if necessary) so that any disruption is minimised.
Insurance
MG should ensure that it has suitable political risk insurance in place to provide some financial protection
if operations cease.
4 F Food
Top tips. Dont be afraid to draw upon real world knowledge (for example of global fast-food chains), but ensure
what you write is relevant to the question requirements.
(a)
Objectives
Initially it will be necessary to examine the objectives of F Food. If they are seeking to expand sales
volume by expanding into Asia, but only looking for a small market share and concentrating on the home
market of North America, the issues are not as important as if they are seeking to operate as a truly global
organisation.
Organisational and local culture

The culture of F Food needs to be assessed so that it does not conflict with local cultures within Asia.
Similar to the way McDonalds operates in parts of Asia, the choice of food may have to be altered in
particular locations to match religious or cultural requirements.
Similarly, by failing to allow for diversity or to understand the local culture, planners based in North
America could make mistakes when drawing up marketing campaigns in Asia.
Ronen and Shenkar identified four key characteristics of national culture, which are all important to
consider when expanding operations overseas.
The four characteristics are: the importance placed on work goals, the role of job satisfaction, the impact
of organisational and managerial factors and the impact of work roles and interpersonal relationships.
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F Food will need to ensure that the roles they offer at least match the characteristics at different
locations. In some locations where job satisfaction is not considered as important, F Food may wish to
ensure their employees do have higher job satisfaction anyway (Corporate Social Responsibility).
Managers need to be flexible enough to adapt to cultural differences and be able to ride what Ronen
and Shenkar referred to as the waves of culture.
Management structure
The management structure of the Asian operations needs to be considered. A variety of factors influence
management methods in an international setting. These factors pull in different directions and it may be
that compromise is necessary.
The geographical distance between North America and Asia will cause some issues.
Central control, based in North America, may be the most appropriate structure as F Foods experience in
international operations is low. Centralisation is seen as promoting efficiency and prevents duplication of
effort between regions. For example, the Asian operations may have to accept supervision of its quality
assurance or financial reporting functions from North America. For this to be successful though,
consideration must be given to time differences and it may be necessary to have staff available in North
America during normal working hours within the Asian locations.
The need for a quick response to local opportunities and threats may mean that there needs to be a
significant measure of decentralisation. National, political and cultural sensitivities may reinforce this
need for a level of local management, but a shortage of local talent may limit the scope.
Another issue could be poor information systems and communications. However, the rapidly falling costs
of telecommunications through the use of Voice over Internet Protocol (VoIP) and the spread of e-mail and
video-conferencing facilities mean this is less likely to be a problem than it would have been in the past.
Holding meetings can also become difficult and expensive when a company expands internationally. Air
travel and hotel costs can be significant if many people are travelling from overseas. Video-conferencing
is an alternative to face-to-face meetings which would give a considerable cost saving.
(b)
The bonus scheme and the dominance of the CEO both present corporate governance concerns to F Food.
Bonus scheme
The existing bonus scheme gives an incentive for individuals to manipulate short-term results in order to
achieve a certain level of bonus. To mitigate this risk, there should be a review of results by an
independent body.
A separate risk arising from this bonus scheme is that it encourages short-term thinking. Decisions are
likely to be taken that improve results in the short-term, to earn the bonus, but these decisions may not
be in the long-term interests of F Food. This is an example of goal incongruence. Changing the bonus
scheme to incorporate longer term measures may help to eradicate this.
Dominant CEO
The dominance of a company by one individual is a cause for concern as this has been a feature in
several high profile corporate governance failures. The CEO may be operating in his own interests rather
than those of F Food. The presence of non-executive directors on the board is felt to be an important
safeguard against domination by a single individual due to their independence from the company.
The dominance of the CEO may indicate other issues with the board such as a lack of meetings or a
failure to oversee the activities of F Food. The board should meet regularly in order to be able to
effectively run the company.
Audit committee
Another area where F Food may want to improve is its audit committee. The role of the audit committee
is to oversee the work of the internal audit function and to challenge the external auditors to ensure that
their audit procedures are appropriate and rigorous. It is important that there are enough individuals on
the committee with sufficient technical knowledge or expertise in auditing.
Remuneration policy
Director remuneration should be sufficient to attract, retain and motivate directors of the quality required,
but should not be more than is necessary (as this wastes company resources). A significant proportion of
executive directors remuneration should be linked to individual performance. An appropriate policy
encourages behaviour that benefits the director (proportionately) and improves the long-term health of the
company.
Answers
(c)
Factors favouring expatriate staff

Poor educational opportunities in the market may require the import of skilled managers. Expatriates have
been needed in many western business operations operating overseas because they understand the
importance of profit.
Some senior managers think that a business run by expatriates is easier to control than one run by locals.
Expatriates might be able to communicate with the corporate centre better than local staff.
The expatriate may know more about the organisation overall, which is especially important as
they are representing the organisation in a new territory.
It may be hard for locals to assimilate into the corporate culture of F Food, which might lead to
communication problems.
Factors favouring the use of local staff
Local staff are cheaper than expatriate staff due to the saved relocation costs and other expenses such as
subsidised housing and school fees.
The expatriate may fail to adjust or immerse themselves into the local culture (eg by associating only with
other expatriates). This is likely to lead to poor management effectiveness, especially since the business is
likely to require personal contact.
Local staff have greater local knowledge of how business is conducted. A substantial training programme
might be needed to educate expatriate staff about the local culture. This may need to include language
and cultural training and cover local social and business customs and norms..
Other relevant factors to consider
A glass ceiling might exist in some companies. Local managers may not make it to board level due to
favouritism to western members of management. Local management will also have greater local
knowledge but may not have an understanding of the wider corporate picture. However, this is true of
many management staff at the operational level whether local or expatriate.
5 G banking group
Top tips. Think about why the BRIC economies are so attractive to multinational businesses, their population
represents both a huge resource and a huge potential market. Do not confuse outsourcing (using a vendor
company to provide services) with offshoring (moving operations overseas). The workers in India are employed
by the G Banking Group, not a third party.
The examiner has emphasised the importance of writing enough. Remember to make your point, explain it and
relate it to the scenario.
Easy marks. Identify the BRIC countries. The advantages and disadvantages of offshoring should be familiar
material.
Examiners comments. A substantive 25 marks are available. However, there was a lack of content in most
cases indicating that insufficient time had been spent in addressing the issues in the scenarios.
Common Errors
Not writing enough. Some answers were nothing more than outline notes when the questions had more
substantial requirements.
(a) exposed knowledge gaps in a number of unprepared candidates.
Some candidates argued a case that employees could be redeployed, when the question makes clear they
cannot.
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Marking scheme
Marks
(a)
Up to 2 marks for each relevant, fully explained point
10
(b)
(c)
Up to 2 marks per valid point referenced to the scenario
10
5
25
Our answer shows what we consider the most appropriate points to make. Other relevant points that
answer the question would earn marks. However, irrelevant points that do not answer the question would
not earn marks.
(a)
BRIC economies
Brazil, Russia, India and China have all experienced rapid economic growth in recent years. They are
becoming increasingly important in the world economy, both individually and even more so collectively.
They are representative of a shift in economic power thats likely to accelerate in future years, and are
collectively referred to as the BRIC economies.
Factors involved in the emergence of the BRIC economies
Large pool of labour and consumers. The BRIC economies represent a huge market, which makes them
attractive to multinational businesses wishing to both reduce production costs and sell more of their
goods. As the purchasing power of the population as a whole increases they will provide even larger
potential markets for both domestic and multinational producers.
The emergence of a relatively wealthy middle class. The BRIC countries have experienced the emergence
of a relatively wealthy middle-class living in urban areas and fuelling economic growth through consumer
spending.
Relatively low wage rates. The relatively low wage rates in the BRIC economies has made them very
attractive to multinational businesses looking to relocate and reduce costs. China in particular has a huge
pool of relatively cheap labour and manufacturing skills.
Increasingly educated population. There are now sufficient numbers of well educated locals to set up well
managed, efficient production facilities in the BRIC countries.
Natural resources. The developing world economy needs the resources that the BRIC countries can
provide. Brazil and Russia have extensive raw materials such as agriculture, iron ore and oil.
Globalisation has helped fuel the growth of the BRIC economies. Globalisation refers to the growing
interdependence of countries worldwide through increased trade, increased capital flows and the rapid
diffusion of technology.
Particular features of globalisation that have benefited the BRIC economies (and other economies)
include:
The ability of individuals and organisations to enter into transactions with individuals and organisations
based in other countries
Increased influence and power of multinational enterprises and increased mobility of skilled people
The rise of globally linked and dependent financial markets, with easier access to capital
The trend to increased similarity in consumer tastes around the world fuelled by increased trade and the
global media
Reduced transaction costs through developments in communications, transport and technology
The rise of emerging and newly industrialised nations with governments more willing to embrace free
markets and remove internal restrictions to doing business overseas
It is now common for components for a product to be manufactured in a number of different countries.
China is sometimes referred to as the workshop of the world.
Answers
(b)
Offshoring
Offshoring is the relocation of some part of an organisation's activities to another country. Developments
in technology have made offshoring feasible in many situations, such as back office support for banking
operations.
Offshoring has grown significantly in recent years. India is one popular offshoring country, many UK banks
and other companies now have service centres based in India.
Offshoring offers a number of advantages to the G Banking Group.
Lower overall cost. Labour and other costs (eg premises) will be lower in India than in country D.
Able to afford a more qualified workforce. Call centre positions in India are often filled by better qualified
individuals than would be the case in country D.
Investment by host government. Infrastructure (for example communication) in emerging economies has
often been heavily invested in by the host governments, in order to attract inward investment.
Economies of scale / centralised operations. The back office operations will now be able to concentrate
its back office operation in India, where it already employs 3,000 people. Economies of scale are likely to
result. Long-term moves such as this also encourage strategic planning.
Allows specialisation. Offshoring back office operations to India will allow the G Banking group to
concentrate on the more complex side of its banking operations and grow its international business by
allowing other staff to focus on specialised areas of operation. This is necessary in a global economy
where competition is increasing
On the other side of the discussion, managing operations based in another country will involve a number
of challenges for the G Banking Group:
Risks associated with currency exchange rates. As an experienced banking group, this should be
manageable. Exchange rates will always be liable to fluctuate and this may erode some of the cost
savings.
Language barriers and cultural differences. This may not be such a significant hurdle to overcome for G
Group as they already have a large presence in India. There may be some resistance by customers based
in country D, due to perceived problems dealing with call centres based overseas.
Technical challenges. Staff in India will need to be properly trained to ensure that service levels in the
offshored function do not suffer. Some functions may be retained at the call centres in country D, so that
customer service and satisfaction levels remain high.
Exercising control from a distance. Offshoring can lead to a loss of control, particularly over quality.
Dealing with different time zones. This is a challenge that a multinational company should be able to
meet reasonably comfortably, although employees may find themselves inconvenienced occasionally (for
example the timing of telephone conference calls). Globalised business operates 24 hours a day and the
G Group would be no exception to this.
(c)
Role of the Human Resources Division

The 500 employees of The G Group that arent redeployed following the offshoring will be dismissed
through reason of redundancy.
The Human Resources Division should have policies governing redundancy and ensure these are
followed.
The HR Divisions role should include setting policies that cover areas such as:
Selection for redundancy the criteria for selection must be clear and must be communicated as clearly
as possible
Pre-redundancy consultation and clear communication of where and when redundancies are to occur to
enable staff to plan their futures
Help with developing a CV and clear guidelines covering time off to attend interviews
Clear guidelines on redundancy payments, with clear communication of packages and negotiation where
appropriate
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Assistance with re-development of skills, re-training to learn new skills for a new career, or re-location of
redundant employees
Careers advice, counselling and post-redundancy support
Redundancy is likely to be an unpleasant experience. The HR Division must ensure affected staff are
handled with care and sensitivity.
HR should also play a part ensuring remaining employees remain motivated, and morale is as high as
can be expected in the circumstances.
6 Changeland
Text reference.Chapters2, 8, 9 and 10
Top tips. Parts (a) and (b) are tricky as they do not give you much of a structure to use. This means you must
create your own. In part (a) think about the different types of tax that can be collected. In part (b) think about the
process the Government would have to go through in order to create its strategy.
Easy marks. Coming up with CSR and ethical issues in part (c). If you get stuck then just think about how a
business could help its local community there are plenty of issues in the scenario to relate them to.
Examiners comments. Sub-questions (a) and (b) caused difficulties for some candidates. A common failing in part
(a) was a failure to answer the question which related to taxation. A common failing in part (b) was a failure to
relate marketing thinking to the scenario rendering some responses more a summary of marketing techniques.
Some candidates' efforts were rather sparse considering the number of marks available.
Marking scheme
Marks
(a)
(b)
(c)
Up to 2 marks per valid point referenced to the scenario; 1 point each for brief general
(but relevant) points
1 mark each for each point.
10
10
5
25
Our answer shows what we consider the most appropriate points to make. Other relevant points that answer
the question would earn marks. However, irrelevant points that do not answer the question would not earn
marks.
(a)
Developing a tax system in Changeland

The Government of Changeland wishes to introduce a fair system of taxation. What fair is has not been
defined but there are a number of policy areas that the Government should consider as part of this
decision.
Direct versus indirect taxation policy
The first policy decision that is required is what proportion of tax does the Government wish to raise from
direct or indirect taxation.
Direct taxation is normally a percentage of income which is deducted from an individuals earnings or a
businesses profits. It is often viewed as a progressive tax that is simple and easy to understand.
Indirect taxation is a tax on consumption that is levied on a person or organisations expenditure. The
basic cost of the product or service is increased by a particular percentage and is paid by the buyer to the
seller. The seller then pays over the tax collected to the Government. Indirect taxes are often viewed as
regressive, unfair and difficult to understand.
Answers
Options
When deciding on the proportion of direct versus indirect taxation the Government could chose three
options, mainly direct taxation, mainly indirect taxation and an equal or other split between the two other
options. When deciding the Government should consider a number of factors.
Indirect taxation is generally cheaper for the Government to administer as the cost of collecting and
paying the tax is a burden on business organisations, but it will increase inflation since it increases the
cost of goods and services. It is also generally popular with the public if they feel that they have a choice
of whether to incur it (by deciding whether or not to buy goods subject to the tax). It becomes unpopular
where all goods and services are subject to indirect taxation and it is impossible to avoid.
Direct taxation is generally unpopular with the general population has they see that their income is
reduced. This reduction in income helps to reduce inflation by reducing demand but it is expensive for the
Government to administer and requires considerable laws and regulations to be introduced.
Individual taxation versus corporate taxation policy
The second policy decision is in regard to the proportion of taxation that should be paid by individuals and
business.
Options
The Government could choose to mainly tax individuals, mainly tax business or an equal or other split
between the two other options.
By mainly taxing individuals the Government risks stopping the economy growing as people do not have
enough disposable income to spend on goods and services, this will also reduce company profits and
reduce the level of corporation tax collected.
If levels of corporation tax are too high then the country may become a less attractive place for foreign
companies to set up business and they may relocate their operations to other countries with a more
favourable tax regime. This may have an effect on the products and services available in the country as
well as on growth and unemployment levels.
Mixture of indirect taxation policy
The third policy decision that is required is in regard to the mixture of the different types of indirect
taxation.
Options
The types of indirect taxation that Changelands Government may consider are:
Value added tax
This tax is levied on all goods and services, although the rate on each type of good or service may vary.
For example goods that fulfil basic needs such as food may be taxed at a lower rate than luxury goods
such as cars. As mentioned above, this would be unpopular with the public as they cannot escape it, but
it would provide the Government with a large amount of tax for relatively low cost.
Tax on undesirable goods
The Government could make the goods that it deems undesirable subject to a higher tax than other
goods. This should help deter the population from buying the goods, or at least reduce their consumption
of them. It would therefore help the Government meet its objective of discouraging sales without banning
the products but would be seen by the public as taking away their free choice of consumption.
Import duties
Import duties are taxes placed on goods imported into a country. They are paid by the importer and
effectively passed onto the consumer through a higher price. The Government could apply these duties to
the goods it is trying to discourage people from buying and the effect would be the same as if it taxed the
undesirable good as above. It may be marginally more popular with the general public than such a tax as
it is hidden from them within the general price. As with corporation tax, import duties may encourage or
discourage overseas companies from operating in a country. Before imposing import duties, the
Government should consider the possibility of retaliation by other countries. Changeland may find similar
duties are placed on its exports, which will damage its income from trade.
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(b)
Social marketing
Changelands Government has identified a number of goods sold in the country that it considers
undesirable, these are known as demerit goods and examples of such goods found globally include
cigarettes and alcohol.
To help curb consumption of such goods, the Government should consider social marketing, the
application of marketing techniques to achieve non-commercial goals.
Consumer buying behaviour
Before Changelands Government can shape consumer buying behaviour it must first understand the
factors that influence it. According to Lancaster and Withey there are four groups of factors that should
be considered, these are social, cultural, personal and psychological.
Social factors
Social factors relate to the social groupings a consumer belongs to or aspires to, and trends in society
which influence buying patterns. These groupings include reference groups, roles and family.
A reference group is an actual or imaginary group that influences an individual's evaluations, aspirations
or behaviour. They influence a buying decision by making the individual aware of a product or brand,
allowing them to compare their attitude with that of the group, encouraging the individual to adopt an
attitude consistent with the group, and then reinforcing and legitimising the individual's decision to
conform.
Roles relate to the expectations which other people have of an individual. For example, a male may
consider himself to be a father and husband, an active member of the local community, or a supporter of
a sports club.
Families are usually defined as parents and their children, but may also be extended to grandparents and
even uncles and aunties. The interests, tastes and beliefs of a particular family will differ from others.
Cultural factors
Culture comprises the values, attitudes and beliefs in the pattern of life adopted by people, that help
them integrate and communicate as members of society. Culture comprises cultural artefacts, lifestyles,
and so on. For example, alcohol consumption is part of the culture of many countries in Western Europe,
whereas it is frowned on in Muslim and some other countries.
Personal factors
Personal factors include such things as age, stage of family and life cycle, occupation, economic
circumstances and lifestyle. Individuals will buy different types of product depending on their
circumstances. This is particularly relevant to such products as clothes, furniture and recreation.
Psychological factors
There are four main psychological factors that influence the process of buyer behaviour, these are
motivation, perception, learning and beliefs and attitudes.
Motivation is an individuals inner state that energises, activates, or moves, that directs or channels their
behaviour. It is the product of numerous items including a persons needs and factors they find satisfying
and dissatisfying.
Perception is the process whereby people select, organise and interpret sensory stimuli into a meaningful
and coherent picture. The way consumers view an object may vary according to their past experience,
expectation, needs, interests, attitudes and beliefs.
Learning concerns the process whereby an individual's behaviour changes as a result of their experience.
A belief is a descriptive thought that a person holds about something. Beliefs are important to marketers
as the brand beliefs that people have about products make up the brand images of those products.
An attitude describes a person's enduring favourable or unfavourable cognitive evaluations, emotional
feelings, and action tendencies toward some object or idea. Attitudes lead people to behave in a fairly
consistent way towards similar objects. Attitudes tend to settle into a consistent pattern to change one
attitude may entail major changes to other attitudes.
Answers
Marketing techniques to shape consumer behaviour

An appropriate social marketing strategy that the Government could use to shape consumer buying
behaviour away from the undesirable goods would be to segment the market and then to deliver its
message using appropriate media.
Market segmentation
Market segmentation is the subdivision of a market into homogeneous subgroups that can be selected
and be targeted with a distinct marketing mix. Changelands Government would be initially targeting
young people but this may need to be further subdivided, probably according to personal factors, to target
an age range and those with lifestyle and economic circumstances that may be the most likely to buy the
undesired products.
The message
Once the market has been segmented the Government should determine the message that it wishes to
put across to it. Clearly it should be designed to put the target market off purchasing the undesirable
products, but to do this will mean the marketers will need to understand the segment in terms of social,
cultural and psychological factors that contribute to its buying behaviour. Once the segment is
understood, a message can be created that is more appealing than the marketing message put out by the
marketing teams of the undesirable products.
Media
The Government should select the most effective media to use in order to get its message across. It
appears that the general market segment is young people. This means that traditional marketing
channels, such as newspaper adverts, may not be as effective as newer channels, such as the Internet
because that is what younger people are interested in. The newer types of media may also be more
effective than traditional ones since, for example, online video clips may better target psychological
factors (such as a persons perception of the undesirable products and their motivation to buy or not buy
them) than printed adverts.
(c)
Corporate social responsibility (CSR)

Corporate social responsibility (CSR) involves an organisation accepting that it is part of its local
community and is therefore responsible for the consequences of its actions within that community.
Ethics
Ethics are moral principles that individuals or businesses decide to follow. They are more than just
compliance with the law and extend to standards of behaviour that the individual or business believes in.
CSR and ethical issues in Changeland
Changeland is transitioning from a dictatorship to a democracy and there a number of CSR and ethical
issues that companies operating in the country should consider.
Contribute to healthcare improvements
Companies could help improve healthcare provision for their employees by providing paid for health
insurance so that staff can afford the best healthcare available.
Support education
Businesses could work with local schools to provide work experience placements for children. They could
also support schools through sponsorship or by providing them with computers and office equipment
when they upgrade their existing systems.
Aggressive advertising
Companies should consider whether their marketing campaigns take advantage of poorly educated people
and are therefore unethical.
Taxation
Foreign multinationals that operate in Changeland should consider how they are structured for tax
purposes. If they are able to pay less tax than local businesses then this can be considered an unfair
advantage and damaging to the development of businesses in Changeland. Paying less tax would also
mean less revenue for the Government to help develop housing, healthcare and education.
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7 Cranmoor
Text reference. Chapters 1, 2, 9, 11 and 12
Top tips. In part (a) you may have trouble focussing your answer (as the examiner mentions in their comments
below). The secret is to set out a structure for your answer before you begin to write, and in this case a good
place to start is by splitting your answer between regulation and economic matters.
Easy marks. Identifying the benefits of CSR in part (b).
Examiners comments. Answers to part (a) were in many instances too vague giving answers such as 'provide
support to businesses' or 'maintain a balance between business and individuals' rather than addressing the
question on the validity of regulating less and concentrating on economic matters. Answers to parts (b) and (c)
generally addressed the requirements better, though in (b) some candidates simply discussed CSR without
showing the benefits to business and in (c) failed to show the relationship between CSR and HR policies.
Marking scheme
Marks
(a)
1 mark for each relevant, fully explained point
10
(b)
Up to 2 marks for each relevant explained point
(c)
1 mark per valid point referenced to the scenario
10
5
25
not earn marks.
(a)
Regulation and economic matters

The business leaders of Cranmoor have suggested that the Government should regulate less and
concentrate on economic matters. We shall consider each point in turn.
Regulation
Regulation can be defined as any form of state interference with the operation of the free market. Most
markets are subject to regulation and some examples of regulated areas include:
Minimum wage
Pricing
Employment practices
Product safety
Pollution and waste disposal
Competition within an industry

Governments regulate industries in order to balance the needs of the customer (which are not always
being met) with the needs of the industry (which is usually profit maximisation). The goal is to ensure
safe products are services are available without inhibiting the function and development of the industry
that provides them.
Where a need for some form of regulation has been identified, business organisations within the industry
may set up a voluntary regulation scheme in order to manage the regulation itself, rather than being
subject to Government legislation.
Those who advocate the reduction of legislation (such as the business leaders of Cranmoor) believe that
the free market will allocate resources effectively and encourage businesses to become efficient due to
increased competition. Businesses that are subject to less regulation will not encounter costs of meeting
regulatory requirements and should therefore be more profitable.
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However, those in favour of regulation cite the need to enforce competition, where the market is not
competitive, and to improve the quality and quantity of goods and services provided, where the industry
does not meet the needs of the customer.
Economic matters
Governments have a macroeconomic policy that usually is based around four objectives. These objectives
are a controlled balance of trade, economic growth, controlled inflation and employment. Cranmoor
currently has a substantial balance of payments deficit and a weakening economy, so these areas are of
prime concern.
Balance of trade
The balance of trade reflects a countrys trading position and concerns the amount that it exports as
against how much it imports. Cranmoors balance of trade deficit indicates that the country is importing
more than it is exporting. It is therefore very important that the Government seeks to reduce this deficit by
increasing exports in relation to imports.
Economic growth
A countrys economic growth refers to the level of demand for goods within the economy and how much
is being produced. Cranmoors weakening economy indicates that demand for goods is falling and the
amount of goods being produced is also falling. This may explain the high amount of imported goods. The
Government should therefore seek to improve growth, perhaps by looking to increase the disposable
income of its citizens (by reducing taxation) or stimulating demand by investing in infrastructure projects.
Inflation
Inflation refers to the rate at which the price of goods and services changes over time. Rising inflation
means the price of goods and services is increasing and this can be a consequence of too much demand
within the economy. Those on fixed incomes, such as those on pensions or state benefits, are the hardest
hit in times of inflation. Cranmoors government should seek to prevent inflation becoming a problem by
managing demand so that prices do not rise to quickly.
Employment
High employment is a key goal of any government. This is because it means the amount it receives from
personal taxation is maximised and the amount that it pays out in state benefits is minimised. It also
means that citizens have more disposable income and therefore can spend more, fuelling economic
growth. Cranmoors government should establish policies that encourage job creation in order to support
its other macroeconomic goals.
(b)
Benefits of Corporate Social Responsibility policies

Corporate social responsibility (CSR) refers to the expectation in society that companies are accountable
for the social and ethical effects of their actions. This expectation has grown since the 1970s and
organisations are expected to demonstrate a duty of care to society.
The government of Cranmoor has stated that without good CSR a number of stakeholder groups within its
society may feel isolated and vulnerable. This suggests that Cranmoors businesses are not currently
always acting in the interests of wider society when making business decisions and it may be because
they do not appreciate the possible benefits to them of behaving in a socially responsible manner.
Benefits to an organisation of adhering to good CSR principles
Improved corporate image
The adoption of good CSR policies will demonstrate to customers and potential customers that the
business is forward looking and is proactive in dealing with changes in society. This is especially true
where a business changes its behaviours before it is required to (ie before legislation on that particular
area comes into force). This will create a positive view of the business within the market.
Marketing
An improved corporate image will enable the business to differentiate its products and services from those
of the competition because the brand and its values become a unique selling point. Public relations (PR)
is a key part of the promotion mix and therefore improved public relations that result from the CSR
policies will present the business with an increased range of marketing possibilities.
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Branding
A business may build a brand based on strong ethical and socially responsible values. Such values may
contribute to brand equity and the value of the brand, as well as the long-term success of the company.
This is because the business may be able to gain and retain customers because they share the brands
values and will stick with the organisation in good times and bad.
Efficient operations
Many socially responsible policies, such as improving recycling and reducing waste, will have a secondary
benefit of improving the efficiency of business operations.
Pricing
A strong brand and CSR values may enable the business to charge a premium for its goods and services
above that of its competitors. This is because customers may accept a higher price in return for buying
into the organisations values. Therefore the organisation will have some flexibility in its pricing decisions
with the possibility of increasing its revenues whilst maintaining its customer base.
Profitability
Potentially increased revenues and reduced costs as identified above will together improve the
organisations profitability.
(c)
Corporate Social Responsibility and Human Resource policies

Human resource policies concern how an organisation recruits, develops, rewards, motivates and
develops its culture. They are linked to CSR policies since they both concern people. We shall now
consider a number areas where HR and CSR policies overlap.
Recruitment
A strong, socially responsible brand will help the business not only attract and retain customers, but also
staff as well. Employees may be attracted by the organisation, particularly if they share its values and
may decide to work for it rather than other, less socially responsible organisations. The quality of staff
may also rise as a consequence.
Development
Socially responsible businesses see their employees as people rather than just a number. They take an
interest in improving their employees, not only in terms of what is needed in their current career, but also
other areas of personal development.
Reward
In recent times there has been a move to socially responsible rewards and benefits offered to employees.
For example, home working, flexible working, the living wage and support for gym memberships and
childcare.
Culture
Socially responsible businesses often have a culture with a positive outlook, a can-do attitude and
support for philanthropic activities (for example allowing employees time off to undertake voluntary work).
Such a culture will feed into the corporations external image (supporting the business and recruitment of
employees) and the motivation of existing staff.
Motivation
The combination of corporate culture, development and reward discussed above should help motivate
employees. This extra motivation should help improve business productivity, reduce absenteeism and aid
staff retention. These will have cost benefits to the business in the long-run.
Answers

8.1
An intranet provides a storage and distribution point for information accessible to staff.
8.2
An expert system could be described as a database built on knowledge and experience.
8.3
Corrective maintenance is carried out to correct residual faults. Options B and C are enhancements
(perfective maintenance). D takes account of anticipated changes in the processing environment
(adaptive).
8.4
Data redundancy occurs when data is duplicated.
8.5
The new system will:

Change the way architects work
Compatible software allows workers to share ideas electronically.
Change the way the companys services are provided
8.6
8.7
As the architects can share ideas electronically, they no longer need to work together at the clients
premises.
Virtual teams are interconnected groups of people who may not be present in the same office or
organisation but who:
Share information and tasks
Make joint decisions
Fulfil the collaborative function of a team.
A direct approach may be preferred because:
There is complete confidence in the new system
To overcome a reluctance to 'let the old system go'
It is cheaper and more convenient than running two systems
The change may be implemented before staff are able to object
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9.1
As the direct approach involves the old system ceasing operation completely at a given time, this
approach is the most risky.
9.2
Dial-back security requires users to identify themselves before the system dials them back on their
authorised number before allowing access.
9.3
Denial of service attacks attempt to disable an Internet site by overloading it with traffic.
9.4
Application Service Providers are third parties who manage and distribute services and solutions to
clients over a wide area network.
9.5
Four roles that the new system may play in Comseek are:
Planning future operations
Recording transactions
Performance measurement (comparing actual results against plans)
To help senior management make decisions
9.6
Enterprise-wide systems are designed to co-ordinate all business functions, resources and information.
Under an enterprise-wide system each business area is provided with a system that fulfils its needs,
however each module shares a common database that is the basis of all the information within the
organisation.
9.7
Testing should include:
User acceptance testing to establish whether user acceptance criteria is met
Realistic tests realistic data and environment
Contrived tests how the system copes with unusual and unexpected events
Volume tests ensure the system can cope with the expected number of transactions, and more
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10 S&C software project

Top tips. Do not be tempted to write too much in Section B questions ensure you cover the points clearly then
move on.
To pass each part you need to make five explained points. Some of the answers below make more than five
points to indicate the breadth of possible answers.
Easy marks. Stating who the users are in Part (c) and why they are important would gain easy marks. Use this
list of users in Part (e) and state how (realistically) they would become involved in the project.
(a)
Alignment with business strategy

The system is likely to be a source of competitive advantage for the firm because the cost savings and
subsequent productivity gains will not be available to its competitors. To make the most of the advantage,
it must be aligned with the firms overall business strategy.
Fitting the software and business processes
S & C has two choices if the software does not fit its business processes.
1.
Customise the software to the match the process.
2.
Change the processes to match the software.
Customise the software

The benefit of this option is that there will be less disruption within the firm as the business processes
remain unchanged. However, there could be a large financial cost if external experts have to be brought in
or if the changes are complex. There is also a risk that new programming introduces glitches into the
system.
Change the processes
This option saves the cost of additional programming and the risk of introducing glitches. However,
changing business processes could have a negative impact on the morale and efficiency of the staff as it
would represent a major change in the way they work.
(b)
Direct approach
Under a direct approach, on one particular day the old system is switched off and the new one switched
on. There is no overlap or period of dual running of both systems.
Phased approach
A phased approach involves selecting a complete section of the system for direct changeover.
The phased approach is more suitable than a direct approach as it controls the risk involved when
switching over to a new system this is particularly important as S & C will be introducing a brand new
system that no one else has used.
The firm would implement the new system in discrete stages corresponding to the current system they
replace.
This would have the following advantages:
Risk is reduced as glitches will be limited to the new subsystem only.
Staff will adapt to change more easily as it occurs over a longer period in small chunks.
It allows time for feedback from staff involved in earlier phases to be considered when rolling out
later ones. For example, small glitches or user-friendliness.
There is less disruption so the benefits of the changes can be felt more quickly.
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(c)
The following roles within S & C are important for the implementation to succeed.
Partners
Their support in terms of visible behaviour and making sufficient resources available is crucial.
Project manager (change agent)
It is their organisation and drive that will keep the project on track and focussed. This will ensure
business performance is not affected by the change. A regular presence is required to ensure this.
If the current manager cannot keep regular attendance they should be replaced.
Steering group
The group should be available to support staff in the weeks immediately prior and subsequent to the
implementation. They also have a key role to play in winning over staff who resist it.
HR department
HR should ensure staff receive suitable training and support during the implementation. Where system
success depends on targets being met a reward system should be put in place. It should also develop
policies to deal with staff who resist the change.
Staff
It is their acceptance of the system that will decide if it is a success. It is important that they
communicate ideas and suggestions as this will help them feel that the system is theirs.
Managers
They have a key role to ensure information regarding the change is communicated in a clear, timely
manner to the staff. This will help minimise any disruption to the business.
(d)
User involvement in system implementation is essential to obtain user acceptance. Specific examples of
activities users should be involved in include:
Testing
Developers should ask a group of users to test the system to check that it works as it should and actually
meet their needs.
Training
The implementation phase is usually towards the end of the development. Users should start their
training on the new system so they are prepared for the changeover.
File conversion and transfer
Data within the old system will need to be transferred to the new system. Users should be involved in the
transfer as their knowledge will help ensure data is interpreted correctly.
Quality circles and discussions
Forums that include users should be set up to discuss the overall quality of the system and how it could
be improved.
Championing change
Users who can see the benefits of the new system should become involved in winning over other users
who may resist the change.
Answers
(e)
There are three distinct groups within S & C who have different training needs.
Partners
Partners will not be using the system on a day-to-day basis, however, they should have a good basic
understanding of it so they understand how the work they review was assembled. Such training could be
provided by an executive presentation. Some additional, hands-on training may be required covering how
reports and snapshots performance are obtained.
Managers
Managers should receive training to enable them to understand the software involved in areas they are
responsible for. In particular, security features that prevent unauthorised access or loss or damage to
data.
Users
Users need to be trained in the day-to-day features and processes that the system provides. This would
include data-entry and report writing amongst others.
Methods of training can include:
(f)
In-house demonstrations
On-line learning
Computer based training using dummy data
A number of methods can be used to evaluate the success or failure of the system.
Cost-benefit review
Following the completion of the project a cost-benefit review can begin. This analyses the actual costs
incurred in developing and implementing the system with the actual benefits the system provides.
Benefits can be difficult to quantify so the firm may have to make use of estimates. This review will help
determine whether the system is a financial success or failure.
Performance reviews
Performance reviews consider whether the system is performing as expected and may cover issues such
as:
System efficiency is the system operating quickly enough, does it slow down when processing
large volumes of data?
Security is the system secure, have there been many breaches?
Error rates does data in the system contain errors? If there are then there may be problems in
data collection and file conversion.
Output does the system produce its output on a timely basis, is it being used as expected, does
it go to the right people?
Post-implementation review
This establishes whether or not the systems objectives and targeted performance criteria have been met.
It compares the systems actual and predicted performance. The contents of this and the other reviews
are used in a formal post-implementation review report to judge the systems success or failure.
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11 S1K
Top tips. Part (a) gives you scope to include any aspect of information technology and information systems.
Ensure you explain how the uses of IT/IS you identify will improve SKs operations. Be concise though, dont
waste precious time with waffle. In part (b), avoid providing a general discussion of the points highlighted by the
Chief Executive. Instead, focus on potential implementation problems (as stated in the requirement). Ensure you
cover both aspects of part (c) - identifying the main individuals and explaining whether their training should be
in-house or not.
Easy marks. You are told in the scenario that Internet possibilities are being missed - development of an
effective website provides easy marks in part (a). Commenting on the need to appoint a project manager and
discussing whether the proposed phased implementation approach is appropriate provides some easy marks in
part (b). In part (c), the new project manager and all shop staff are two obvious candidates for training.
Marking scheme
Marks
(a)
Two marks for each relevant, explained use of IS/IT at S1K
10
(b)
Two marks for each relevant, explained point related to the Chief Executives analysis
(c)
Up to two marks for each individual/group and training method
10
5
25
not earn marks.
(a)
Five ways in which either information technology (IT) or information systems (that these days tend to
utilise IT) could be used to improve S1Ks operations are identified below.
Establish a well designed website
SK1 could invest in a website to provide information to customers, enhance the brand, offer online
booking for optical appointments and sell own-brand products. It would be essential that the site was
integrated with back-office systems, to ensure the booking process went smoothly.
The site should include e-commerce and also be a key marketing tool.
Establish a Wide Area Network (WAN)
By linking computers at shops together, a WAN would facilitate improved communication and
collaboration between shops.
The WAN would enable data and information to be shared quickly and effectively, and would also provide
a platform for the implementation of organisation-wide systems.
Implement a new integrated sales, stock and financial system
There are currently a series of shops operating independent computer-based systems and some shops
using manual systems. A common stock and point of sale system, integrated into the proposed new
financial system, would save time analysing and searching for information in shops and enable quicker
and more accurate production of financial information.
Integration between systems is important to reduce the need for keying data, as this is expensive and
likely to introduce data inconsistencies and errors.
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Introduce consistent, simplified operational procedures

The new sales system referred to above should include an EFTPOS system. This would enable staff to
process sales more efficiently, improving customer service. It would also mean less time spent on
accounting and administration tasks, as the calculation of sales figures and the updating of stock would
be largely automated.
All shops should use the same system, allowing procedures to be standardised bringing an additional
benefit of staff being able to work at more than one shop.
Implement an Executive Information System (EIS)
An EIS sitting on-top of the new integrated sales, stock and financial system would enable the new Chief
Executive and other senior managers to produce tailored high-level information to support strategic
decisions.
The software should facilitate the monitoring of Key Performance Indicators (KPIs) linked to Critical
Success Factors (CSFs).
(b)
The key points from the Chief Executives analysis of potential implementation problems are discussed
below.
No project manager in place
There was a project manager in place who was responsible for the implementation of the new financial
system, but that person has left and not yet been replaced.
The Chief Executive recognises the need to appoint a new project manager as soon as possible. He also
believes the project manager should come from within S1K, rather than appointing an external person.
Appointing from within SK1 would ensure the new project manager was familiar with the organisation
and the processes surrounding the existing finance system.
However, project management requires specific skills - there may not be a suitable individual within SK1
for the role. A specialist project manager appointed from outside SK1 should have the required skills and
experience of similar implementations and may also bring a fresh perspective to the situation.
The proposed software does not fit existing business processes
The Chief Executive recognises that the new software does not fit existing business processes exactly, but
he still believes it to be a good choice. This belief is based on the fact that competitors use the software
and that it is recognised as an industry best practice system.
However, software and systems should facilitate efficient working practices and business processes.
Changing processes to fit a particular type of software could actually introduce inefficiencies. This requires
further investigation. On the other hand, it could be that due to its rapid growth S1K operates in an
inconsistent and inefficient way, so a change in processes could be beneficial.
A possible complication in any review of the choice of software is that S1K may already be committed
contractually to take the proposed software.
The implementation approach to adopt
The Chief Executive states that the previous project manager recommended a phased approach to
implementation and drew up a timetable for implementation under this approach. The Chief Executive
agrees that a phased approach is the best option as it would be the least problematic for S1K.
A phased or modular changeover involves changing part of the system first, for example the receivables
ledger, then changing other parts of the system over in stages. A phased approach could also take the
form of implementing the whole new finance system in a particular location (such as a shop) at a time.
The phased approach is less risky than a direct approach as the area of change or upheaval is restricted.
It allows for problems to be identified and corrected in a relatively restricted environment, before the
system is introduced organisation-wide.
The phased approach is a good option for SK1 both as a risk management technique and to reduce the
impact on staff already under pressure from takeovers and the change of Chief Executive.
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(c)
The main individuals and groups S1Ks Human Resources Department should target initially for training
are:
The new project manager
Assuming the new project manager comes from within SK1, he or she will require training in project
management skills.
Training should be provided by a specialist and the recipient should be free from the distractions of dayto-day work. Therefore, this should be held off-site.
S1K senior management
Successful implementation of IT projects requires support from the top of the organisation. SK1 senior
management must understand the role of the new system and be seen to support the project.
Senior managers may require training to fully understand (and then be able to explain to staff) the benefits
the system will bring. This training would probably best be provided in-house, to senior managers as a
group, with the new project manager present. It should be provided by a combination of the software
supplier and the new project manager, ideally with some input from the Chief Executive (given his
background).
Head office finance staff
Head office finance staff will use the new system to consolidate shop results into organisation-wide
financial statements. Depending upon how operations are structured, they may also provide a centralised
accounts function (eg payables and receivables).
Even though this is an off-the-shelf package, the supplier should offer training options (for example a
consultant) either as part of the contract or for an additional fee. As the software is widely used, private
training courses may be available. An external trainer delivering training in-house may be the most
appropriate option, followed up with on-the-job training.
Shop staff
Staff operating in shops will need training to ensure they can process transactions efficiently, maintaining
standards of customer service.
Training should cover operating procedures, data entry requirements, payment processing, system
commands and security aspects (eg passwords).
This would best be achieved through a combination of an initial out of hours face-to-face session, and
then on the-job training through the use of internal system champions who have been trained by the
software vendor in advance of other users. Online help, printed manuals and a telephone helpline should
also be provided.
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12 LD2
Top tips. Part (a) requires you to explain potential benefits of a new IT system. Refer to problems outlined in the
scenario, if the new system solves an existing problem, thats a benefit.
For part (b), the wording of the question is general and you could make a number of different points in your
answer. The question refers to the main approaches to quality, not quality control, which suggests that quality
assurance schemes must feature in your answer.
If you are a regular user of the Internet, it should be possible to answer part (c) largely from experience and with
the application of some logical thinking about what makes one companys website better than others. Although
only five points are needed, we have provided six for study purposes.
Easy marks. There should be some easy marks to gain in part (a) by discussing benefits of an improved IT
system, in part (b) from discussing quality assurance and in part (c) by discussing the feature of a good
commercial website.
Examiners comments. This question attracted the better responses overall of the two 25 mark questions and
appeared the more accessible for candidates. Many responses to part (b) were of the 'all I know about' variety
regarding quality, though parts (a) and (c) were answered well by many candidates.
Marking scheme
Marks
(a)
10
(b)
1 mark each for explaining QC and QA, up to 3 marks for explaining each approach
10
(c)
5
25
not earn marks.
(a)
The ways in which the proposed People and Payroll system will benefit LD2 include:
Integration of systems.
The new system will provide one single system that replaces a number of separate systems. A single
system will solve the current problems due to incompatibility of software between different systems, and
remove the need for complex reconciliation of system output.
Cost and quality.
The new system should support a simpler and better quality of operation resulting in lower operating
costs. Separate systems are more costly because they require different input and reconciliation of output.
With an integrated system, data will be input just once, reducing input time, effort and cost.
Fewer errors.
The new system should be designed to reduce the likelihood of undetected input and of input errors.
Calculations should be done within the system, by the software. The payroll and invoicing errors that
currently occur due to faulty data input or calculation should be eliminated.
Capacity for growth.
The LD2 group has grown by acquiring other businesses, a strategy which may continue. The People and
Payroll system should be designed so that it can take on additional processing capacity that may be
required in the future, for example allowing acquired businesses to be transferred to the system.
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Speed of access to information.

The new system will provide immediate access to information. More timely information should improve
management control and decision making.
Speed and accuracy of data entry.
We are also told that the new system should enable management to submit accurate timesheet entries
directly into a central payroll system.
Improved management reporting.
Management reports are currently often late. An integrated system should make it easier to provide up-todate reports in a timely fashion (avoiding delays due to the need to collect and combine data from
different systems and sources.
Comparative efficiency.
LD2s technology currently lags behind that of its competitors. A new system will enable LD2 to utilise
current technology and (hopefully) overtake the competition.
(b)
LD2 should have a general strategy and policy for quality management, based on four basic requirements:
A commitment by senior management to quality.
Senior management should demonstrate their commitment and set an example for others.
Developing the competence of employees.
Employees may need to be trained in procedures and processes, to improve the quality of their work and
raise it to the required standard.
Communication.
The need for quality and the benefits for the organisation from quality in processes and procedures should
be communicated throughout the organisation, so that all understand why quality is important.
Continuous improvement.
An organisation should always be looking to improve.
There are a number of different approaches to quality management.
One approach is to apply standards of quality control, which aims to achieve target standards though
inspection and testing procedures. The focus is on detecting and correcting errors after they have
occurred.
Quality control involves:
Establishing targets or standards for quality in a product or service
Establishing processes and procedures for achieving the target standard
Measuring the actual quality of output produced or services provided
Comparing actual performance with the target standard
Taking remedial action when actual performance is significantly worse than the target
Periodically reviewing the quality standard or target and making changes if this is considered
appropriate
A weakness of the quality control approach is that relies on the detection of mistakes rather than
attempting to eliminate them. For this reason, organisations with a commitment to quality are likely to
take an approach based on quality assurance.
Quality assurance (QA) is based on the view that poor quality should be prevented rather than detected
after the event. The emphasis with a QA approach is on systems and processes, and designing these so
that quality is achieved within the system and failures are eliminated.
There are a number of different approaches to quality assurance.
Answers
Total Quality Management (TQM) involves:
A commitment to the principle of right first time. Errors should not be allowed to happen. Waste
should be eliminated.
Continuous improvement. The should be a continual search for better ways of doing things and
achieving higher quality standards
The search for continual improvement should rely on participation and commitment by all
employees to quality.
SERVQUAL
SERVQUAL measures the quality of service provided to customers in terms of reliability, assurance,
tangibles, empathy and responsiveness. A comparison is made between what customers expect and what
they get, and measures are then taken to bring the actual quality of the service up to customer
expectations.
ISO 9000
The International Standards Organisation has issued a series of quality standards (the 9000 series).
Management may decide to seek certification of the organisations processes. Certification requires
independent verification that the organisations processes achieve the standards set out in ISO 9000.
Radical improvements in quality
Management decide that a big bang approach is required and implement major changes in systems and
processes in order to achieve quality improvements. Approaches to major change include Six Sigma and
Business Process Re-engineering (BPR).
(c)
LD2s new corporate website should include the following features if it is to compare with the best in the
industry:
Easily found.
A corporate website should be easily located through the main search engines (eg Google) and should
appear on the first page of the list of website addresses. The name of the website should also be easy to
remember.
Providing information that users require.
The website contains all the information that users expect, so that when they visit the website they find
what they are looking for. The information on the website should be continually refreshed and kept up-todate.
Easy to navigate.
The website should be easy to navigate so users are able to find what they are looking for quickly and
easily. Information should not be buried in the site, it should be available within a few clicks. The site
should include a search facility to help with the location of information.
Attractive design.
The website should be designed in such a way that it is attractive and appealing to users, so that it
encourages them to explore it.
E-commerce.
The website should enable customers to buy the companys products or services. E-commerce is an
important revenue stream for most businesses. Payment processing must be secure.
Two-way communication.
A good website should encourage feedback from customers and provide a facility that allows them to ask
questions or to make comments about the quality of the companys goods or services.
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13 CQ4
Top tips. You may already be familiar with EPoS systems as most supermarkets use them. Use this knowledge
when answering part (a).
Easy marks. Suggesting ways of dealing with resistance to change in part (b).
Examiners comments. This question was reasonably well answered overall, with many candidates showing good
knowledge and competence in the subject area.
Marking scheme
Marks
(a)
10
(b)
10
(c)
5
25
not earn marks.
(a)
EPoS systems
CQ4s operations might be transformed in the following ways as a consequence of the EPoS system.
Cashing-up
The EPoS system should improve the speed and accuracy of cashing-up as the checkouts will be part of
the system and will record each sale made.
Checking inventory
Audits of inventory will be sped up as the system will store records of what entered inventory and what
was sold.
Ordering
Ordering goods will be sped up as the system will quickly identify quantities of specific product lines
within each store. The system also records quantities of each product sold so each store can ensure it
only orders the appropriate amount of stock.
Reporting
Preparation of store managers reports will be made quicker and more accurate as information can be
extracted from the system directly. It is likely that the process could be run entirely from head office if
required, freeing up store manager time for other purposes.
Customer experience
The EPoS system will speed up transactions within each store, saving customers valuable time and
improving their experience. This may help improve customer loyalty.
Performance reporting
A wide range of reports and information can be accessed from the system by head office. This will enable
the performance of store and product lines to be analysed like never before. Such information can be used
to make changes to how stores are run and unprofitable product lines can be removed.
Answers
Consistency
The EPoS system will help bring consistency across all CQ4s stores for example regarding prices and
reporting. This will help head office control the business and help establish a consistent brand image.
Control of staff
It does not appear that CQ4 has a problem with staff stealing goods or cash, but it might become a
problem in the future if staff resist change. However, the EPoS system is an effective deterrent and control
to ensure that it does not happen.
Improved look and feel of stores
The new technology, such as the touchscreen terminals, will give the stores a modern feel rather than the
current old fashioned style.
Customer management
CQ4 could introduce customer loyalty cards which monitor what customers buy and offer them deals or
other incentives to come back to the stores.
(b)
Methods of managing change

It is likely that many of CQ4s employees may resist the change that the new technology will bring. This is
because the organisation has a policy of retaining staff when it takes over stores and that staff seem used
to, and happy with, their current working practices.
Kotter and Schlesinger (1979) identified six methods of dealing with resistance to change and CQ4s
managing director may choose to implement some or all of them. However, they are not intended to be
used separately in isolation and a combination of them is likely to be required.
Education and communication
This method is involves educating employees regarding the reasons the change are necessary and
communicating with them. This method is effective where the cause of the resistance is lack of
information about the change.
Participation and involvement
By involving employees in the change, CQ4 may find that they become increasingly committed to it as
they embrace the new technology and see its benefits. Where those affected by the change have the
power to resist it, this method reduces the resistance by taking their views into account.
Facilitation and support
Training and counselling can be used to overcome fear and anxiety that some employees may have about
the change.
Negotiation and agreement
Some employees will resist change as they feel that they will lose out as a consequence of it. In CQ4s
case, it is likely that staffing levels or hours will be cut as the technology introduces operational
efficiencies (for example employees will spend less time producing reports and so on). Compensating
those who lose out may be appropriate in some instances.
Manipulation and co-optation
This method involves the presentation of partial or misleading information to those resisting change or
'buying-off' the main individuals who are at the heart of the resistance. Whilst this method might be
effective in the short-term, it may create long-term problems if employees find out what has gone on.
Explicit and implicit coercion
This involves the use or threat of force to push through the change. It should be used as a very last resort
if parties are operating from fixed positions and are unwilling to move. In CQ4s case this would mean
threatening staff who do not comply with the change.
(c)
Human resource issues associated with the EPoS system

CQ4 may face the following HR issues regarding the new policy:
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Redundancies
It is almost inevitable that some staff will need to be lost as a consequence of installing the EPoS system.
This is because of the efficiencies created by the system (time saving when producing reports, cashing up
and stock checking and so on).
Hiring new staff
Some staff may decide to leave employment after the change. This might offset the need for
redundancies, but if large numbers of staff leave it may be necessary to spend time and money hiring new
people.
Training
Employees who accept the change and want to move forward will need to receive suitable training on the
new system. This is necessary to ensure they can use they system effectively and for the company to
realise the full benefits of its introduction.
Communications
To help promote the consistent approach to operations that the system will bring with it, employees
should receive appropriate communications from head office regarding the use of the system.
Performance appraisal
As a consequence of the system, the performance of individual stores will be increasing under scrutiny. To
help improve store performance it is likely that an appraisal system for store managers, based on key
performance indicators will be required. Once this has been set up managers can be set monthly targets
to achieve.
14 WV8
Top tips. In part (a) you will get marks for any sensible advantages, but you must make sure that you relate
them to WV8. Dont forget in part (c) that you are dealing with a not-for-profit organisation.
Easy marks. Stating the advantages of decentralisation.
Examiners comments. A substantial 25 marks are available. As with previous examinations there was a lack of
content in most cases indicating that insufficient time had been spent in addressing the issues in the scenarios.
Common Errors
Not writing enough! Some answers were nothing more than outline notes when the question had more
substantial requirements.
There was confusion in some cases between outsourcing and offshoring.
With (a), it was apparent that many candidates did not understand decentralisation and instead discussed the
advantages of outsourcing.
Marking scheme
Marks
(a)
(b)
(c)
Up to 2 marks for each relevant, explained point

Up to 1 mark for each relevant point explained point
not earn marks.
10
10
5
25
Answers
(a)
Decentralisation
Decentralisation means to move services, such as the provision of information systems away from a
single, centralised location, to other geographical areas. This often involves each local office or branch
being responsible for the provision of its own service.
There are a number of advantages to WV8 for decentralising the CIS, these include:
Reduced bureaucracy
Decentralisation will hand over the CIS function to the main users. This will reduce the layers of
management and therefore give local users the responsibility to make decisions locally, free from centrally
imposed rules.
Faster decisions
By giving the main users the power to make decisions locally, the whole organisation will benefit from
faster decision making.
Reduced central costs
Service users have complained that the CIS is expensive to run. Decentralisation will remove this cost
from WV8 as the service will be provided locally. The delegation of decision making away from a central
location will mean that some cost savings can be achieved through job losses in management.
Better service provision
A consequence of the current system having to meet the needs of a number of local areas is that it never
quite meets the exact needs of any of them and users have complained that it is unresponsive to their
needs. Decentralisation will mean that each location can develop a system that is appropriate to it.
Relations with government
By looking to save costs through decentralisation of the system, WV8 will show government that it is
listening to it and being responsive to the cuts which have been made. This should help strengthen the
relationship the organisation has with the government.
Improved morale of staff
Decentralisation will give local staff more responsibility to make decisions. This should be a source of
motivation for them.
Improved recruitment
Under the current arrangement WV8 has had difficulty recruiting staff and it has been suggested that this
is due to unattractive rates of pay. With decisions over running the system to be made locally, pay rates
can be set by each location and there may be scope to improve them and therefore attract better quality
staff.
Job enrichment
With increased responsibility, staff may also find the nature of their job changes with more depth or
scope. This is job enrichment and may improve employee motivate and make the job more attractive to
potential candidates for recruitment.
Improved management
Management in local offices will have to take on new roles from those previously held centrally. This may
include decision making, project management and so on. This will help improve the skills of local
managers and therefore generally improve the standard of management in the organisation.
(b)
Total outsourcing
There are a number of implications to WV8 of total outsourcing, these include:
Better cost management
Under an outsourcing arrangement, WV8 will pay a third party a regular fee for the service provision. This
payment should not vary and will therefore help the organisation control its costs.
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Contract
The arrangement will be set out in a contract and service level agreement (SLA). Once the contract has
been entered it could be difficult or very expensive to stop the agreement before the end of the term. This
means WV8 should take advice and very carefully consider if all the terms in the deal are suitable before
entering into it.
Quality
WV8 knows the quality of the service that it currently receives from its staff. It should be happy that this
level of quality continues or is improved as a consequence of any outsourcing agreement. Any third party
should respect the organisations culture and the fact that it is a not-for-profit organisation and as such its
ethos may be different to what they are used to.
Effect on existing staff
The outsourcing agreement may result in current staff losing their jobs, even if some are re-employed by
the outsource provider. This may create strong resistance from the staff affected and others in the
organisation.
Loss of knowledge
WV8 currently retains the skills and knowledge of the staff involved in providing the CIS. If the function is
outsourced then these skills and knowledge will be lost from the organisation and this may be difficult to
replace if it decides to bring the service provision back in-house at a later date.
Gaining specialists
The service provider is likely to have staff with greater skills and experience than those WV8 currently
employs. Therefore the organisation may find the overall standard of service improves greatly as a
consequence.
Strategy
WV8s current strategy is to reduce its cost base and manage its operations more efficiently. The use of a
third party to provide the CIS fits with this strategy.
Alternatives
The organisation should consider alternatives to a total outsourcing arrangement. For example it could use
a number of different suppliers and manage them with a smaller team of in-house staff.
Importance of system
WV8 should consider the importance and reliance that it places on the system. If it views it as highly
important, or core, to its operations then it might think it best to retain control of it. However, if it views it
as a subsidiary system, of little importance or it does not place much reliance on it, then it might feel
happy to transfer control of it to a third party.
Risk
With any arrangement there is an element of risk involved. In this case WV8 should consider and plan for
what would happen if the outsource partner goes out of business or decides at the end of the contract
that it does not wish to continue it.
(c)
Marketing principles
Despite being a not-for-profit organisation, WV8 can learn a number of lessons from marketing principles
adopted by profit-making businesses.
Set objectives
The organisation should set itself objectives that it needs to meet. The generation of profit wont be an
objective but control of costs and efficient use of government grants might be.
Target marketing
Public sector organisations, such as WV8, have been criticised for having a poor understanding of the
communities they serve. Target marketing involves learning about your customer so that you can serve
them better and this is something that WV8 might consider doing with its stakeholders.
Answers
Communication
Once the organisation has developed a good understanding of its stakeholders it should communicate
with them. As a not-for-profit organisation, WV8s funders would be the government and the public who
contribute it through the taxation system. It should look to improve communication with them for
example by promoting its activities.
Public relations
WV8 and organisations like it may have a poor public image and it might be necessary to improve this
image through public relations activities before it can develop relations with its stakeholders.
Appearance and attitude
The organisation should ensure that it promotes a business-like attitude amongst its staff through
internal marketing and ensure that its facilities are, whilst not extravagant, modern and have all the
necessary equipment to do business. This will show visitors and other people that the organisation is just
as capable as a profit-making organisation.
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15.1 C
Quality refers to fitness for purpose, which means how suitable a product or service is for its
intended use.
15.2 B
The balanced scorecard approach to quality measurement focuses on customer, operational

and financial perspectives.
15.3 A
To gain ISO accreditation an organisation is required to submit documentation to show that their
processes meet ISO requirements. The other options are not necessarily required.
15.4 D
Optimised production technologies focus on the removal of production bottlenecks.
15.5 B
In this paper, you have studied ABC as an inventory management method that concentrates
effort on the most important items.
15.6 A
Kaizen seeks to improve quality by small, incremental steps. It does not seek radical changes
(options B and C) and is not a problem solving technique (option D).
15.7
To obtain the best possible purchase prices bulk buying contracts
To improve quality in the future quality standards can be agreed
To ensure continuity of supply during periods of limited availability
To tie the supplier to the organisation - reducing the supply options of competitors
15.8
Organisational structure: How supply interacts with other functions
Relationship portfolio: How many suppliers? 'Partnership' or price-driven?
Cost-benefit: Is the chosen supply strategy the most cost-effective?
Skills and competencies: Do staff have the skills required to integrate?
Performance measures: To monitor and control the strategy
Answers

16.1 D
Sustainability in operations management is primarily concerned with efficient use of resources.
16.2 B
In a demand network, products are developed in response to market signals (demand).
16.3 B
A manufacturer who focuses on developing new product features is product orientated.
16.4 D
Primary activities are those across the base of the value chain the supporting or secondary
activities being shown above these. The last primary activity is supporting products sold, that is
service, so D is correct.
16.5 Internal failure costs are identified before the item reaches the customer.
Cost of materials scrapped due to poor inventory control
Cost of materials lost during production
Cost of output rejected during inspection
Cost of re-working faulty output
Cost of reviewing product specifications
Losses due to selling faulty output cheaply
Note. Only four examples were required.

16.6 External failure costs are identified after the item reaches the customer.
Delivery of faulty products and replacements
Operating a customer services section
Repair or replacement
Refunds
Significance
Loss of 'quality' reputation
Loss of future custom
Damaged staff morale
Bad PR
16.7 Total Productive Maintenance (TPM) reduces breakdowns and helps ensure production consistency. This
will help Goldseek ensure uniform output and reduce waste. It therefore lowers the cost of quality. TPM
also improves the accuracy of production schedules and therefore facilitates on-time order delivery an
important aspect of customer service quality.
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Text reference. Chapters 3, 5, 6 and 7
Top tips. Don't forget to use headers and short paragraphs to make your answer readable. Part (f) gives you the
opportunity to be creative and use your imagination. You could have used any industry as an example, we used
the car industry.
Easy marks. Where possible define the terms you are required to explain.
(a)
Inventory
A level capacity strategy involves building up an inventory buffer to enable orders to be met from held
inventory when demand exceeds capacity.
A Just In Time (JIT) approach involves producing goods (eg cars) when they are needed eliminating the
need to hold inventory.
The build up of inventory required under a level capacity strategy contradicts the no inventory approach
required under JIT. Therefore, the two approaches are incompatible.
Under JIT, production is driven by immediate demand. The capacity management approach consistent
with JIT is a chase strategy which involves adjusting production levels to match demand. This would
allow nil (or minimal) inventory, as required under JIT.
(b)
Demand
Demand management strategies attempt to influence demand to reduce fluctuations to levels above or
below capacity. One of the ways demand may be managed is through marketing. Therefore demand
strategies influence marketing practices.
If demand is below capacity, marketing initiatives such as price incentives and advertising campaigns
may be used to increase demand.
If demand exceeds capacity, it may be decided to reduce some marketing activity (eg advertising) and/or
to promote orders in a future period rather than those requiring delivery in the short term (eg order next
year's new model now).
Marketing may also be used to try and distribute demand evenly throughout the year, for example though
seasonal offers and other incentives to increase demand in less busy periods (eg interest free finance).
(c)
Chase vs flexible
Chase strategies involve adjusting activity levels in response to fluctuations in demand. The ability to
significantly change production levels quickly and efficiently (while maintaining quality levels) requires a
high level of organisational flexibility.
The need to react quickly to an ever changing environment has led to organisations adopting flexible
structures such as project based teams and virtual or networked firms.
In many industries, world class manufacturing techniques are used to provide flexibility. Computer Aided
Design, Computer Aided Manufacturing and JIT can all be used to achieve this.
Concepts such as 'economies of scope' are important in this context, as they provide the flexibility
required to change what is being produced in relation to relative changes in demand.
(d)
Services vs manufacture
Service organisations differ from manufacturing organisations when considering capacity management in
the following ways.
Production and consumption occur at the same time
Inventories of services can't be built up in quieter times, which makes the balancing of capacity and
demand more difficult.
Answers
Greater interaction
The customer plays an active role in the delivery process. Customer service quality is integral to the
customer experience.
Output is different each time
Each customer service interaction is different in some way eg different conversation, attitude etc.
Achieving a consistently high level of output is more challenging.
Generally greater reliance on staff
Service delivery depends on the people delivering the service. The 'mood' of staff on the front line
shouldn't adversely impact upon the customer experience.
Intangible output
This makes measuring the quality level of output more difficult as there is no physical product to inspect.
Obtaining feedback of customer satisfaction is important.
(e)
Supply portfolios
An organisation creates a supply portfolio by purchasing raw materials and components from a number of
suppliers rather than just one. The suppliers are chosen for their individual attributes which enable the
buyer to maximise the benefits each offers.
Benefits of supply portfolios
Quality
Suppliers provide products of varying quality. Buyers can use variances in quality to produce premium or
economy ranges of their own products.
Cost
Suppliers charge different prices for their products. Buyers can turn to cheaper suppliers to reduce their
costs of production if necessary.
Supply
Suppliers are of different sizes and produce different levels of output. Buyers can therefore match order
sizes to appropriately sized suppliers. For example, a small supplier that can only produce a few products
a day would be unable to meet the requirements of a large order. However, they would be able to supply
a small order that a larger organisation, which may set minimum order quantities, turns down.
Expertise
Suppliers offer varying levels of expertise and may, for example, be able to advise the buyer which
components would be best for their product. Building relations with a number of suppliers therefore helps
the buyer to make more informed buying decisions.
(f)
Assistance from information and communications technology

The following types of information and communications technology could be used by
people/organisations trying to improve demand for cars.
Advertising on websites
The car manufacturer could use pop ups on sites used by their target market eg the Automobile
Association.
Buy now
Individual car dealers may offer a 'buy now' facility on their website. However the value of the transaction
and need to sign contracts/purchase agreements means some face to face contact will still be required.
User registration
The use of user registration on websites could be used to help identify and track potential customers. The
website could also include promotional material and virtual vehicle tours and virtual test drives to
encourage purchase.
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Database
A database could be used to manage relationships with potential and existing customers (repeat purchase
is very important particularly with fleet sales).
Mobile phone or M marketing
This may be used to target young, IT literate potential customers (eg if mobile telephone numbers were
collected during website registration). 'Text back now to arrange a test drive of the NEW Series 3' or
similar messages may be appropriate.
Email
This could be used in a similar way to the text message approach described above.
Search engine optimisation
Websites should be configured to produce high rankings on search engines such as Google, for example
for users searching for new car London. Paid-for listings can also be used.
18 YO and MX
Text reference. Chapters 5, 6, 11 and 12.
Top tips. Don't spend too long on any one part of this question. As all parts are worth the same marks, treat
them equally, giving them the same amount of attention.
Strong answers to Part (a) will set the evaluation in the context of the relevant theory in this case Porter's value
chain. In Part (b) ensure you explain some background principles of TQM. In Part (c) think of ways to motivate
employees and then expand on them. A selection of relevant points will earn you a pass in this part.
Easy marks. Defining a value system in Part (a).
(a)
Value system
A value system links the value chains of individual companies together. In terms of Porter, each company
has a value chain including inbound logistics, production and outbound logistics. The outbound logistics
of one company becomes the inbound logistics of another company.
In the scenario, YO provides clothes to MX so the outbound logistic system of YO is therefore linked to the
inbound logistic systems of MX. Similarly, YO receives inputs from its own suppliers linking inbound
logistics back to those suppliers.
Value chain management
Management of this supplier value chain between companies is essential to create and maintain
competitive advantage. If YO fails to supply the correct goods, or supplies the correct goods late, then
MX's sales will be affected. It is in the best interests of all companies in the supplier value chain to ensure
products pass along the chain in a timely fashion and appropriate quality is maintained.
Current strategy
MX's current strategy regarding suppliers has been multiple sourcing this means that the same inputs
are obtained from a number of different suppliers. This decreases individual supplier power, as MX can
choose which supplier to purchase from. However, YO is heavily dependent on MX 80% of YO's sales
being made to MX. This means MX has additional power over YO YO cannot afford to lose MX as a
customer. MX's policy of paying minimum prices and returning goods not up to specification is therefore
not surprising.
New management
MX is now considering limiting the number of suppliers, improving the quality of inputs and paying more
per garment purchased. This change indicates that MX wants to be more actively involved in the supply
chain and improve product quality for the benefit of both MX and YO. MX is sacrificing some supplier
power (few suppliers to purchase from) for a better supplier relationship. This strategy should help to
provide more competitive advantage for YO/MX's products.
Answers
(b)
YO's current position

Currently, YO has focused on producing clothes at a relatively low price, because its major customer, MX,
has the strategy of selling large volumes at low prices. However, MX is now moving 'upmarket' which
means that the company is attempting to sell goods of a higher quality at a higher price. This has the
effect that MX expects a higher quality of inputs and is now rejecting inputs which are below this new
quality standard.
New quality requirements
From YO's point-of-view, production at high quality but low price is difficult. Provision of a higher quality
output implies that the customer is prepared to pay for this quality, and it does not appear that MX is
prepared to raise prices at present. YO therefore needs to raise quality for the same price. One method
that some of MX's suppliers have used to do this is Total Quality Management (TQM), which is a
technique that YO can consider using.
Quality system
YO will need to implement a three stage system to monitor the quality of clothes produced.
1.
Inspection of the final product to detect quality errors
2.
Set quality standards and assess performance against those standards
3.
Extend quality management to all areas of the company, not just focus on production. For
example, ensuring that design quality is maintained/improved.
Factors for the successful use of TQM include:

Quality culture
A culture of quality is required involving all staff from senior management to production workers.
Commitment will be obtained because MX is YO's major customer, so all management levels will be
committed to success of TQM.
Empowerment/training
All employees are encouraged to avoid mistakes (rather than detecting them), and are empowered to
improve quality where they can. This also means that YO will provide training for employees in how to
implement and use TQM techniques.
Continuous improvement
Improving quality is seen as an ongoing process, not a one-off change. Policies such as quality circles and
communication of quality objectives will be required to ensure the ongoing success of TQM.
(c)
The changes YO must implement can be considered as follows.

Human Resource practices
YO will be changing the focus of production from cost to quality. This means that HR practices must
focus on quality improvement, not cost minimisation. Specific changes that can be expected include:
Staff training on how to improve the quality of products, including TQM techniques.
Remuneration packages to focus on the achievement of quality, not quantity, of output. Many
clothes manufacturers pay production staff on a piece-rate. YO needs to consider focusing some
element of remuneration on attaining quality standards.
Attempting to retain workers who can attain the quality standards necessary within YO. Provision
of benefits such as more holidays or wage increases each year will assist this objective.
Recruitment of staff who are already familiar with the concepts of TQM. This will limit training
time (and cost) for YO.
Staff appraisals to be linked to TQM targets to show the importance of these measures in YO.
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19 W company
Text reference. Chapters 5, 6, 11
Top tips. Supply chain management has changed dramatically in recent times, and reference is often made to
supply chain networks. Clearly apply your knowledge of this, and BPR, to Ws circumstances
Easy marks. You could have referred to Cousins strategic supply wheel in your answer. For part (b) provide a
definition of BPR, explain what process maps are, and show how the two work together.
Examiners comments.
Common Errors
Not writing enough. Some answers were nothing more than outline notes
(a) Poorly answered, generally exposing a lack of knowledge and understanding
(c) Some candidates outlined the content of a code rather than explaining how it could help.
With regard to Section C a good answer should demonstrate knowledge and understanding through clear, well
developed narrative relevant to the requirements of the sub-question. Purposeful expansion of points made and
good application of the thinking to the context of the scenario.
Marking scheme
Marks
(a)
10
(b)
10
(c)
5
25
not earn marks.
(a)
Developments in strategic supply chain management

Supply chain management is concerned with the flow of goods and services through the organisation with
the aim of making the firm more competitive.
Supply chain management is now viewed as a strategic function that impacts significantly on
organisational performance. It involves organisations working more closely with suppliers, establishing a
mutually beneficial long-term relationship.
Cousins Strategic Supply Wheel provides a useful framework when considering how an organisation deals
with relationships relevant to overall strategy and supply strategy. Cousins research showed that the more
collaborative the relationship between the organisation and its key suppliers the greater the degree of
strategic alignment required.
Increasingly, organisations are recognising the need for and benefits of establishing close links with
companies in the supply chain. Market and competitive demands are compressing lead times and
businesses are reducing inventories and excess capacity. Links between businesses in the supply chain
are becoming tighter. Shorter lead times and integrated IT systems are typical.
Improving W Companys competitive performance
Management of the supply chain and supply network is now seen as a potential source of competitive
advantage.
By adopting a more strategic approach to supply chain management, W Company can improve its
competitive performance through:
Answers
Greater coordination across the global supply network. This will allow W to develop relationships with
suppliers worldwide.
Partnering with other companies in the supply network (organisational integration). Reliability, trust and
collaboration is highly important. W may even consider reducing the number of suppliers it uses, so
deeper relationships can be developed with a select few (perhaps selected using cost-benefit analysis).
Being able to meet demanding customer service and product performance standards. Innovation in
consumer goods is required if products are to remain attractive to consumers.
If necessary, restructuring the organisation to better facilitate closer supplier relationships and control
processes.
W Company could establish a supply chain network. This is an interconnecting group of organisations
which relate to each other through linkages between the different processes and activities involved in
producing products/services.
Organisations now often outsource non-core activities, such as the distribution. W may be able to benefit
from adopting this trend. The benchmarking exercise undertaken by JH may have indicated that Ws
competitors are already doing so, and that W needs to catch up.
Efficiencies can also be attained by applying technology to dealings with suppliers, using electronic data
interchange (EDI) this paperless communication is more efficient in terms of administration, and is
quicker and cheaper than traditional ordering methods.
(b)
Process design
Process design involves analysing and seeking to understand the activities or processes that enable an
organisation to function. The aim is to ensure that these activities or processes are designed so as to be
as effective and efficient as possible. Process design can be applied to the development of new processes
or (as with W Company) it can be applied to improve existing processes. Two tools often used in the
context of process design are Business process reengineering (BPR) and process maps.
The use of BPR
Business process reengineering (BPR) is the fundamental rethinking and radical redesign of business
processes to achieve dramatic improvements in performance, such as cost, quality, service and speed.
W could use BPR to redesign its processes with the aim of working more efficiently (and bringing costs
down). W should implement BPR systematically, following these key stages:
Planning - understand what needs to be done to improve performance in line with company goals
and customer needs
Learning - examine existing processes and how they enable the company to currently function
Redesign - if necessary, or eliminate if they cannot be made effective and efficient
Implementation - of new processes
Hammer and Champy identify four themes of BPR that can be applied to W Company.
Process reorientation. The focus should be on resources and tasks - can the way these interact be
redesigned?
Creative use of IT. For example could W Company use CAD and or CAM?
Ambition. Dont be restricted, think widely. For example, could W adapt processes to enable it to
sell direct to consumers?
Challenge and break rules. Old rules may not apply to new processes. For example is a flatter
organisation structure required?
BPR could also play a part to help bring about improvements in supply chain management.
BPR can be a costly process, so the benefits need to outweigh the cost of implementation and the
ongoing cost of operating and working under the new processes.
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The use of process maps

One way of analysing and representing processes is with the use of process maps. Process mapping aims
to identify and represent the steps involved in a process, in visual form.
The use of process maps will help W Company design effective and efficient operations by:
Describing the flow of materials, information and documents what is happening, and why?
Showing how W Company takes components (inputs) and transforms them into white goods
(outputs)
Displaying the tasks contained within the process
Helping establish how efficient the process is and identify any waste
Demonstrating the relationships between the process steps
Changing systems and working methods (for example, via BPR) without understanding the underlying
processes can lead to costly mistakes. It can also create conditions that make it difficult for staff to work
effectively. Moreover, if W does not understand a process, it will not be able to improve it.
Process mapping will enable W to clearly define and understand current processes. It will help identify
likely problem areas such as bottlenecks, delays or waste.
The knowledge that process mapping provides will help W Company to develop solutions and plan new,
improved processes. It will help identify responsibilities and key stages in the supply chain.
(c)
An organisational code of ethics is intended to be a guide for employees on what constitutes acceptable
behaviour. For example, the code may provide guidelines relating to the acceptance of gifts from clients.
At W Company, there has been illegal behaviour (misappropriation of funds) as well as unethical
practices. Unethical practices may not necessarily be illegal, but would be considered by most people to
be wrong. For example using child labour in developing countries may not be illegal, but many developed
world consumers feel it is wrong and avoid purchasing goods manufactured this way.
A code of ethics could help reduce unethical behaviour at W company in a number of ways.
Reduce the potential for ambiguity. Ethical dilemmas are often ambiguous or open to interpretation. A
clear code would reduce the potential for ambiguity.
Establish a consensus. The code should be developed through a consultation process involving
management and employees. This will enable a consensus of what is acceptable behaviour to emerge.
Procedure to report breach. The code should include the procedures to follow to report a breach of the
code. The increased likelihood of a whistleblower report should deter some individuals from acting
unethically.
Clear consequence for a breach. The code should include clear consequences for unethical behaviour.
For illegal behaviour such as misappropriation of funds, the consequence should be dismissal.
Training. To ensure the code is understood and is effective training covering what the code means may be
necessary. Management and employees must understand what is expected of them.
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20 2JN
Top tips. There are many issues that you could discuss in part (b) and the selection included in the answer
below are just a few of them. When marking your answer you should think about whether your point is relevant
to 2JN, if it is then you can award yourself a mark.
In part (c) you should think about the financial implications of high quality. These are linked to reputation and
cost-base.
Easy marks. Stating the requirements for TQM in part (a).
Examiners comments. With regard to (b), a significant number of candidates either drew no reference to
training or mentioned it only passingly, instead dealing with organisational TQM issues. There also appeared to
be a common misconception that ISO9000 and TQM were one and the same quality programme.
Marking scheme
Marks
(a)
10
(b)
10
(c)
5
25
not earn marks.
(a)

TQM is the continuous improvement in quality, productivity and effectiveness. Its objective is to ensure
that the quality of products meets or exceeds customer expectations and to achieve this, employees at all
levels of the organisation need to be involved.
The requirements for 2JN to introduce TQM include:
Commitment
Employees throughout the organisation need to commit to building quality into everything they do. This
commitment needs to come from staff sharing the quality philosophy rather than being coerced into the
change.
Leadership
2JNs move towards TQM is currently being put forward by the MD. However, the MD needs to gain the
acceptance and support of the senior members of the company in order for the change to go through.
Empowerment
For TQM to be successful, employees need to be empowered to make decisions without the need to refer
to a supervisor or manager for approval.
Training
Introducing TQM means considerable training and support is required at all levels of the organisation. This
will have a cost implication and productivity is likely to fall in the short-term as employees get to grips
with the requirements of TQM.
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Customer focus
A core value of TQM is that the organisation must meet, and even exceed, the expectations of the
customer. To be able to do this, 2JNs employees need to understand the customers and their needs.
Changes to appraisal and reward systems
Appraisal and reward systems should be aligned with the goals of TQM ie to achieve high quality.
Relationships with suppliers
To achieve high quality output, 2JN needs to be able to rely on high quality inputs from its suppliers. This
will require the forging of closer relationships with suppliers to enable the organisation to rely on the
quality of its raw materials. If possible, suppliers should operate TQM as well.
Team working
Team working is a key competence under TQM. All employees have strengths and weaknesses so it is
important for them to work together for the benefit of the company. 2JN should emphasise the
importance of teams and assist in their development in the workplace.
Internal suppliers and customers
The various departments within 2JN should view themselves as suppliers and customers of other
departments within the organisation. This will lead to the development of quality chains as each part of
the chain improves the quality for the next link (or customer) in the chain.
(b)
Training
2JN needs to arrange training when introducing TQM. A number of groups and issues need to be
considered.
Training strategy
As TQM will affect every part of the business it is important that 2JN develops an effective training
strategy to ensure the training meets the needs of the business, all the objectives of TQM are met and all
staff receive the necessary support.
Needs of individuals
TQM will affect employees in different parts of the business differently. Therefore the training provided to
different groups within the organisation will need to be tailored to their specific roles.
Effective learning
There are a number of principles that any effective training programme should be based on. These are:
Participants must be motivated to learn.
An overview of what is to be learnt should be developed before the specifics are worked out.
Participants should be provided with feedback during the training.
Praise or other rewards for progress should be provided.
Training should be practical where possible if new skills are to be learnt.
The learning curve should be appreciated and that some individuals will progress faster or slower
than others.
The training an individual receives should be specific to their role.
Training provider
2JN should give careful thought into who provides its training. It is likely that a provider with experience
of introducing TQM into a manufacturing organisation would be the best choice if they are available.
Location and cost
Consideration should be given to where the training is to take place as this will have a cost implication.
Costs will be reduced if the training is provided at 2JN rather than at a venue that needs to be hired.
However, this cost saving may be offset by the disruption it may cause to on-going operations.
Answers
Evaluation
After the training has been completed its success should be evaluated in terms of whether or not it has
met the objectives set for it. In 2JNs case it will be whether TQM has been successfully introduced and
individuals have a clear understanding of their role. Individuals or teams that are not performing as
expected may need further training and support.
The different groups within 2JN should be considered as follows:
The workforce
The workforce currently has no knowledge of TQM or what it involves. If TQM is introduced without
educating them as to why it is important and reassuring them about what it means for their jobs then this
may cause resistance to the change. Therefore training should begin with presentations and talks to get
the message across. There should be time allowed to answer any questions asked. Once employees
understand the change, then more job specific training can begin.
Supervisors
Supervisors will be responsible for implementing TQM in their teams. Once they have a good grounding in
the philosophy behind TQM it is important that the training they receive supports their role in
implementing it. This is likely to include the development of new skills such as problem solving,
communication and people management.
Senior managers
The senior managers should be the first to be trained as they will be responsible for the general
implementation of TQM in the organisation. For the implementation to be successful they need to
demonstrate commitment and leadership to push the plan forward. This is specialist training which might
be best provided off-site, especially to keep the plans confidential before they are announced to the
workforce and supervisors.
Quality committee
The quality committee will oversee the entire process of introducing TQM into 2JN. Rather than see one
aspect of TQM, they will be involved in all aspects of it and therefore members of the committee need a
thorough grounding in all areas. Due to the volume of training it is likely that it will need to be provided
over a longer period of time than other groups and with a more formal structure of it so the group stays
focussed.
(c)
Quality
Quality may affect costs as follows:
By building quality into production, 2JNs costs of production will rise, but this could be off-set by
reduction in costs of rework and scrapping defective goods.
External quality costs will fall as will the cost of any warranty claims.
The costs of quality inspection will fall as all employees are responsible for quality.
Quality may affect revenue as follows:
Revenue may increase as 2JNs reputation for quality improves and its products become more attractive
to new customers.
Sales may be increased by a reduction in prices driven by falling costs.
2JN should find it easier to retain customers once they realise quality is increasing. This should help stop
the decline in profitability.
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21 BC4
Text reference. Chapters 8 and 6
Top tips. This is a straightforward question that invites you to score highly. In parts (a) and (b) you can put
forward general advantages (that might apply to any company) providing you relate them to BC4.
Easy marks. Stating the advantages of market segmentation in part (a).
Examiners comments. This question caused few difficulties although a significant minority confused ISO 9000
with TQM and apparently did not understand the difference between quality assurance and quality control. Some
answers could have benefitted from being further expanded upon and developed.
Marking scheme
Marks
(a)
(b)
(c)
10
10
5
25
not earn marks.
(a)
Market segmentation
Market segmentation recognises that every market consists of groups of potential buyers with different
needs and different buying behaviour. The process of market segmentation subdivides the market into
distinct groups, each group made of homogenous members who react in a similar way to marketing
activity (to a distinct marketing mix). Therefore, a different marketing approach (mix) can be devised for
each market segment.
Advantages of market segmentation to BC4
BC4 may benefit from market segmentation in the following ways.
Efficient use of marketing budget
By carefully segmenting the market, BC4 can target segments appropriately. This means it can apportion
its marketing budget to each segment in proportion to the likely return it may receive from them. This will
help maximise the return on its marketing spend. BC4 currently sells its range to the whole market and is
therefore not using its marketing budget effectively. This is something that can be resolved by market
segmentation.
Identify new opportunities
Segmentation will enable BC4 to understand the needs of its customers better. Understanding these
needs may identify gaps in the market or other opportunities that BC4 may be able to exploit.
By having a better understanding the needs of its customers, BC4 can make changes to its products, for
example in materials and features. Meeting the needs of customers and not providing any unnecessary
features promotes the efficient use of raw materials and other resources.
Answers
Competitive advantage
BC4 can look to dominate particular market segments. This will not only maximise the profit from each
segment, but also help reduce the market share of its competitors, thereby forcing them out of the
market.
Better customer relations
BC4 may segment the market geographically and switch its focus away from the north where it has
difficulty in fulfilling its obligations. This will help bring its attention to the customers that it can serve
more productively and therefore improve its relationship with them.
(b)
Advantages of ISO9000 certification

The following are advantages of ISO9000 certification to BC4.
External verification of quality
Obtaining ISO9000 certification provides external verification that an organisation has achieved the
quality assurance standards set out in ISO9000. If this is achieved, BC4 would have succeeded in
improving its standards of quality management to a high level through standardised practices and would
be able to make this fact known to customers and potential customers. This would enhance BC4s
reputation and may allow it to expand its customer base by targeting those companies who insist on ISO
accreditation for their suppliers.
Improved processes and procedures
BC4 would benefit from a systematic implementation of quality processes and procedures throughout the
organisation. The differences in operating efficiency between factories should be reduced (or eliminated).
Improved quality of goods
Under ISO9000, the focus is on eliminating errors and therefore customers should benefit from
improvements in quality, and the number of goods returned under the extended guarantee arrangement
should fall.
Improved profitability
Fewer returned goods will mean fewer replacements and less re-working of faulty items, so that these
costs should fall and BC4s profitability should improve.
Reputation
BC4s reputation for quality should improve. By publicising its ISO9000 certification, the organisation
should also be able to raise customers expectations about the quality of its products. An improvement in
reputation for quality may stimulate higher sales demand.
Staff morale
ISO9000 may improve employee morale as staff take on more responsibility for quality. It should make
employees more aware of the importance of quality, and may therefore support efforts by management to
continue raising quality standards and improving efficiency.
(c)
ISO9000 and quality control

The Production Manager is suggesting that a quality control (QC) system is established rather than
seeking ISO9000 certification.
Traditional quality control systems rely on the detection of faults and errors in production through
inspection and testing. ISO9000 is a quality assurance system, which involves raising the quality of
procedures to a high level so that errors do not occur in the first place.
Despite QC systems being viewed as a little out of date, they may still have some benefits to BC4. These
include:
Lead time
ISO certification can take considerable time to introduce whereas QC inspectors can be hired and trained
relatively quickly. This means BC4 may see the benefits in less time.
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Reduction of external failure costs

Improving the quality of goods before they are sent to the customer will reduce BC4s external failure
costs.
Suitable for the organisation
QC inspectors are suitable to meet BC4s pressing need to improve quality. At this stage, ISO certification
may over-complicate matters.
Education
The QC inspectors can feed back into the production process. This may help reduce errors made during
production and help other employees improve the quality of their output. Having work rejected for poor
quality should help guide staff to improve the standard of their work.
Answers

22.1 D
A marketing orientation involves structuring an organisation's activities around the needs of the
customer.
22.2 A
In terms of a PESTEL analysis, 'P' standards for political.
22.3 A
The government is not considered to be a customer of a charity. Beneficiaries, supporters,

regulators and stakeholders (including trustees) are.
22.4 C
A shakeout would occur between market growth and market maturity (shaking some of the weaker
'players' out of the market).
22.5 Viral marketing involves the use of pre-existing social networks to spread brand awareness using video
clips and Flash games etc.
Guerrilla marketing is unconventional and involves taking people by surprise and creating a buzz in
unexpected places. Publicity stunts are an example.
22.6 Experiential marketing involves creating an emotional connection between a person and a brand, product
or idea. The person then makes a conscious decision that they want to make a purchase.
This differs from the traditional marketing approach where a product or service is directly sold to the
customer.
22.7 A brand is a name, term, sign, symbol or design intended to identify the product of a seller and to
differentiate it from those of competitors. It is important because it is a key element of marketing and
corporate strategy - it generates revenue and therefore has a financial value.

23.1 D
Undifferentiated marketing involves producing a single product and getting as many customers as
possible to buy it. There is no market segmentation.
23.2 C
Skim pricing, otherwise known as market skimming, involves setting an initially high price for a
product to take advantage of buyers who are prepared to pay it.
23.3 B
The aim of depth interviews is to explore customers unconscious attitudes and motives for
behaviour.
23.4 C
Perishability refers to the fact that services cannot be stored for example an appointment at a
hair salon. This makes anticipating and responding to levels of demand crucial.
23.5 An organisations promotion mix consists of the blend of promotional tools that is considered appropriate
for a given marketing campaign. For example, advertising, sponsorship, branding and direct marketing.
However the process is very much an art and a marketer will very often make the choice intuitively.
23.6 Internal marketing involves informing, training and motivating employees to support the organisation's
external marketing activities. It aids employee understanding of how their tasks, and how they perform
them, create and deliver customer value. Therefore, the success or failure of an organisations external
marketing efforts can be influenced by its internal marketing.
23.7 Using the BCG matrix, MNAs products can be classified as:
Jupiter Star
Mars Question mark
Pluto Dog
Neptune Cash cow.
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24 V
Text reference. Chapters 8, 9, 10, 11, 12.
Top tips. Although this question focuses on marketing you are also required to discuss HR implications. You
should always be prepared for questions such as this that cover a range of syllabus areas.
Easy marks. You could probably answer Parts (d) and (e) without textbook knowledge providing you use the
Internet regularly.
(a)
The traditional marketing mix includes Product, Price, Promotion and Place. Each of these factors play
an important part in the overall offering to customers. V's proposed approach can be understood in this
context.
Product
V's products are good quality, fun products with a strong brand. It is important the cosmetics offered are
consistent with the established reputation of the brand.
Price
Pricing is competitive, but not the cheapest (ie affordable to most). An important decision is whether the
'list price' will include padding to enable agents to offer discounting. Website sales may be offered at a
lower price although this may make party purchases less attractive to customers.
Promotion
V will rely on word of mouth, public relations (such as the radio interview mentioned in the scenario) and
the strength of the brand.
Place
V's distribution strategy is to use one level marketing (the cosmetic associates) and some web sales. This
relies upon the skill of associates and user acceptance of e-commerce. V also needs efficient
transportation options (eg partner a courier business) to ensure order fulfilment.
The 'fifth P', people, is relevant to the distribution strategy explained above. Further 'people issues' are
covered in part (b).
(b)
V has built a strong brand. The reputation of V must be protected. Allowing cosmetic associates (who
aren't employees) to use the V name/reputation carries considerable risk of damaging the brand.
The human resource implications of this include:
Agent selection
Ensuring cosmetic associates (ie agents) have the skills and attitude required is essential. Selection
criteria should include a sense of fun, honesty, business awareness and trustworthiness. Formal selection
procedures including an interview and reference checking by V HR staff are an important control.
Training
Training of cosmetic associates must be thorough and comprehensive. It should include how to arrange
parties, how to ensure they provide a fun customer experience, sales techniques and product knowledge.
Specific training will also be required for those dealing with orders/queries submitted via the website or
SMS (text).
Remuneration
Cosmetic agents remuneration must be structured in a way that provides motivation/incentive, but without
resulting in strong-arm sales techniques. Commission may also be linked to pricing for example
associates may be given the flexibility to sell at a lower price by reducing their commission.
Monitoring and control
On-going monitoring and control of associates is important to enable any potential problems to be
identified before too much damage is done. Customer satisfaction surveys/questionnaires could be useful
as could the use of employed 'area supervisors' who visit or speak to associates and customers.
Answers
(c)
Direct marketing is a concept that involves the producer of a product interacting directly with the end
customer or consumer. The approach can be summed up as 'cutting out the middle-man'.
Channel
This is sometimes referred to as a 'zero level channel', as there are zero levels between supplier and the
end customer.
Internet
The Internet has enabled more businesses to utilise direct marketing. For example, an airline such as
British Airways may sell tickets direct to the public via its own website (selling flights via a general travel
website isn't 'pure' direct marketing as this involves an intermediary even if that intermediary happens to
be based on the web).
Marketing mix
Using direct marketing has implications for the marketing mix for example promotion can target web
users. Order fulfilment (ie actually delivering the product) is key.
(d)
Advantages of the Internet as a marketing channel include the following:
(e)
Communication is quick allowing rapid response to customer orders/queries

The range of tasks able to be performed eg promotion, display products, e-commerce
Enables quick price and feature comparison for customers
Can lower costs through reduced need for physical outlets
Provides an opportunity for global reach even for very small organisations
Facilitates information collection and developing customer databases for future promotions
Customer convenience as it may be accessed from home or work at any time
V could use Internet in the following ways.

E-commerce
A website with an e-commerce capability would enable orders to be submitted and paid for on-line (using
credit and debit cards). Efficient order fulfilment is vital.
Product information
The website could also be used to provide detailed product information to customers, for example the
ingredients of different cosmetic products (particularly relevant to those with allergies) provide cosmetic
advice and related discussion groups.
Corporate information
General information about V as a group and about V cosmetics could also be communicated in this way
helping to cultivate the idea of a 'fun' organisation.
Promotion
The site could be used for promotion using web banners and could include links to 'partners' sites and a
search facility (eg access to Google from within V's site).
Target marketing
Micro-site capability for specific target audiences or cosmetic needs could be established.
(f)
Ethics is concerned with right and wrong acting responsibly and with a sense of fairness. The main
ethical issues associated with Vs proposal are:
Will the cosmetics be tested on animals and if so will associates and customers be informed?
Where and how will the products be produced? Will this involve factories in developing countries
what about employment conditions, worker remuneration, waste disposal?
Are associates treated fairly? What mark-up is V making?
Is it acceptable to target customers through mobile phones? This could be seen as intrusive and
an abuse of personal information.
Is party selling ethical? V should consider the blurring of business and pleasure and the use of
alcohol at the parties. Are people pressured into attending and then made to feel they should 'join
in' and buy?
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25 CW
Top tips. You are told your answer to part (a) must not cover the application of the marketing mix and market
research options (as these were covered in the first meeting). There are many possible aspects of marketing you
could include, for example adopting a marketing orientation, the use of branding, relationship marketing and the
use of experiential marketing.
Part (b) requires you to draw upon your knowledge of market segmentation and apply it to CW. Ensure you cover
both aspects of part (c) - identifying the promotional activities and explaining possible ethical concerns.
Easy marks. Dont throw marks away in part (a) by covering aspects you were told to avoid! Explaining what
segmentation is, and the processes involved, would earn a couple of easy marks in part (b). Identifying two types
of promotional activity will earn marks in part (c).
Marking scheme
Marks
(a)
Up to 2 marks for each relevant, explained aspect of marketing, related to CW
10
(b)
Up to 2 marks for each relevant, explained process or implication of segmentation

/targeting related to CW
10
(c)
Half a mark for each promotional activity identified

Up to 2 marks for each explained ethical concern for each activity
1
4
5
25
not earn marks.
(a)
Five aspects of marketing that could be helpful to CW are explained below.

Adopt a marketing orientation
Adopting a marketing orientation involves identifying customer needs and then ensuring these needs are
satisfied. CW has a number of different stakeholder groups that could be considered customers. The
needs of donors, volunteers and of people who will benefit from the charitys work must all be identified
and met. By satisfying the needs of these groups, CW is likely to achieve its overall objectives.
Partnering with commercial organisations (cause marketing)
CW could attempt to form a close relationship with a number of businesses. Suitable organisations should
be identified and approached with the aim of co-operating and collaborating on the running of fundraising
events, and perhaps the running of the charity. The business organisation benefits through being seen as
a good corporate citizen (Corporate Social Responsibility).
Branding
CW could use branding to help it stand out from other charities by establishing a distinctive identity that
communicates its core values. A distinctive logo incorporating clean water and/or healthy crops, with a
suitable strapline, would help keep CW in the forefront of peoples minds. As water is such a basic
commodity, CW could emphasise that every donation really does make a difference, giving donors and
volunteers a reason to choose CW over other charities.
Answers
SWOT analysis
The general strategic technique of SWOT analysis could be utilised by CW. The SWOT exercise should
reveal internal strengths and external opportunities that marketing activities should focus on. New income
streams may be identified, and ideas generated from considering the actions of competitors.
Work more closely with key individual donors (relationship marketing)
CW could identify donors who donate significant sums and/or donate regularly and seek to develop this
relationship further (investment in CWs IT systems would be required to facilitate this). A group could be
established, for example Friends of CW who are consulted and communicated with, increasing their
involvement with CW - with the ultimate aim of increasing revenue both directly from these individuals
and indirectly from the insights they provide.
(b)
The process of market segmentation

Market segmentation recognises that every market consists of groups of potential buyers (or in this case
donors) with different needs and different buying (or donating) behaviour.
The process of market segmentation subdivides the market into distinct groups, each group made of
homogenous members who react in a similar way to marketing activity (to a distinct marketing mix).
Therefore, a different marketing approach (mix) can be devised for each market segment.
The process of segmentation for CW would involve identifying groups of donors who react to marketing
activity in different ways.
The implications of market segmentation for CW
The implications of market segmentation and targeting for CW are firstly that it needs to analyse the total
potential market for charitable support in Statesland and identify specific groups within this, and secondly
that CW needs to decide upon an appropriate marketing mix to target each group.
Factors that CW should consider as criteria for segmentation include:
Individual or organisation
Gender
Age
Occupation and income
Lifestyle
Geographical location
The process of targeting

Targeting would involve CW deciding which market segments to aim its marketing efforts towards. The
process requires measuring and comparing the potential of segments, and considering how CW could
reach each segment.
When selecting which segments should be targeted, questions CW needs to ask include:
Can the segment be measured?

Is the segment big enough?
Is the segment stable?
Do segments respond differently?
Can the segment be reached cost effectively?
The implications of targeting for CW

External sources such as national statistics may help establish levels of charitable giving and provide an
indication to the potential of a segment.
When devising an appropriate marketing mix the traditional 4Ps (product, promotion, place and price)
and the three extra Ps (people, process and physical evidence) should all be considered.
To target specific market segments CWs marketing activities will need to be more sophisticated, rather
than simply using undifferentiated marketing (targeting the whole market with one marketing mix). Its
likely that CW will decide to follow a differentiated (targeting several segments with distinctive mixes
unique to each) approach rather than restricting itself to a single market segment with a single mix
(concentrated approach).
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(c)
Two types of promotional activity CW may consider using are television advertising and viral marketing.
Television advertising
Television advertising would involve producing an audio-visual commercial and purchasing broadcasting
slots to air this on selected television channels.
Possible ethical concerns of television advertising
Television advertising is expensive and could be seen as inappropriate and wasteful for a charity that
prides itself on low overheads. Donors may resent a proportion of their donation paying for advertising.
Television advertisements often also tend to play on peoples emotions to encourage them to donate,
which some may see as unethical.
Using viral marketing as a promotion tool
Viral marketing involves the use of social networks to further marketing objectives. CW could set up a
page on Facebook and Twitter, with links to a site such as Justgiving that allow donors to donate online.
Video clips could be used to show the good work being done by CW. Individuals should be encouraged to
email links and information to members of their individual network.
Possible ethical concerns of using viral marketing
An online presence on sites such as Facebook could be seen as an attempt to engage with children or
adolescents, which some may see as unethical. Its unlikely that children could donate online as this
would require a debit or credit card, but they could be encouraged to persuade their parents to donate
and to volunteer in shops.
The use of viral marketing and in particular social networking sites could also be seen to trivialise matters
of life and death. It could also result in unwanted email (SPAM) through the use of tell a friend links.
26 DD
Text reference. Chapters 2, 9, 10, 11 and 12.
Top tips. Start part (a) by identifying the activities that have ethical and CSR implications. These include aiming
advertising at children, sponsoring sporting events, promoting a healthy lifestyle, the association with Mr TT, the
retreat from this relationship and the health watchdog report. Then discuss the implications of these issues.
For part (b), ensure your answer explains how the marketing mix and branding appeal to DD's target market
segment. This requires identification of DDs target market, which appears to be children and teenagers.
In (c), think about how companies such as Pepsi have utilised the Internet. If youre struggling, think back to
book knowledge covering benefits of an effective website and apply these to DDs situation.
Easy marks. Ensure your answer to part (b) covers the four Ps , product, price, promotion and place.
Examiners comments. A common error was not writing enough, particularly on requirements (a) and (b).
Marking scheme
Marks
(a)
10
(b)
10
(c)
5
25
not earn marks.
Answers
(a)
Some of DDs activities have implications for its ethical stance and CSR position.
Aiming television advertising at children and teenagers could be seen as unethical and irresponsible.
Children do not have the ability to make reasoned judgements. Encouraging children to drink potentially
unhealthy products will be seen as unethical by some, and contradicts DDs commitment to behave
ethically while helping improve the quality of life of society generally. Targeting teenagers is less
controversial, as teenagers understand the concept of advertising and should be able to make an informed
decision.
Whilst supporting sporting events and promoting healthy lifestyles could be seen as ethical, it could also
be seen as unethical. By trying to establish a link between healthy activities and its possibly unhealthy
products, DD could be seen as hypocritical and be accused of misleading the public, particularly children.
The celebrity endorsement of Mr TT has caused concern. Mr TTs association with exploitation of females,
violence and bad language does not fit with DDs ethical, responsible image. However, Mr TT appears to
appeal to teenagers, DDs target segment.
Involvement with Mr TT exposes what seems to be a fundamental mismatch between DDs squeaky clean
ethical and CSR position and the attitudes of a key target market (teenagers). Whether DD should be
overly concerned about the people offended by their association with Mr TT is debatable, as these people
probably dont buy DDs products.
The admission by DD that using Mr TT was a mistake will have positive and negative repercussions. The
back-down may limit damage to DDs ethical, responsible reputation, but to a large extent the damage to
their reputation has been done. By ending its association with Mr TT, DD may have lost credibility with a
key target market, teenagers. This could damage sales, for example teenagers may start an online
campaign in support of Mr TT and start a boycott of DD.
It isnt clear from the scenario how long has elapsed since the health watchdog report stating that DDs
products have high sugar levels and linking them to gum and tooth decay was released. It is essential that
DD responds promptly and honestly to the report. It may be necessary to introduce low sugar products
to better reflect the current expectations of society.
One aspect of DDs activities that should help support its ethical, socially responsible stance is the
donating of a percentage profits to a number of local charitable causes every year. However, if the
products themselves are seen as unhealthy and DD appears to be misleading the public, this will
outweigh the positive public sentiment generated by the donations.
(b)
Market positioning involves designing the company's offer and image so that it occupies a distinct and
valued place in the target customer's mind.
DDs main target market appears to be children and teenagers, as most advertising targets this group.
The marketing mix (product, price, promotion, place) and branding play an important role in DDs
positioning to appeal to children and teenagers.
The product includes the drink itself, the packaging and the package of benefits the consumer gets from
the purchase. The taste, ingredients, any health benefits (or adverse effects) and physiological benefits
such as feeling part of a particular social group are relevant. The social aspect is particularly important for
teenagers who generally seek social acceptance and want to be seen as cool or hip.
DDs pricing strategy is typical of that found in the soft drink sector. DDs premium products are branded
as DD offerings. DD produces other, cheaper products that are branded in a different way, for example
supermarket own brands. Price is used to reinforce customer perceptions of quality the implication is
that a DD branded drink must be higher quality as it is more expensive. Teenagers, even those who are
relatively cash poor, are often prepared to pay a premium price to buy-in to the brand culture (if they
identify with it).
Promotion has proved to be problematic for DD. The target market of teenagers identify with personalities
such as Mr TT whose image seems at odds with DDs highly ethical, socially responsible public image. To
retain credibility with a key target market (teenagers), DD may need to consider relaxing its ethical stance
and trusting the public to understand that a relationship between DD and with Mr TT does not mean DD
endorses violence and the exploitation of women. The alternative would be to perhaps target a different
market segment, such as the over 20s. This would probably require product development (perhaps a
sports rehydration drink) and some market repositioning, which carries risk.
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Place refers to how the product is distributed and how it reaches its customers. Soft drinks are generally
purchased at supermarkets, other convenience stores and from vending machines. The support of the
large supermarket chains is vital to ensure an effective route to market (supermarket shelf space is highly
sought after). Teenagers are increasingly using supermarkets, particularly the smaller local or metro
stores located in town and city centres.
Branding is important in the drinks industry. Effective branding can result in a drink becoming associated
with a certain attitude and lifestyle. This breeds brand loyalty, and explains why people are often
prepared to pay more for a branded drink than they will for a supermarket own brand product that they
may actually struggle to taste the difference between in a blind tasting. Branding requires extensive,
effective advertising, so is expensive. Effective spending on branding is an investment in future sales.
(c)
The likely benefits of DDs increased use of the Internet for marketing purposes include the following.
Increasing online advertising should enable DD to spend less on television advertising
The Internet provides DD with the potential to establish a community and to spread its message using email and social networking tools such as Facebook (to go viral).
The Internet provides interactivity, speed (instant feedback) and convenience (including access via
mobile devices). Potentially, DD can reach people anywhere, anytime. This is particularly true of
teenagers, who tend to be early adopters of technology such as the mobile web (and fans of web 2.0 with
users interacting and collaborating with each other).
DD can use the Internet to forge relationships with other organisations, both commercial and charitable.
For example, the DD website could host music quizzes with electronic iTunes vouchers as prizes. Links to
charities could also be provided, free of charge, to reinforce DDs ethical, responsible position.
DD could also launch a mobile application (get the DD app). To appeal, this must be credible and offer
something more than just DD marketing material. For example, a deal with a record label could be struck
which allowed limited streaming of music videos through the DD app.
27 99
Top tips. In part (a), your answer should link the value of a strong brand to the to the company in the question,
99.
For part (b), consider aspects of product first (the product mix) and then consider aspects of place (the place
mix). The deal between Z and 99 should be considered from the perspective of both Z and 99.
For (c), the positive aspects of 99s success may be attributable in part to its HR policies, which are described in
the scenario. You could identify the features of 99s HR policies, then suggest how they may have contributed to
99s success, and then go on to consider whether they may be relevant to the HR policies of Z.
Easy marks. Ensure your answer to part (a) identifies the value of a strong brand and makes reference to the
business and product(s) of 99.
Examiners comments. Common Errors
As before, a common error was not writing enough, particularly on sub-questions (a) and (b)
Many candidates unnecessarily described all features of the marketing mix rather than the product mix and the
place mix in part (b)
Some candidates identified non-HR factors in part (c)
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Answers
Marking scheme
Marks
(a)
10
(b)
10
(c)
5
25
not earn marks.
(a)
A strong brand is important to 99 for a number of reasons.

A brand is an aspect of product in the marketing mix, particularly for consumer products. A strong
brand helps to create the image of the product that the manufacturer want to present to the public. In
the case of manufacturers of environmentally-friendly products, such as 99, the brand name can help to
deliver a message of the companys concern for the environment and the contribution of its products to
protecting it.
99 could also use their brand, through advertising, to deliver a message that the company is contributing
to providing cleaner water in poor communities around the world.
Branding also helps a company to differentiate its products from those of its competitors. There are many
producers of bottled water, but not so many that work to improve water quality in economically poor
countries. The 99 brand may therefore help consumers to identify the companys products with high
ethical and moral standards.
By purchasing the companys products, consumers can feel that they are making a statement of their
concern for the environment, and help them to feel better about themselves. This will strengthen loyalty to
the brand. As consumers become more environmentally-conscious, a brand name that consumers
associate with concern for the environment should help the company to sell more of its products.
A strong brand may help a company such as 99 to ask for premium prices for its products, by making
customers feel that they are buying something of better quality or value than when they buy a rival
product.
Even if the brand does not command premium prices (since there are many branded water products), it
will nevertheless help customers to recognise the brand, so that stockists are more willing to sell the
companys products and customers are more willing to buy them.
The ability of a company such as 99 to sell more products and at higher prices can be financially
significant. Small companies may have high fixed costs relative to income, and although 99 pays its staff
low wages or salaries, it will incur high costs of energy (since green energy is expensive) and probably
also for distribution.
Brand names can help to build customer loyalty to a companys products. Once customers have started
to buy a companys branded products, loyalty will make them buy the same brand the next time the make
a purchase, in preference to other products on the shelves.
Successful brands are intangible assets that have a value. Companies such as 99 are likely to be taken
over eventually by another larger company. Z for example wants to acquire 99. A strong brand will enable
the company to command a higher price from a buyer.
In summary, without a strong brand small environmentally-conscious companies such as 99 may struggle
to sell their products and operate profitably. With a strong brand, 99 can create a perception of a superior
product that does good for society and the environment, so that some customers will be willing to pay a
higher price.
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(b)
Aspects of product mix and place mix in a deal between Z and 99

There are benefits for both 99 and Z in a deal that has the potential to improve the product mix and place
mix for both of them.
Product mix
E believes that a deal with Z would enable 99 to make use of Zs expertise to develop the 99 brand
further. This may involve adding to 99s product range, expanding its product mix.
A deal with Z may involve further investment in the 99 brand name. The brand is an aspect of product,
and a stronger brand would benefit the product mix for 99.
99 currently sells its products in ordinary plastic bottles, whereas Z has plans to make all packaging
biodegradable or recyclable. This form of packaging would strengthen the concept of 99s products as
environmentally-friendly and so would strengthen its product mix.
Z has carbon labelling for its products. 99 may not have the facilities to do this, and a deal with Z may
therefore enable it to apply carbon labelling to its products for the first time. If so, this may add to the
environmental credentials of its products.
Z may be willing to invest in improvements to operations at 99, so that 99 is able to offer its two
products in a wider variety of forms, such as in larger or smaller-sized bottles, or even with some form of
discrete flavouring. Adding to 99s product range would add to its product mix.
For Z, the acquisition of 99 would complement its product portfolio. This suggests that Z does not yet sell
bottled water. In principle, a large company could develop new products internally, but this would take
time. The acquisition of 99 would enable it to obtain these new products immediately.
Place mix
At the moment 99 sells its products in a few garages, on airplane flights and in airport shops. Its
distribution is therefore limited. 99 is currently unable to get its products stocked in supermarkets. A deal
with Z would enable 99 to sell through supermarkets, which would improve the place mix for 99.
Zs distribution involves the use of low-carbon vehicles. Its likely that a deal with Z would therefore make
distribution more environmentally-friendly for 99s products. This would enable supermarkets to be
supplied in an acceptable way to 99s customers, improving the place mix.
99 could also make use of the entire distribution system of Z, including its warehouses and inventory
management systems as well as its distribution system.
A attraction of a deal for the owner of 99 is that Z has promised to increase the number of water pumps
supplied to poorer communities. This is indirectly related to place mix for 99, because the effect of the
deal would be to increase the distribution of water pumps to communities around the world.
For Z, a deal with 99 would not affect its place mix significantly, except that its distribution systems
would need to handle 99s products.
(c)
Positive features of 99s success

99 employs just ten people, and it may therefore be argued that the HR policies at 99 will not be
applicable to a much larger organisation such as Z. However, the same features of the HR policies at 99
that may have helped to improve its operating and financial performance may be of value in a review of
Zs HR activities.
There has been no staff turnover at 99. This may be due to the fact that employees enjoy working for an
ethical employer and being involved with an environmentally sound company. Z may wish to consider
whether its employee retention rate may be improved by involving its employees more in the
environmental or socially beneficial aspects of its activities.
For similar reasons, Z may wish to consider whether potential recruits to the company might be attracted
by a strong sense of ethical working. It is possible that over time, talented individuals will demonstrate
an increasing preference for ethical working, even if salaries are not as high as obtainable elsewhere.
Because 99 employs only ten people, its likely that many employees will be involved in a variety of
activities, such as production, administration, marketing and selling. There may be lessons for Z to learn
from the variety of the work that 99s employees are given, and the responsibility that goes with it. A redesign of jobs at Z may help to create a more motivated and productive workforce.
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Answers
The wages of 99s employees are modest. This indicates that employees are motivated by factors other
than (or in addition to) pay. Z may therefore be interested to consider the non-financial elements of
working and the internal rewards of a motivating job.
A notable feature of 99s policies has been to involve employees directly in the installation of water
pumps in poor communities around the world. This helps employees to associate the work that they do,
and the mission and objectives of their employer, with the creation of social and environmental benefits.
This can be personally rewarding. It also enables employees to visit countries in the world that they would
not otherwise visit, thereby giving them a valuable life experience. Z maybe interested in introducing
similar aspects of charity work to other areas of its operations and other employees these activities can
increase employee loyalty and retention.
28 iB4e
Top tips. Use the structure of the question to provide a logical structure to your answer to part (a). Sharpening
the focus is centred on three issues, listed in the question - your answer should address each of these three
issues.
Part (b) asks for advantages and disadvantages of a total reward package approach. Your answer should
discuss advantages and then disadvantages, dont jumble them up! Some ideas can be obtained by reading
carefully the details provided in the question, such as the fact that the organisation has difficulty in attracting
individuals from outside even though it offers comparable salaries to its rivals and the fact that the new Director
was unaware of the benefits beyond basic pay and pension.
In (c), begin by explaining briefly what internal marketing involves and its purpose, then lead on to the value of
internal marketing. Again, make use of information in the question: existing employees take on customer
relationship management temporarily but some staff have been more successful than others at this.
Easy marks. For part (a), dont forget to think like an accountant! Successful brands sell well, often at premium
prices: so there is a sales and profitability benefit to be gained. Some ideas for part (b) should be easier to think
of than others; but remember to explain your ideas and points clearly, even if they seem obvious to you.
Examiners comments. Some candidates answered this question well, though others tended to write all they
knew about branding, rather than answering the question set. Many responses to part (a) were unfocused,
discussing Brand or 4Ps, instead of focusing on potential benefits. With regard to responses to part (c), some
candidates merely discussed promoting products to staff.
Marking scheme
Marks
(a)
10
(b)
10
(c)
5
25
not earn marks.
(a)
The CEO of iB4e has stated that sharpening the focus should centre on:
Improved corporate performance
Connecting more closely with customers
Improving marketing practices.
The contribution that effective brand management can make should be considered in relation to these
three issues.
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Answers
Improved corporate performance

Successful branding helps to create product differentiation and distinguishes a companys products from
those of competitors. Branding can therefore help to create competitive advantage, especially when the
customer associates the brand with an attractive combination of product (or service) quality and price.
Branding can be used to make advertising more effective, because consumers can readily identify wellknown brands and so may be more likely to buy the branded products.
When a brand name is used for advertising and sales promotion, so that it becomes more readily
identified by consumers, retailers and wholesalers will be more willing to stock the branded products as
they are likely to sell relatively well (compared with lesser known products).
A successful brand can be used to extend a companys range of products using the same brand name.
This creates opportunities for developing the business through increasing the product portfolio.
A strong brand should enable a company to sell its products at higher prices, so that sales and
profitability are improved.
In addition, brands are intangible assets, and have a value. Companies that own successful brands
should have a relatively high market valuation.
Connecting more closely with customers
When a company is able to connect closely with its customers, there should be strong customer loyalty.
Customers are more likely to look for the companys products and buy them even if the products of a
competitor are more readily available. Brand management can therefore help to strengthen customer
loyalty.
Successful brand management creates an emotional bond for the customer with the brand. A brand
name can promote a sense of togetherness, so that customers have faith in the ability of the branded
products to be good for them and produced in their interests.
Improving marketing practices
A successfully marketed brand creates a sense of status for the customer, so that the customer believes
(often sub-consciously) that he or she is making a statement about themselves when they buy and use
the products. This is particularly true, for example, with fashion goods.
The brand name of iB4e is not as strong as it could be, and there is recognition of a need to revitalise the
brand. This objective can be used to focus on marketing initiatives to build the strength of the brand, and
so gain the benefits of improved performance and connecting more closely with customers.
Brand management is an integral part of the 4Ps of the marketing mix. The brand name is an element in
the product, and can be used to associate the product with quality or value for money. The strength of a
brand name is a factor in the price at which products can be sold. A promotion campaign may focus on
the brand name as a way of gaining customer recognition and more sales. A strong brand name also
makes it easier for a company to find distribution channels (retailers and wholesalers) who are willing to
stock the companys goods.
(b)
There are several advantages for iB4e in developing a total reward package approach.
Rewards for employees do not consist of pay and nothing else. Pay is important, but a pension scheme,
flexitime arrangements, training opportunities, a subsidised canteen and a company sports club all add to
the value of working for iB4e. The company should promote all these benefits, so that employees and
potential employees are made aware of them.
The company has experienced difficulties in recruiting individuals from outside the organisation, even
though it offers salaries that are comparable to those offered by competitors. Until she took up her
position, the Director of Branding was unaware of all the additional benefits for employees. By making the
total reward package more apparent, the company should be able to improve its success rate in
attracting well-qualified candidates to apply for a job.
A total reward package should also make existing employees more aware of the benefits they are getting
(which they may be able to compare with the rewards offered by other employers). If the total package is
attractive, employees will be more willing to remain with the company, so that staff turnover (which has
been a problem for iB4e) may be reduced.
Answers
It is recognised that pay is not the only motivator for employees. By promoting the total rewards available
to employees, and making employees more aware of them, the company may succeed in improving
employee motivation (although firm evidence may be difficult to obtain).
A total rewards package does not ignore the significance of incentives through pay, and incentives for
good performance can be included within the total package.
It has been suggested (by Carrington) that a total reward scheme can be used to make a positive
statement about the culture of the company, and help to create a better sense of unity rather than a
them and us mentality within the organisation. Strong employer branding and a strong sense of
company culture may, as suggested above, result in improved recruitment and employee retention.
Disadvantages
There may also be disadvantages with developing a total reward package approach.
Cost. To offer an attractive total package of rewards, the company may have to commit itself to higher
staff costs and staff welfare costs.
Preference for salary. Some employees may prefer to have a higher salary than a lower salary plus a
range of additional benefits. Some employees may think that management are promoting the total
package as a scheme to keep salaries lower, and as a consequence ask for higher salaries.
Effect. A total reward package approach may not have a huge effect on the recruitment and retention of
staff, as many people tend to focus on salary. The failure to recruit enough people and the loss of
experienced staff may also be due to other factors, such as poor recruitment procedures and
dissatisfaction with management style.
Stagnation. There may be some risk that if employees are satisfied with the total package they are
receiving, they will lose motivation to improve their position in the company. If so, this could encourage
stagnation and loss of initiative and innovation within the company.
Once implemented, a total rewards package approach will be difficult to change. Management need to be
confident that they have an acceptable and sustainable package to offer before they start to promote it.
(c)
Internal marketing could have value for iB4e in a number of ways.

Internal marketing could be used to create, develop and maintain an internal service culture and
orientation, which would improve internal communication and support the achievement of iB4Es goals.
The basic premise behind internal marketing is that employee behaviour and attitudes affect the
relationship between employees and the organisations customers. By improving employees ability to
relate well with customers and to demonstrate a customer orientation, internal marketing would improve
customer service and the customers perception of iB4E - and customer loyalty.
Internal marketing in effect means selling the need for customer orientation to employees. iB4e could
use internal communications, employee development and training, empowerment, clear performance
targets and measures and a system of recognition and rewards. Successful internal marketing will ensure
the need for a customer-oriented approach is felt throughout iB4e.
At iB4e, employees without experience of dealing with customers have been put into customer
relationship management roles. Successful internal marketing should improve the standard of customer
relationship management. If so, iB4e will benefit from stronger customer loyalty, more sales and higher
profit.
By marketing a new internal rewards package internally, iB4E should increase the chances of staff
accepting and buying in to the scheme, improving motivation and efficiency.
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Answers
29 TT Drinks Company
Top tips. Remember in part (c) that sustainability is not just about being a good corporate citizen for ethical
reasons sustainable practices can bring financial rewards too.
Easy marks. Identifying the stages in the product lifecycle and the four classifications of the BCG matrix will
bring some easy marks. Remember though to explain how these models would help TT manage their product
portfolio.
Examiners comments. A substantial 25 marks are available for this question. As with previous exams, there
was a lack of content in most cases indicating that insufficient time had been spent in addressing the issues in
the scenario.
Common Errors
Not writing enough! Some answers were nothing more than outline notes when the question had more
substantial requirements
(a) - generally poorly answered. Many failed to describe the features and instead provided a marketing mix or
PEST analysis, which was not asked for
(b) - several candidates did not know one or both of these models, others merely described the models
Marking scheme
Marks
(a)
Up to 2 marks per feature referenced to the scenario
10
(b)
Up to 2 marks per model or framework referenced to the scenario
10
(c)
1 mark for explaining sustainability and per benefit referenced to the scenario
5
25
not earn marks.
(a)
To be considered effective, TTs new strategic marketing plan should have the following features.
Clear aim and purpose
TTs new strategic marketing plan should set out how TT wishes to market itself in order to achieve its
corporate goals. It must be clear what the aim of the plan is, this should be stated clearly at the start of
the plan.
Compatibility with corporate strategy
Strategic marketing plans should facilitate the achievement of corporate goals. Therefore TTs new plan
should be driven by, and be compatible with, its overall corporate strategy.
Internal appraisal
TT should conduct a marketing audit (or review of its marketing activities). It should look at its strengths
and weaknesses for example, does it have a strong brand or is the marketing team sufficiently trained.
External appraisal
TT should then focus on its external environment and look for opportunities and threats which it may
exploit or need protecting against. For example are there new markets that it could sell its products to or
does its customers want it to innovate new products rather than continue with its me too approach.
Answers
Gap analysis
Following on from internal and external appraisal, TT should conduct a gap analysis to identify markets
which it is not doing as well as it should. This information can be used to help target marketing resources
more effectively.
A clear marketing strategy markets, products and customers
The information generated from the internal and external appraisals, the gap analysis and other sources
should be analysed and a clear marketing strategy developed. This strategy should drive the use of
marketing resources. It should identify target markets and customer needs, plan products to satisfy those
needs and organise marketing resources to match products and customers.
SMART objectives
TTs plan should set specific, measurable, achievable, relevant goals which should be achieved within a
time-frame. This may be, for example, to increase market share or turnover by X% within three years.
Implementation, monitoring and control
Finally, TTs plan should set out how the strategy should be put into action and how progress will be
monitored. If progress does not proceed as planned, TT should take control action to move things back on
track. In some circumstances, for example if the environment changes, it may be necessary to re-plan.
(b)
TTs new Director of Marketing has identified two models which are appropriate to managing the
organisations product portfolio. The models are the product lifecycle and the BCG matrix.
Product lifecycle
The product lifecycle helps an organisation understand its products by identifying a number of stages that
products go through from their introduction until they are terminated. The stages are Introduction,
Growth, Maturity and Decline.
The product lifecycle model would help TT manage its portfolio in a number of ways.
Ensure a balance of products at different lifecycle stages
TT should ensure its product portfolio is balanced. For example, if it has products in decline, it needs
newer products that are earlier in the lifecycle coming through to maintain revenue. TT needs to ensure
that as older products are terminated they are replaced with new products coming through.
Investment decisions
By identifying which stage in the lifecycle a product is in a decision can be made as to how best manage
it for maximum profitability, for example whether it is worth investing further resources in. Products in the
introduction stage require significant investment, for example on advertising.
Product termination
The lifecycle model will encourage TT to look more critically at products, and perhaps accept that some
are entering the decline stage and should possibly be removed to make room in the portfolio for more
innovative products with a brighter future.
BCG matrix
The Boston Consulting Group (or BCG) matrix classifies products according to their market share and
growth in the market. A product can be classified as one of four categories, Question Mark, Star, Cash
Cow and Dog.
The BCG model would help TT manage its portfolio in a number of ways.
Ensure a balance of products in different BCG model categories
This model will help TT assess the role of each product within its product range. As with the product
lifecycle, TT should aim to have products in various categories of the BCG matrix to ensure on-going
profitability. For example, products classified as Dogs are in decline and need to be balanced by products
in the other three categories.
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140
Answers
Spending decisions
By identifying Star products, TT will then be able to direct funds (for example advertising spend)
appropriately with the aim of ensuring a product remains a Star for as long as possible. At some point, a
Star is likely to become a Cash Cow. Cash Cows typically make substantial contributions to an
organisations profits but are usually further along in the product lifecycle meaning it may be appropriate
to harvest its returns by cutting back on marketing expenditure.
Product development and termination decisions
The matrix will encourage TT to think and make decisions about Question Mark products. These products
may require significant investment or product development to compete with competitor products, so a
decision needs to be made as to whether this investment is justified.
Question mark products may be in an early stage of the product lifecycle, but still not justify significant
investment the BCG matrix helps identify products that may best be withdrawn early in the lifecycle.
(c)
According to Goldsmith and Samson (2004), sustainability is a long-term programme involving a series of
sustainable development practices, aimed at improving organisational efficiency, stakeholder support and
marketing edge. Sustainability practices include reducing waste, using less energy and recycling as part of
an organisations operations.
Benefits that the introduction of sustainability might bring to TT include:
Cost saving
By changing its operations to use resources more efficiently, TT should see a cost saving as fewer inputs
are required for the same amount of output and where waste and by-products are re-used by the
company and its suppliers.
Quality improvement
As part of becoming more efficient, new operating practices might be introduced to improve quality. This
is typically seen in organisations which move towards lean operations that reduce waste.
Stakeholder support
Sustainability may prove popular with stakeholders, such as the local community, who stand to benefit
from less pollution. Their support may be important in the future.
Marketing edge
Moving to sustainability is becoming increasingly important as organisations look to promote themselves
as ethical and socially responsible. Products which are produced sustainably are desired by customers
and organisations which adopt sustainable practices will benefit from promoting themselves as green.
30 CXC
Top tips. You can base your answer to part (a) around a SWOT analysis (minus the strengths and opportunities
of course!)
Easy marks. Thinking of factors to consider regarding the bonus scheme in part (c).
Examiners comments. This question was generally answered reasonably well with some strong answers to part
(c). With regard to part (b), some candidates did not really discuss the process of strategic marketing planning,
but instead described actions to be taken.
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Answers
Marking scheme
Marks
(a)
10
(b)
10
(c)
5
25
not earn marks.
(a)
Strategic marketing weaknesses and threats

CXC has the following strategic weaknesses and threats
Weaknesses
Lack of incentive for sales associates
Sales associates are paid a flat-rate and therefore have no incentive to increase sales.
Organisational structure
CXC operates an out-of-date hierarchy with several layers of management and what appears to be a top
down approach with little or no feedback coming back up the hierarchy. This indicates that
communications between those at the top and bottom of the organisation may be a weakness.
Cost-base
The hierarchy mentioned above and a large office in the capital city indicates CXC has a high cost-base
which may be a competitive disadvantage in comparison with its competitors.
Reliance on sales associates
It appears that CXC relies on the ability of its sales associates to bring in new business (despite the lack of
sales incentive mentioned above). Some of this burden should be shared amongst team leaders and
supervisors.
Lack of ambition
CXC seems reluctant to embrace new technologies, such as trading online, and is happy to continue
selling the same products through the same channels. This lack of ambition and willingness to adapt to
the business environment may be holding it back.
Customer experience
Whilst customers seem happy with how their enquiries are dealt with they soon become unhappy and
complain of poor service. Poor customer service is damaging the organisations reputation and ability to
generate repeat sales.
Poor marketing mix
CXCs market share has fallen 2% in two years. This indicates that it is failing to provide what the market
wants in terms of the marketing mix (product, promotion, price and place).
Threats
Competitors
Competitors have taken 2% of CXCs market share and the organisation has recently lost a lucrative
contract with a pension fund. This indicates that competitors are a significant threat to the organisation.
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Direct selling
CXC has only recently trialled telephone sales and therefore lacks experience in operating this channel.
Continuing to operate this function may pose a threat to the reputation of the organisation as customers
are complaining of poor service.
Online trading
A lack of an online sales presence is a major threat to the reputation of the organisation. Customers are
likely to see competitors offering online sales and may switch to them as it is more convenient to them.
(b)
Developing a strategic marketing plan

A strategic marketing plan should look 3 to 5 years in the future, define the organisations product and
marketing activities and match the organisations activities to its competencies. It may be necessary to
clarify CXCs corporate objectives in order to define the marketing strategy.
CXCs working party should develop a new strategic marketing plan as follows:
Set objectives
Objectives drive the rest of the plan and must be specific, measurable, achievable, realistic and timebound. For example to increase market share by 5% in 2 years.
Internal appraisal
The working party should look at the strengths and weaknesses of the organisation in terms of its
marketing. A marketing audit and review of marketing activities should be performed.
External appraisal
Opportunities and threats should then be considered. These are usually environmental factors in
connection with customers, products and markets.
Gap analysis
Any gap between the objectives set and what might be realistically achieved should be analysed.
Develop strategy
The working party should develop strategies to fill the gap. This may mean, for example, reallocating
resources, identifying new markets and developing new products as appropriate.
Practical issues
The working party will have to consider a number of other issues that will be affected by the plan. These
issues may include:
The need for staff training and a training budget
Methods of monitoring performance against the plan
Identifying who should be responsible for certain aspects of the plan
Integrating the plan within the overall corporate strategy
Communicating the plan and gaining the support and buy-in of all staff involved
(c)
Bonus scheme considerations

CXC should consider the following issues when devising a bonus scheme for its sales associates:
Fairness
Sales associates must feel that the bonuses are fair and achievable. Targets that are unrealistic will not
motivate employees to increase sales.
Cost
The amount of the bonus payment should be in proportion to the amount of sales revenue gained. The
business should increase its returns as a consequence of the scheme.
Pay differentials
Other groups within CXC should be considered as they may be unhappy if the pay differentials change
significantly as a consequence of the scheme. The motivation of staff not on bonus schemes might be
affected.
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Understandable
The scheme should be simple to understand so that sales associates can work out how much they will
benefit if they increase sales. Simplicity is also important to the payroll department responsible for
calculating and paying the bonuses.
Team or individual based bonus
Consideration should be made of whether individuals should receive a bonus based on their own
performance, or whether a bonus paid to all sales associates based on the performance of the whole team
is more appropriate.
31 H345
Top tips. The marking scheme for part (a) indicates up to 2 marks will be awarded for each relevant, explained
point that you make. If you only make 5 points then you need to make sure that you have provided enough detail
to earn the two marks on offer. In part (b) you will not gain any marks for making more than the five points that
the question asks for.
Dont forget that the model answer below does not include every possible point that you could have made. Make
sure that you apply the marking scheme correctly when marking your own work and award yourself marks for
relevant points that you make.
Easy marks. Explaining the importance of the brand.
Examiners comments. For well-prepared candidates, this question presented few difficulties and good answers
were produced. Others struggled with requirements (a) and (b) in particular. A significant minority of candidates
did not understand branding and brand equity and there was a general over-reliance on the basic marketing mix
alone when answering requirement (b).
Marking scheme
Marks
(a)
10
(b)
(c)
1 mark for each relevant explained point
10
5
25
not earn marks.
(a)
Reasons for the Chief Executive attaching importance to H345s brand

The Chief Executive of H345 attaches a great deal of importance to the companys brand. There could be
a number of reasons for this including the following.
Product differentiation
Branding aids product differentiation, conveying a lot of information very quickly and concisely. This helps
customers readily to identify the goods or services and thereby helps to create customer loyalty to the
brand. It is therefore a means of increasing or maintaining sales.
Marketing
Branding maximises the impact of advertising for product identification and recognition. The more similar
a product (whether an industrial good or consumer good) is to competing goods, the more branding is
necessary to create a separate product identity. This is of great importance to the market that H345
operates in where clothing is fairly homogeneous (a shirt is a shirt wherever it is bought from).
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Market segmentation
Branding supports market segmentation. In H345s case the company is seeking to gain back its market
share in the affordable, but quality clothing market. The company should therefore focus its attention by
communicating the brand in this part of the market rather than targeting other, less important segments.
Brand value
A brand is an asset of a company because it has a value. The value is effectively the premium that can be
charged for goods that carry the brand. By focussing on H345s brand, the Chief Executive will be aiming
to improve the value of the brand (perhaps through communicating the brands message to customers and
building brand awareness). This may have a short-term cost implication, but in the long-term it should
increase sales and improve asset value of the business.
Connection with customers
Through improved brand awareness and communication, the Chief Executive will be looking to reestablish the brands connection with its customers. Satisfied customers who share the values of the
brand may develop an emotional connection with the organisation. This will help secure repeat business
through customer satisfaction and loyalty. A loyal customer base will provide the company with a more
secure revenue base to build its future on.
(b)
Five aspects of H345s marketing operations for the Chief Executive to review
There are a number of marketing aspects that the Chief Executive could review. Five examples include:
Marketing orientation
Market analysts have commented that H345 has lost touch with its customers and this is why it has lost
market share. A reason for this could be that the business has become sales oriented, that is just
concerned with generating cash. If the business switches its philosophy to that of a marketing approach,
where it centres its activities on satisfying the needs and wants of its customers, it may be able to win
them back.
Market research
In order to reconnect with its customers and understand their needs, H345 should look at researching its
market and the needs of the customer. A variety of research techniques can be used, such as customer
surveys, focus groups and desk-based research on the Internet or looking at market reports by third
parties. The company needs to truly understand its customer base and should develop a picture of the
age, sex, social group and geographic location of them. This information can be used to segment the
market and target the customer.
Market segmentation and targeting
Using the information from the market research, H345 should firstly segment its market. This means to
sub-divide it into small groups that share similar characteristics, for example males and female, age range
(teens, twenties and over thirties) and style of clothing (modern, traditional). Once the market has been
segmented, the company can select the most profitable segments to concentrate its marketing activities.
This will ensure the maximum results are gain from the investment in marketing.
Marketing mix
H345s marketing mix includes price, place, product and promotion the basic decisions that the
company has to make in regards to its marketing. The particular mix that H345 chooses should be
determined by the needs of the customer and the target market that it has already identified. There are a
number of variables for H345 to consider in regards to its marketing mix for example prices could vary
considerably - but there are limits to what the target market is prepared to pay, especially if the company
continues to market to the affordable market.
Marketing performance against competitors
In recent years, H345 has lost market share to new competitors who have entered the market. This loss
of market share has been caused by the competition meeting customer needs when H345 has failed to
do so. In order to regain market share, the business should review what it and its competitors have done
over the time period to account for the difference. This will provide H345 will valuable information, firstly
to understand its past mistakes (so as not to repeat them), and secondly to understand what the
competition did that was successful (to help it develop future plans).
Answers
(c)
Human resource activities that could be improved

There are a number of possible causes of attitude and ability problems of H345s workforce. Some
suggestions and how they can be overcome are explained below.
Recruitment problems
Problems at the recruitment stage include poor advertising of vacancies that do not attract enough
suitable candidates. To overcome this, H345 should carefully select where it advertises vacancies and
should set out what is expected of candidates in terms of experience and ability.
Selection problems
A faulty selection process would result in poor quality candidates being offered roles at the expense of
better quality candidates. This problem can result from a number of issues such as poor training of
interview technique for interviewers or not checking references. To overcome this, interviewers should
receive adequate training in order to identify the best candidates and all references should be vetted
before a candidate is offered a job.
Training problems
If employees do not receive suitable training then they will not understand what is expected of them or be
able to offer the customer the desired level of service. All employees should receive training on relevant
company systems as well as customer care training. This process should be on-going, perhaps with the
use of mystery shoppers to identify staff that may require further training.
Motivation problems
Poor attitude is often an indicator of poor motivation. H345 should adopt a performance management
scheme that aligns the goals of the individual and the company. This may include setting targets for sales
or customer satisfaction with rewards for those who meet the targets and training or disciplinary action for
those who fail to do so.
Internal marketing
All employees should embrace H345s values and what its brand stands for. An internal marketing
campaign should be run ahead of any new external marketing campaign. This will help to ensure that the
external marketing campaign has the support and understanding of the employees as well as improving
their attitude to the company and the customer.
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32.1 B
Taylor believed individuals were motivated by material reward and that efficiency in the workplace
was vital.
32.2 D
The so-called 'psychological contract' is a notion that is based on the expectations the organisation
and employee have of one another.
32.3 D
CIMA's ethical guidelines require members to act responsibly, honour any legal contract of
employment and conform to employment legislation.
32.4 A
Job candidates are assessed at an assessment centre.
32.5 Recruitment involves employing people from outside the organisation. It includes finding applicants,
communicating opportunities and information and generating interest.
Selection is the process of choosing who is offered the job. Selection involves procedures to choose the
successful candidate from those made available through the recruitment process.
32.6 Herzberg identified hygiene factors as factors that don't motivate when present, but cause dissatisfaction
if not present. An example is salary level. The argument is that employees who feel poorly rewarded could
be demotivated, but that monetary reward (on its own) does not provide consistent motivation.
32.7 Potential benefits to DES are increased employee motivation and productivity, increased employee
commitment, ability to attract high performing individuals, reduced absenteeism and reduced staff
turnover.
Potential benefits to the employee include easier balancing of personal and professional priorities and
feeling valued which could lead to increased job satisfaction.
Answers

33.1 B
Induction is the set of activities designed to familiarise a new employee with an organisation.
33.2 B
The main risk of performance related pay is demotivation. The other problems can either be
overcome or are simply not relevant to PRP.
33.3 D
Appraisal should be a participative, problem-solving process.
33.4 D
Charles Handy's 'shamrock organisation' consists of a three-leaf structure of core, contractual and
flexible part-time employees.
33.5 Advantages
Tailored to an organisation's specific requirements.
Cost effective when provided by in-house staff.
Disadvantages
Participants may be distracted by on-going work issues.
More likely to cancel due to lack of a cancellation fee.
33.6 Human Resource cycle
Selection process: obtain people with appropriate skills.
Appraisal process: set individual performance targets in line with organisational goals.
Training and development: fill any skill gaps and check the organisation retains appropriately
skilled people.
Reward system: to motivate and retain employees.
33.7 Appraisal purposes
Reward review measuring the extent to which employee bonuses or pay increases are deserved.
Performance review for identifying training and development needs and validating training
methods.
Potential review planning career development by assessing the employee's long term capability.
The overall purpose of an appraisal system is to improve efficiency.
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34 ARi9
Top tips. When answering each question part, plan out what you want to say in bullet points. Once planned, use
the bullet points as headers and write a short paragraph on each.
There are many possible answers to each part so do not worry if your answers are different to those below. You
will still earn marks if you have made relevant points.
Easy marks. Stating the levels of Maslows hierarchy of needs in part (f).
(a)
On-the-job training
The advantages and disadvantages of on-the-job training include:
Advantages:
Training is provided that is relevant to the job being undertaken.
Training is 'just-in-time' that is specific queries are identified.
Training can be given both in and outside the office.
Disadvantages:
(b)
Training is difficult when the employee is dealing with the client.
Where training is being carried out by a manager, they may not have the appropriate training
skills.
Benefits to the company

Profit on sale
Being in the capital city, it is likely that ARi9s office building is worth a considerable sum of money.
Therefore, selling it and purchasing a smaller building outside the capital is likely create a large financial
gain for the company.
Ongoing costs
The costs of heating and maintaining a smaller building are lower than for a large building. Locating
outside of the capital could mean a reduction in business rates.
Staff productivity
Staff productivity whilst in the office has already been identified as an issue. The open plan arrangement
and crowded work stations have contributed to interruptions and other problems which mean staff are
becoming less productive.
It is likely that allowing staff to work from home will help alleviate these problems and should increase
staff productivity.
Attracting staff
Recruitment of new staff is also currently a problem for ARi9. There is considerable competition to attract
talented individuals who live a short commute away.
Working from home may help attract these highly talented individuals to work for ARi9. They can choose
to live in a location that they can afford and also working from home is often seen as a benefit by the
employee.
Retaining staff
The same factors may help retain existing staff that are currently being lost when taking career breaks or
maternity leave.
Answers
(c)
Costs of the proposal

Equipment cost
The new IT equipment is likely to be expensive to purchase considering the numbers of staff which need
to be provided with it.
Ongoing costs
There is also the ongoing cost of replacing the equipment every few years to keep pace with technology.
Reduced co-ordination
Having employees spread out in many locations makes co-ordinating them very difficult. However,
provided ground rules are set and suitable technology is in place to enable the work to be done, problems
due to lack of co-ordination can be reduced.
Reduced control
Managers will have less direct control over how an employee works. Problems such as poor employee
output will only come to light over time and cannot easily be prevented or intercepted by a vigilant
manager. Poor work by employees could potentially lead to a loss of clients.
Diluted culture
Employees will see less of each other if they work from home. This may dilute the organisations culture
and identity.
(d)
Benefits to employees
Reduced cost of commuting
Employees currently have to pay high costs in relation to their commute into the office, in particular
parking charges. These costs to the employee will be much reduced if they can work from home most of
the time.
Reduced stress
Rush hour driving and few available parking spaces create stress for the employee even before they start
work. This stress will be reduced if the employee has to visit the office less often.
Cost of housing
Employees can choose to live further from the office if they can work from home. This gives them scope to
find housing which is cheaper in terms of mortgage or rent payments, giving them more money left over
each month.
Balancing work and home life commitments
Employees all have personal lives and working from home allows them to strike an appropriate balance
between work and home life. For example, the time saved on the commute could be used for other
purposes such as taking children to school or other family commitments.
Privacy
Working in the office environment means that employees get very little privacy, for example, telephone
conversations are easily overheard. Working from home will allow employees to enjoy as much privacy as
they want as no other employees will be around them.
(e)
Problems for employees

Loss of distinction between work and home
Some employees may prefer to keep their work and home life separate. Forcing them to work from home
may be viewed as an unfair intrusion into their home life.
Risk of distraction
Employees may find it difficult to concentrate on work whilst in the home environment. Distractions such
as television, or if children are around, could disrupt their work flow meaning they get less done.
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Facilities available at home

Employees would have to provide a permanent area where the IT equipment can be installed. Not
everyone will have sufficient space in their home for this purpose, or if they do, some may be unhappy to
have a part of their home permanently dedicated to work.
Increased costs
Whilst employees may save money by working at home, some costs may rise. For example, electricity or
heating bills will increase as the home is occupied for longer during the day. Home insurance costs will be
affected as policies need to be amended to reflect the fact the home is being used as a place of work.
Lack of contact with colleagues
Many employees enjoy the social aspect to work. Colleagues often form strong friendships and see each
other away from work. By working from home, this social interaction will be substantially reduced and
some employees may suffer from isolation.
(f)
The hierarchy of needs and its relevance to ARi9s teleworking scheme are as follows.
Physiological needs
These are basic survival needs, for example food and shelter, that individuals must meet to keep
themselves alive. These needs will be unaffected by the teleworking proposal, as both before and after
any change the employee would be earning money to pay for them.
Safety needs
These are needs for security, order, predictability and freedom from threat, ie that no physical harm will
happen to the individual. Like physiological needs, they are unaffected by the teleworking scheme.
Love/social needs
These include the need for relationships, affection and belonging, ie social interaction. Under the
teleworking scheme, individuals will be expected to work in isolation at home and therefore these needs
are clearly affected by it. Employees who need social interaction will be demotivated by working at home.
Esteem needs
Esteem needs are almost at the top of the hierarchy. They include independence, recognition, status and
respect from others. Clearly some of these needs will be affected by the teleworking scheme.
On the positive side, employees will now be virtually independent as they will be working alone, and
therefore those employees who crave their independence will be better motivated.
However, some needs will be affected in a negative way. The increased distance between employees and
managers mean it will be increasingly difficult for employees to gain the recognition they feel they
deserve.
Self-actualisation
This is the fulfilment of personal potential, and as it represents the top of the hierarchy, will be unaffected
by the teleworking scheme. Because it can never be satisfied it will always motivate an individual.
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35 Middleregion
Top tips. Read the requirement for part (a) carefully. Ensure your answer covers both the development and the
implementation of HR practices.
Dont be surprised if occasionally you see a term in the exam you have not seen before, for example workforce
strategy. Use the term itself, and its context, to decide whats required. Planning a new workforce strategy
could be interpreted as planning a new HR strategy or producing a new HR plan - either of these
interpretations are fine for answering this question. So, for part (b), you may find it helpful to refer to a HR
planning model to provide a structure for your answer. Our answer is based on Mullins model. You may have
used a different model, or no model at all. The points you make within the answer are what earn marks. The
model, if you use one, simply provides a framework that helps you cover relevant areas.
In (c), start by thinking about the costs associated with any new system implementation (hardware, software,
changeover, training, maintenance etc) then apply them to the scenario.
Easy marks. Part (c) should prove relatively straightforward as even explaining generic systems development
costs will earn marks.
Examiners comments. substantial 25 marks are available. However, there was a lack of content in many cases
indicating that insufficient time had been spent in addressing the issues in the scenarios. Common Errors
Not writing enough. Some answers were nothing more than outline notes when the question had more
(b) was poorly answered, many candidates failing to address strategic planning issues adequately
Most candidates answered requirement (c) more confidently than the other sub-questions
Marking scheme
Marks
(a)
10
(b)
10
(c)
5
25
not earn marks.
(a)
Middleregions HR department should focus on developing a high level HR strategy that can be applied
by managers to meet their needs and employees the needs of employees. The strategy should enable staff
to effectively deliver education, social care and environmental services.
Middleregions HR department should develop policies and practices covering the key areas of HRM.
Devanna identified four key aspects of HR, discussed below.
Effective recruitment and selection practices are important to ensure Middleregion obtains people
with the qualities and skills required. Succession planning is also important.
The appraisal system should enable targets to be set that contribute to the achievement of the
overall strategic objectives of Middleregion. It should also identify skills and performance gaps and
provide information relevant to reward levels.
Effective training and development practices are required to ensure employee skills remain up-todate, relevant, and comparable with (or better than) other public and private sector organisations.
The reward system should motivate and ensure valued staff are retained.
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A key influence on the HR practices developed would be the structure or hierarchy in place. The trend is
towards flexible, flatter structures, with teams often built around specific initiatives or projects. HR
planning and practices need to take into account the need for flexibility and constant environmental
change or uncertainty.
The HR department should also ensure HR practices are co-ordinated. Devanna points out that the
overall performance of the organisation depends upon each of the four components and how they are coordinated.
The contributions of Middleregions line managers is more likely to be in implementing HR practices
developed by the HR department.
The strategy developed by the HR department should allow some flexibility to line managers, enabling
them to ensure procedures are appropriate for local conditions and to the service being provided.
Another key contribution of line managers is to provide effective leadership. Part of this involves ensuring
individuals are clear about their role and responsibilities. It also involves motivating employees, and
supporting them to ensure they have the resources required to do their job.
If high quality employees are to be retained by Middleregion, it is important they have opportunity for
career progression and development. Line managers play an important part identifying individuals for
progression and providing the opportunities they need.
To help staff retention, line managers could consider the implementation of job enlargement (adding
additional tasks) and job enrichment (increasing responsibility) schemes to help employee motivation and
prevent staleness.
Line managers should also encourage teamwork, this is always important, but even more so in projectbased teams
(b)
Middleregion requires a workforce strategy that takes account of a changing environment and is relevant
to local conditions.
The workforce or HR planning process should follow the steps outlined below (based on Mullins).
1
Start with the corporate strategic objectives

The starting point for workforce strategy is the overall objectives of the organisation. It is these
objectives that the organisations people are tasked with delivering.
Middleregions strategic objectives should ensure the efficient and effective delivery of education,
social care and environmental services.
To take into account the changing, volatile environment, strategic objectives should be reassessed
regularly, for example every year (ie shorter planning time frame).
Design the organisation structure

Middleregions organisation structure should be designed to enable strategic objectives to be
delivered. To provide flexibility, a relatively flat, project-based structure is likely to be required to
deliver education, social care and environmental services.
There may be potential for some employees to work across different functional areas at different
times. For example a project manager may be equally able to manage an education project as a
social work project (given sufficient specialist expertise within the project team).
Develop HR plan
The strategic HR plan includes forecasts of human resource supply and what is required to deliver
organisation objectives (ie the organisations HR demand).
The plan aims to ensure Middleregion has the right number of people, with the right skills, in place
at the right time.
People and / or skill shortages must be identified and a plan to match demand with supply drawn
up. In some areas there may be an over supply of resource, perhaps requiring redundancies or
retraining.
Succession planning, particularly for senior positions should be considered.
Answers
Develop HR management action plan

The HR action plan puts the strategic HR plan in to operation. It includes operational plans for
recruitment, selection, training, development, redeployment and redundancies.
Its important that staff motivation, career progression, and salaries are considered as these impact
both performance and retention.
To provide flexibility, line managers should aim to develop a multi-skilled workforce in which
employees are able to be switched from task to task depending upon demand. Job rotation can
help increase workforce flexibility. Flexible working practises should be introduced.
External factors such as demographics and population trends are important when assessing
demand for Middleregions services. Population characteristics and trends will differ in different
towns and cities throughout Middleregion. Local information must be collected to enable local
conditions to be taken into account.
Exercise control over the plan

Once the HR plan has been established, performance must be monitored and reported. For
example, actual numbers recruited, leaving and promoted should be compared with planned
numbers. Action may be required to correct any imbalance.
Actual pay, conditions of employment and training should be compared with assumptions in the
HR plan. Neglecting these areas may cause excessive staff turnover. Periodically, the HR plan
itself should be reviewed and revised to reflect changed objectives and changes in the
environment.
(c)
The costs Middleregion should take account of when considering moving to e-HR include development
costs, implementation costs and running costs. The cost of the system will depend on the range of HR
tasks moving to e-HR.
Development costs include the costs associated with systems analysts establishing system requirements
and costs associated with software development. It may be possible to purchase an existing system off
the shelf or one in use by another government region. Developing a new system from scratch would be
the most expensive development option.
Implementation costs would include costs of new hardware, costs associated with system changeover
(for example file conversion) and user training costs. Ensuring that existing HR records are transferred
accurately to the new system may require some human checking, which can be expensive. Training may
be able to be provided through online tutorials, which are significantly cheaper than face-to-face sessions.
Running costs include maintenance costs, software-leasing costs, hardware-leasing costs, system
security costs, database administration costs and on-going user support. Effective security is important
when dealing with sensitive data, such as salaries. Users should have access to both online and
telephone support there will be a cost associated with this regardless of whether support is delivered by
in-house staff or outsourced.
It is possible the move to e-HR will result in some redundancies, so there may also be redundancy costs.
For example e-HR systems can effectively monitor sickness absence and accurately monitor and promote
action to support equality and diversity in the workforce. Fewer people will be required to monitor and
record this data.
The costs of moving to e-HR should be balanced against existing HR costs that may be reduced or
eliminated when the new system is introduced. An effective e-HR system can free up HR staff to work on
tasks that support the new workforce strategy.
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36 2TW
Top tips. Read the scenario carefully. For part (a), your answer should include the point that production quality
is poor and that operational efficiency differs between SBUs. The number of returned goods means significant
costs of replacement or reworking. This could be why profitability has been declining even though sales have
been increasing. In addition the CEO fears a loss of control over SBU operations..
For part (b), focus on the relevant comments from the scenario. Bonuses are currently paid on total sales, but
profits have been falling even though sales have been rising. The proposal is to replace existing bonuses with
suitable performance-based measures relating to profitability and quality, but targets will have to be agreed with
SBU managers as part of normal appraisal processes. These comments should provide ideas for factors to be
taken into account when re-designing the remuneration package.
More general points can also be included in your answers to parts (a) and (b), we recommend you prepare an
answer plan before starting to write an answer.
Part (c) calls for a description of the desirable features of suitable performance measures, not a description of
what the measures themselves ought to be.
Easy marks. It should be possible to think of some relevant but straightforward points, for part (a) and part (b),
about the benefits of quality assurance certification and the factors to take into account when designing a
remuneration and reward system. If you use SMART for part (c), easy marks can be obtained.
Examiners comments. A substantial 25 marks are available. As with previous papers, there was a lack of
content in most cases indicating that insufficient time had been spent in addressing the issues in the scenario.
Common Errors
Not writing enough. Some answers were nothing more than outline notes when the question had more
(a) - some candidates confused ISO 9000 certification with TQM
(c) - a large number of candidates described actual measures rather than the features of the measures
Marking scheme
Marks
(a)
(b)
(c)
1 mark each for each point. Referring clearly to S, M, A, R and T should be sufficient for
five marks, especially with references to the scenario)
10
10
5
25
not earn marks.
(a)
Benefits of IS09000 certification

Obtaining certification would provide external verification that an organisation has achieved the quality
assurance standards set out in ISO9000. If this is achieved, 2TW would have succeeded in improving its
standards of quality management to a high level through standardised practices and would be able to
make this fact known to customers and potential customers.
Answers
2TW would benefit from a systematic implementation of quality processes and procedures throughout
the organisation and throughout all SBUs. The differences in efficiency standards between SBUs should
be reduced (or eliminated).
If high standards of quality and efficiency are achieved in all SBUs, this should lessen the CEOs fear of
loss of control over SBU operations.
The management consultants reported that quality control systems were inadequate. Quality control
systems may rely on the detection of faults and errors in production through inspection and testing.
ISO9000 is a quality assurance system, which involves raising the quality of procedures to a high level
so that errors do not occur in the first place.
Eliminating errors rather than detecting them should help to improve the efficiency and reduce the costs
of quality management. Customers should benefit from improvements in quality, and the number of
returned goods should fall considerably.
Fewer returned goods will mean fewer replacements and less re-working of faulty items, so that the
costs to 2TW should fall and profitability should improve.
The reputation of 2TW for quality should improve. By publicising its ISO9000 certification, 2TW should
also be able to raise customers expectations about the quality of its products. An improvement in
reputation for quality may stimulate higher sales demand (throughout Europe) and a greater willingness
of stockists (such as retailers) around Europe to sell 2TWs products.
Better quality assurance may help to improve employee morale. It should make employees more aware of
the importance of quality, and may therefore support efforts by management to continue raising quality
standards and improving efficiency. Quality assurance should lead to continuous improvement.
(b)
Factors to take into account when redesigning a remuneration and rewards package.
When redesigning a remuneration package, consideration must be given to how the overall package
should be divided between basic pay and other types of incentive. There should be a clear idea of the
relative size of basic salary as opposed to other rewards.
The potential size of the remuneration package for each individual SBU manager should also relate to
the size of the SBU and its potential to contribute to the companys profitability. The same package will
not be appropriate for every individual SBU manager.
The significance of other non-financial benefits for SBU managers should also be considered, such as
opportunities for promotion and career development. Non-financial incentives may reduce the need to
offer high levels of remuneration or financial incentive.
2TW needs to consider the levels of remuneration and types of reward scheme offered by rival
companies. Its remuneration scheme needs to compare sufficiently favourably with others to prevent
discontent among SBU managers and the risk of losing talented managers and having difficulty in
recruiting replacements.
Consideration should also be given to the effect that the rewards scheme for SBU managers may have on
other managers and employees in 2TW. The scheme needs to be accepted as fair and reasonable;
otherwise it will stir up discontent and demands from other employees for improvements in their
remuneration.
The total cost of the remuneration scheme and incentives should be within the limits of what it is
appropriate to pay to SBU managers. The costs of the scheme should not be so high that its benefits
come into question.
The current incentive system for SBUs, based on bonuses for achieving sales targets, is inappropriate
given that sales revenue is increasing but profitability falling. Appropriate incentive targets (performance
measures) should relate to aspects of performance that the SBUs are able to control. They should also
relate to aspects of quality (or efficiency) and profitability.
The incentive package needs to be effective, which means that it should be successful in motivating SBU
managers to improve the performance of their units. This is another reason why the selection of
performance measures is extremely important. Incentives should also cover both short term (for example,
annual bonuses) and longer term results (for example, the award of share options).
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SBU managers will need to agree their performance targets and their incentive arrangements. To achieve
agreement there must be open and honest discussion and negotiation, so that the SBU managers are
satisfied that the scheme is fair. Senior management should avoid a confrontational approach by trying to
impose the new scheme.
(c)
Features of measures of performance

The features of measures of performance may be categorised by the acronym SMART - Specific,
Measurable, Achievable, Realistic and Time-bound.
Performance measures should be specific, so that the SBU managers know exactly what aspects of
performance are relevant to their incentive payments. General targets such as improving quality
processes would not be sufficient. Instead, a suitable specific target for an SBU manager may be to
reduce the number of returned items from customers
Targets should also be measurable (able to be measured accurately). Quantitative measures are generally
preferable to qualitative measures. If a qualitative measure, such as customer satisfaction, is included as
an incentive target there must be an agreed method for measuring it. Measures of performance should
also be transparent, so that SBU managers are always able to track their progress towards their targets.
Targets may be challenging, but they should be achievable. In order to be achievable, the targets should
also relate to an aspect of performance that is within the ability of the SBU managers to control.
Targets should also be realistic. If they are unrealistic and unlikely to be achieved, the SBU managers
may decide to ignore them. They could even be demoralising, both by failing to reward SBU managers
and also possibly giving them a sense of failure through inability to achieve the targets.
Targets and measures of performance should relate to a specific period of time (time-bound). SBU
managers should be required to achieve their targets for incentives within a specified time period, such as
the financial year.
37 TB
Top tips. This question requires you to think carefully about the organisation in the scenario. Unless you work for
a multi-national organisation, these challenges may not be familiar to you. Think about things that can provide
unity to an organisation and employees even if they are spread around the world. Providing the points you make
are relevant and answer the question you will score well.
Easy marks. Identifying the advantages and disadvantages of homeworking to the employee in part (b).
Examiners comments. .many candidates did not write enough, though candidates did perform better on this
question.
Common Errors
Many candidates answered part (b) from the perspective of the organisation rather than that of the members of
staff
Some candidates answered part (c) in a purely generic, rather than contextualised, manner
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Marking scheme
Marks
(a)
Up to 2 marks per way of meeting the challenges referenced to the scenario
10
(b)
10
(c)
5
25
not earn marks.
(a)
There are a number of ways in which managers of teams in companies like TB, that have team members
spread across the world, can meet the challenges this brings.
Use of technology to communicate and to tie the team together
Team members spread around the world often find it difficult to visualise and identify with the wider team
they are part of. TB is already utilising technology to improve communication. It could extend this to the
use of shared resources held on a central server, for example an intranet.
Communication is key to managing any team as it allows information to flow and for relationships to be
built. Geographically dispersed teams are no different it is just the type of communication which is
different (being more often electronic rather than face-to-face).
The team manager must be creative in their use of technology and willingness to use it. They should
identify the types of communication which work best for their team and use them wherever possible.
Consistent induction and training processes
It is important that all team members work in a similar way and all have the same understanding and
knowledge. This can be difficult to achieve with team members based in different locations. A single,
consistent induction and training programme can help ensure a consistent levels of expectation,
knowledge and performance across the whole team.
Clear lines of authority and role responsibility
A persons authority and responsibility is often communicated in part by their personality and in person
interactions with others. With geographically dispersed teams, relying upon electronic communication,
these clues and informal discussions to establish responsibility are often absent.
It is essential therefore that all team members are aware of the team structure, roles and responsibilities
these must be clear and available for all to see. For example, in global organisations, it is essential people
know who is responsible for a particular customer or contract that operates in different regions.
Be aware of possible cultural differences
Employees who live in different locations and cultures may have different personal goals. For example,
some cultures are more work focussed than others, with the achievement of promotion and status a key
motivator.
A manager of a geographically dispersed team should be aware of differences between goals of individuals
within their team and to try to ensure all act in a way that helps achieve the organisations goals. This
may require devoting more time managing and mentoring employees than if they were in one central
location.
Build team spirit
Building a sense of team spirit and cooperation can be more difficult when team members are spread
around the world. Employees who only communicate by email or other electronic means do not share the
spirit of collaboration to the same degree and communications become more pressured in tone and
demands. For example an employee may only hear from another when their work is late or something has
gone wrong.
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A manager of a dispersed team should encourage collaboration between employees. This may be
achieved through face-to-face team building events but could also be achieved through giving employees
projects to achieve as a team.
(b)
Homeworking involves staff performing their role at home and is made possible by developments in
information technology. There are a number of advantages and disadvantages of this practice for TBs
staff. These include:
Advantages of homeworking
Cost saving
Working at home saves the employee from having to pay expensive commuting costs such as petrol, car
parking and train fares as well as lower value costs such as having suits dry cleaned and eating out at
lunchtime.
Time saving
The elimination of commuting to the workplace also saves the employee valuable time at the start and
end of the day, freeing time up for social pursuits and family time.
Work/life balance
By working at home the employee is better positioned to balance their work and family commitments. For
example they can fit doctors appointments in during the day, collect children from school or perform
voluntary work which would not be possible if they had to commute to their place of work.
Productivity
Employees often find they are more productive if they work from home as they can avoid interruptions
that occur in the office as well as the benefits from being more relaxed in their own home. TB has
estimated that staff who homework are 20% more productive.
Housing choice
Employees who do not commute have greater freedom when choosing a place to live. This means they
can locate themselves in places where they can afford to buy a house or pay rent or that are more
suitable for their family and lifestyle.
Disadvantages of homeworking
Loss of space
The employee needs to create an office space to work in and for any necessary IT equipment. This may
mean the loss of a whole room (often a bedroom) which must be sacrificed in order for them to work at
home.
Increased utility bills
Certain bills, such as gas, electricity and water, may increase as a consequence of the employee being at
home rather than in a traditional workplace.
Loss of social contact
Some employees thrive on the social contact that they receive at work. Colleagues often become friends
and socialise away from work. Such opportunities would be reduced if a workforce works at home.
Use of home as an office
Employees may prefer to separate home life from work life. Bringing their work home means they are not
able to make such a distinction and may find it difficult to switch off after the working day is over.
Becoming distracted
Working away from the eye of a manager or supervisor may create a temptation for the employee to stop
work and, for example, watch TV or play computer games. This may result in them becoming less
productive and the quality of their work may suffer.
(c)
There are a number of important roles that TBs HR department can play given its working practices.
These include:
Answers
Involving employees in the corporate culture

New employees should be introduced to TBs corporate culture as part of their induction process. This is
particularly important as employees are based in different countries and some may work mainly from
home. The induction may be only one of a few opportunities for such employees to feel part of a wider
family and develop a shared vision of where the organisation is going.
Dealing with personnel issues arising from homeworking
The use of homeworking opens up a number of issues in which the HR department should become
involved as and when necessary. This may include, for example, health and safety issues around
employees home workstation, disciplinary action where employees are found not to be working or where
the IT and telecoms equipment they are provided with is abused.
Ensuring comparability of remuneration
Salary levels between employees in different countries should be comparable (but at the same time
competitive locally) - TBs HR department should be involved in ensuring that employees are neither over
or under paid for their role. This comparability should take into account the economy and overall pay
levels within the country that the employee lives.
Legal compliance
TBs HR department ensure TB meets all relevant employment law and regulations (such as health and
safety rules) which affect it and its employees around the world. This will minimise the risk of TB being
taken to court by employees or others for breaches of legislation (for example minimum notice periods
which must be respected when an employee is dismissed).
Developing an appropriate appraisal system
It is the role of any HR department to develop an appraisal system which is appropriate to the businesses
needs. In a geographically dispersed organisation such as TB, this is complicated by the different cultures
and working practices in which its employees work under. This means that it is also necessary to develop
a sensible system of recording and comparing employee performance. It should also make decisions on
how best to allocate bonuses or other performance related remuneration.
38 T42
Top tips. Part (a) is wide open and you should not have a problem in identify a large number of issues to
consider. In part (b) dont forget to define job rotation before explaining some benefits.
Easy marks. Suggesting factors in part (c) you should be able to come up with enough from your own
knowledge and business awareness.
Examiners comments. A common mistake was confusion between outsourcing and offshoring in requirement
(a). However some thoughtful responses were given to requirements (b) and (c). Some answers could have
benefitted from being further expanded upon and developed.
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Marking scheme
Marks
(a)
(b)
(c)
10
10
5
25
not earn marks.
(a)
Offshoring
Offshoring is the relocation of some part of an organisations activities to another country.
The benefits of offshoring to T42 may include:
Reduced staff costs
T42 may be able to reduce its staff costs as a proportion of sales by employing overseas staff at a lower
cost.
The fact that several of T42s competitors have already offshored some of their activities may indicate
there is a competitive advantage to be had from it. By not offshoring, T42 may find itself at a competitive
disadvantage.
Knowledge of staff
By offshoring, T42 may lose the knowledge and experience of the staff that it currently employs. If the
offshoring arrangement fails then they might not easily be replaced.
Staff availability
T42 could support its claim that it has technicians available 24 hours a day, 7 days a week by offshoring
to a country in a different time zone. Technicians in that country could cover one shift while technicians in
the home country cover another.
Exchange rates
Variations in the exchange rate between the home country and the offshore country may make budgeting
difficult and expose T42 to exchange rate risk.
Political risk
Future operations in the offshore country may be affected by changes to the government and associated
legislation and regulation.
Language
Communications between the home country and offshore country may be difficult, and problems may
arise, if employees in the locations cannot understand each other.
Training and qualifications
T42 will need to ensure that any staff employed offshore meet its requirements regarding training and
qualifications in order to ensure the standard of service to its customers does not suffer.
Answers
Culture
It is likely that there will be cultural differences between the home country and offshore country, for
example in attitudes, working hours and public holidays. There is a need for employees in both countries
to understand and respect each other.
Impact on existing workforce
Offshoring represents a major change to the structure of the organisation and therefore the effect on
employee motivation, morale and goodwill should be considered and steps should taken to resolve any
industrial relations issues that arise.
(b)
Job rotation
Job rotation involves moving employees from one task to another.
The benefits of introducing job rotation amongst T42s technicians include:
Employee motivation
Technicians that are rotated will learn new skills associated with the new jobs that they undertake.
Learning new skills and trying new things should help keep them motivated as they no longer do the
same task every day.
Employee coverage
Job rotation will increase the skill set of technicians and this will enable them to perform a number of
roles if required (such as when other employees are absent or on holiday).
Adaptation to change
Improvements to the flexibility of T42s workforce as a consequence of them being multi-skilled, will help
the organisation adapt to changing market requirements in the future.
Eliminate a strategic weakness
The Chief Executive and Chief Operations Officer have already identified the fact that technicians are
skilled and knowledgeable in a few systems as a strategic weakness. Job rotation should help overcome
this.
Training budget savings
On the job training which is provided as part of job rotation is likely to be cheaper than other forms of
training (such as off-site courses). This should help generate some savings in the training budget which
the Chief Executive has requested.
Develop the company as a learning organisation
T42 already prides itself on having highly trained technicians. Job rotation would be a key policy in
developing it further as a learning organisation.
Acceptance of change
Job rotation will help employees get used to the idea of embracing change and make them more receptive
to supporting management plans for future changes that might be necessary.
Demonstrates management commitment
The fact that management offer job rotation in the first place will demonstrate to employees that the
organisation is committed to them and their future. This may help improve employee loyalty.
Improvements to customer service
Rotated employees not only learn new skills but bring new ideas to the employees that train them. This
sharing of knowledge may help improve the service provided to the customer.
Improved employee collaboration
Rotating employees will bring them into contact with others that they may have had little or no contact
with in the past. New relationships will develop and this may improve how employees relate to each other
in the future.
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(c)
Factors to consider regarding training

Strategy
It is part of T42s strategy to have highly skilled employees. Therefore the training provision and budget
should be sufficient to enable this strategic objective to be achieved.
Method of training
The method of training provision and cost are directly related. It is important that the method of training
selected should be appropriate for the needs of the employee and justify the cost of its provision. For
example classroom based courses may be more expensive than on-the-job training, but on-the-job training
may be more effective at teaching employees new practical skills.
Motivation of employees
Highly trained employees are likely to be more motivated and happy in their work than those which do
not receive any training or support. The extra cost of training may be justified through reduced
absenteeism and turnover of staff which creates more recruitment and selection costs.
Productivity
Highly trained staff are likely to be more productive, for example in relation to the number of clients they
can serve per day. This extra productivity may help offset the cost of training.
Resources
Training will divert resources away from the organisations core business. For example if staff are being
trained they cannot work and the training budget cannot be spent on other aspects of running the
business. T42 should consider the implications of diverting funds away from operations.
39 CM8
Text reference. Chapters 6, 11 and 12
Top tips. Read part (c) very carefully. You just need to explain Maslow or Herzberg not both! The answer
below covers each of them for study purposes.
Easy marks. Stating the roles of the HR department and managers in part (a). These should be quite
straightforward, but to earn the majority of the marks you must be able to discuss them and include
examples to support your argument.
Examiners comments. A common mistake in part (a) was a failure to concentrate on respective roles or a
tendency to provide generic answers rather than answers related to the scenario. A lack of knowledge of
the concept of lean management was exposed in some cases in part (b). Finally some candidates confused
Herzberg with Minzberg or Hofstede in part (c). Some answers could have benefitted from being expanded
upon and developed further.
Answers
Marking scheme
Marks
(a)
(b)
(c)
10
10
5
25
marks.
(a)
CM8
In modern businesses like CM8 the HR department and managers have distinct roles to play as they each
specialise in different aspects of workforce management. The different roles are identified below.
Roles of the HR department
HR departments, such as CM8s, are at a tactical level within an organisation and are responsible for
developing HR policy for the managers to implement within their teams. Examples of roles include:
HR planning
The overall role of any HR department is to develop an appropriate and effective human component for
the organisation based on its corporate strategy. To do this it needs to identify the requirements of the
organisation for staff at all levels and to ensure that they are available when required. This means it is
responsible for recruiting employees and terminating employment contracts so that the right number of
staff are employed at all times.
Training schemes
The HR department should also determine whether the needs of the organisation can be met through the
training and development of staff, for example earmark king employees for future management and
providing them with training to perform the new role.HR is also responsible for the retention of staff and
training and development is an important aspect of this.
Pay structures
A suitable pay structure aids the recruitment and retention of employees and is an important factor in
developing employee motivation. HR departments create organisational pay structures, usually based on
equity or fair differentials between the pay of individuals across departments and at various levels.
Appraisal schemes
The purpose of appraisal is to review individual performance and maximise the future utilisation of the
organisations human resource. To ensure consistent treatment of employees across the business and for
comparability purposes it is important that a single appraisal system is used by all departments in the
organisation and therefore the HR department should be involved in developing such a system to meet
the needs of the organisation.
Working arrangements
HR departments set company policy on how and where employees perform their roles. For example they
may introduce flexitime to allow employees some flexibility in the hours they work. They may also
introduce working at home arrangements for certain employees as appropriate.
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Roles of managers
Managers perform their role at the operational level within an organisation and are responsible for the
day-to-day running of their team and this means that they implement the policies of the HR department.
Common managerial roles include:
Motivating employees
Whilst the HR department is responsible for setting the overall policies that affect the motivation of
employees, it is the manager who implements them on a day-to-day basis. They do this as appropriate in
order to get the best of out their staff. For example, the HR department may allow job rotation and
enrichment as motivational tools, but it is the manager who decides whether they are practical in their
area and whether they are appropriate for the various members of staff who report to them.
Appraisal
The role of managers in appraisal is to implement the system created by the HR department. This means,
for example, that they conduct the appraisal interview, complete the paperwork and provide feedback to
the employee. Information that managers feedback to the HR department will contribute to the HR
departments understanding of employee skills and training needs.
Meeting organisational goals
Within the organisations overall corporate strategy, the manager is responsible for ensuring their team
meets the goals and objectives set for it. This means that they make operational decisions on how best to
run their department, including how best to lead their team in order to get the best out of them.
Discipline
Managers are responsible for dealing with day-to-day disciplinary issues that are relatively minor. For
example speaking to staff about lateness or quality of their work. There are limits to this role and for more
major issues, or where minor issues are continuing they will need to refer to the HR department for advice
and support.
Managing change
Managers have a role to play in organisational change, for example during the implementation of a new
information system or restructuring. They are the main point of contact for employees to voice their
concerns and positive feedback about the change and therefore the manager has an important role to play
in shaping how a change affects their department.
(b)
Lean management
Lean management, or lean production is a business philosophy that aims to minimise the waste of
resources (including time) in all activities and involves the identification and elimination of non-valueadding activities.
Role of modular teams
Teams, such as those employed by CM8, work in small groups or modules on specific products or
components. They are responsible for the output and individuals are generally multi-skilled. They
contribute to learn operations as they allow the following characteristics of lean production to take place.
Continuous workflow
CM8s teams are grouped according to what is being produced. This means that production layout is
based on workflow, a key attribute of lean production as non-value adding movements of people and
equipment are minimised.
Zero inventories
A key feature of lean production is the elimination of inventories. This is because storing raw materials
ties up working capital and storage costs are incurred. Modular teams and continuous workflow contribute
to the reduction of inventories because materials and components flow from suppliers and the production
process as they are required.
Answers
Zero waiting time

Zero waiting time means that production units do not waste time being idle whilst waiting for raw
materials or components to arrive and is another characteristic of lean production. The continuous
workflow created by using modular teams contributes to zero waiting times.
Active involvement of workers in problem solving
CM8s modular teams are semi-autonomous. This means that they are responsible for solving production
problems as they arise. This active involvement of workers, rather than them waiting to be told what to be
done, is another key aspect of lean production.
Defect prevention by building quality into the process
Another consequence of CM8s teams being semi-autonomous is that they are responsible for their
output. This responsibility means that they have an interest in ensuring quality, and from managements
perspective it means that quality is built into the product. Poor quality output is seen under lean
principles as waste since it either has to be corrected later, the output has to be scrapped, or the products
are defective when they reach the consumer and have to be replaced.
Team-based work with multi-skilled staff empowered to make decisions
A consequence of CM8s teams being involved in problem solving and responsible for quality is that they
must also be empowered to make decisions. Under lean principles it is regarded more efficient for those
involved in the production process to make day-to-day operational decisions, rather than senior
management because they are best placed to know the best solution.
Economies of scope (small batch production)
Economies of scope are a key characteristic of lean production and means it is economical to make small
batches of a variety of products. This is the opposite of economies of scale which are associated with
traditional manufacturing. CM8s modular teams support economies of scope because they are multiskilled and are of small size, enabling them to switch between tasks quickly.
Clean and orderly work place
Uncluttered and clean workplaces are associated with lean production as it provides space for teams to
work efficiently and safely. X noted the tidiness of CM8s workplace and therefore the organisation will be
benefiting from this aspect of lean production.
(c)
Maslows thinking and modular teams

Maslows theory states that individuals are motivated by five needs which are organised into a hierarchy
with lower order needs (such as food and shelter) at the bottom and higher order needs (such as to fulfil
personal potential) at the top. Each need is dominant until it is satisfied. The needs are listed below
together with how they may relate to CM8s modular teams.
Physiological needs
These are basic human needs, for example food and shelter, that are required in order for survival. Being
in a modular team does not in itself meet these needs but being paid a salary as an employee would help
meet them.
Safety needs
Safety needs concern security, order, predictability and freedom from threat. These needs are generally
met through law and order in society and therefore CM8s modular teams do not in themselves fulfil these
needs. However, employment would contribute towards meeting safety needs as it provides an employee
and their family a source of stability.
Love/social needs
These are needs which are fulfilled by relationships and a sense of belonging. Modular teams help support
these needs because of the bonding between members of the team.
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Esteem needs
Esteem needs are for independence, recognition, status and respect from others. Whilst team members
should not work independently from each other, modular teams do allow an individual to earn respect
and status from their fellow team members and for their efforts to be recognised as they become apparent
to the people around them.
Self-actualisation
This is the ultimate aim of fulfilling ones potential and is the only need which, in theory, cannot be
satisfied. One way of looking at this need is that it goes beyond what can be fulfilled through work and
therefore CM8s modular teams do not contribute to it. However, another way of looking at things is that
being a member of the team enables an individual to achieve something that they would not be able to
alone (ie to produce a completed product). In that sense the teams could be viewed as contributing to
self-actualisation.
Herzbergs thinking and modular teams
Herzbergs two-factor content theory states that an individuals motivation is affected by factors which
create satisfaction if present and dissatisfaction if not present.
Hygiene factors
These factors prevent or minimise dissatisfaction when present but they do not motivate, or give an
employee satisfaction themselves. Examples of hygiene factors are company policy, salary, quality of
supervision, interpersonal relationships, working conditions and job security.
CM8s modular teams provide hygiene factors in relation to interpersonal relationships (due to team
bonding), working conditions (uncluttered workplace) and supervision (if the supervisor is effective).
Limitations
The modular teams do not provide hygiene factors relating to company policy, salary and job security.
These are the responsibility of the HR department.
Conclusion
Modular working in CM8 provides several factors required to stop team members from becoming
dissatisfied.
Motivators
These factors create satisfaction and are effective in motivating an employee to superior performance and
effort and give them a sense of self-fulfilment and personal growth. Examples of motivators are
advancement, recognition, responsibility, challenge, achievement and growth. CM8s modular teams
provide staff with a number of these motivators, for example:
Recognition
Working closely with other team members allows individuals to demonstrate good performance. The
teams are small enough to allow people to stand out and receive praise.
Responsibility
The team is accountable for its output and therefore individuals share in this collective responsibility.
Challenge and achievement
Modular teams require members to be active in problem solving. This provides them with challenges on a
day-to-day basis and successfully meeting these challenge creates a sense of achievement.
Limitations
Working in a team does have some limitations as there is no way for team members to advance(except to
leave the team) or to grow (because the members are already multi-skilled and have all the responsibility
they can be given). However, as the teams are semi-autonomous, there is the possibility of members
being given the scope to develop new technical or soft skills.
Conclusion
CM8s modular teams provide many, but not all of the motivators that Herzbergs theory describes.
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40 MM
Top tips. In part (a) you should be thinking about how the lean philosophy can be applied by MMs HR
Department this means applying it to labour rather than traditional manufacturing.
Easy marks. Applying the lean philosophy to MMs HR department (only if you appreciate its application to
labour).
Examiners comments. The main weakness with part (a) was not relating answers to the operations of the HR
Department. In part (b) some candidates concentrated on benefits to senior managers rather than how their
involvement could overcome the shortcomings in current processes of recruitment and selection of apprentices.
Part (c) was generally well answered with candidates able to identify the main options available to MM.
Marking scheme
Marks
(a)
10
(b)
(c)
10
5
25
not earn marks.
(a)
Application of the lean philosophy to MMs HR department

Lean production (sometimes referred to as lean manufacturing or lean process improvement) is a
philosophy of production that aims to minimise the amount of resources (including time) used in all
activities. It involves identifying and eliminating all non-value-adding activities.
Lean
production or lean process improvement involves the systematic elimination of waste, such as:
Overproduction and early production
Waiting time delays, idle time, any time during which value is not added to the product
Transportation multiple handling, delay in materials handling, unnecessary handling
Inventory holding or purchasing unnecessary raw materials, work in process and finished goods
Motion actions of people or equipment that do not add value to the product
Over-processing unnecessary steps or work elements/procedures (non added value work)
Defective units production of a part that is scrapped or requires rework
However, MMs HR department is not involved in production and therefore the main application of lean
philosophy will be in reducing waste of the labour resource. Examples of this could include:
Improving productivity
Lean principles may help to identify methods of getting more work done by using less labour ie by
improving the productivity of employees. A key focus for the HR department would be to look at job
design to see if unnecessary processes can be removed.
Reduce waste in the HR function
It appears that some managers believe that the HR department would benefit from the adoption of the
lean philosophy. The HR departments processes should be reviewed from the point of view of reducing
unnecessary work, reducing waste and focussing on value-adding activities.
Minimise labour hours wasted
HR should work with department managers to identify causes of wasted labour hours (such as moving
staff between locations, idle time, handling goods unnecessarily and delays in production). The use of
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labour should be refocused to ensure it is only used to add-value to production and therefore reduce
overall costs per unit of production.
Performance measurement
Lean principles encourage the use of metrics to monitor performance (such as using productivity ratios).
By analysing the performance of various parts of their department, the manager can concentrate their
time on improving those areas which are the least efficient. The HR department could assist department
managers with training in the use of metrics.
Flexibility
In a lean system it is important for a workforce to be flexible in order to manage activity in times of high
or low demand. In terms of the apprenticeship scheme, it may be appropriate to offer an apprentice
experience in various business areas rather than just one. The HR department could also encourage the
cross-training of employees between departments.
Working environment
Safe, clean, uncluttered working areas are a key feature of the lean philosophy. The HR department could
develop a policy on workplace safety and encourage tidiness and organisation within departments.
(b)
Overcoming shortcomings in the recruitment and selection of apprentices

The following shortcomings of the apprentice scheme are identified and addressed below.
Ineffective process
Due to falling attendances at open days over the last three years it is clear that the recruitment process is
ineffective. It is important that the senior site managers conduct a review of the whole method of
attracting potential apprentices and improving the image of the company. Potential improvements may
include:
Attendance of site managers at promotional events rather than the HR team. They are likely to have more
knowledge of the day-to-day aspects of the job and therefore in a better position to answer questions.
Have the promotional material redesigned to improve the image of the company and appeal to potential
apprentices.
Consider alternatives to the open day approach. For example it may be better to advertise on the company
website and offer tours of the business to people who show an interest by applying to the company
directly.
Lack of support by department managers
The current system does not appear to have the full support of the senior site managers. This is a major
problem because ultimately their support is needed for it to work. The current recruitment process is
largely decided upon by the HR director with the consequences being felt by the senior site managers. It
would be more effective for the site managers to determine how many apprentices they need (determined
by forecasted production) and to be involved in selecting the apprentices (via interview for example). This
will help the senior site managers feel more part of the process and give it their support.
Losses due to wasted training expenditure
The cost of training an apprentice is likely to be high because they come into the company with little or
no knowledge and leave as a fully trained member of staff. Time, wastage due to the learning process as
well as any formal training are all costs that may be incurred. All these costs are wasted when an
apprentice leaves.
Losses due to wasted recruitment expenditure
The current recruitment process is expensive. Promotional material is prepared, HR resources are used to
tour schools and open days will undoubtedly result in reduced production on the days that they occur.
These costs are wasted if an apprentice that is recruited through the process subsequently leaves.
Loss of capable employees
In addition to wasted recruitment and training costs, a significant loss to the company is simply through it
being deprived of fully trained, capable employees who were attracted to the business and who worked
hard throughout their training. If they were retained at the end of their training, the business would
benefit from their skills, experience and loyalty in the future as well as having a potential source of
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employees that may be suitable to fill senior roles in the future. Additionally, employees who know that
they are going to be with the company following their apprenticeship are more likely to speak well of the
business to potential recruits at open days.
(c)
Role of the Human Resources Division

In order to address the problem of apprentices graduating without suitable full-time posts being available,
MM needs to improve the whole process of recruiting and training them. Suggestions for improvements
include:
Improve the HR planning process
The number of apprentices recruited should be driven by forecasted future demand for their skills rather
than a figure decided upon by the HR director. The companys HR plan can be used to provide this
information and it should be relatively simple to estimate the companys requirements by considering
current staffing levels, future plans and expected staff turnover. This will help prevent over-recruitment
occurring.
An allowance could be made to retain graduating apprentices on the companys payroll for a period of
time following the end of their training to cover a period where there might not be a vacancy. In the
meantime the member of staff can gain further experience with the company.
Introduce flexibility into the training
Apprentices should receive training and experience across a wide range of roles within the organisation.
Not only does a flexible worker benefit the business generally, but it will be easier to place apprentices
when they graduate because they could fill a range of vacancies.
Use the whole organisation as a source of employment
Under the current system, a graduating apprentice will only be offered work, if it exists, at the site that
they received their training. There may be vacancies at other sites that they could fulfil as well though, so
the whole organisation should be opened up to graduates as a source of employment.
Alternative solutions
Other solutions could be considered that aim to effectively delay the point in time when the graduating
apprentice is taken on. For example, managers may have a budget to take on temporary or part-time staff
that could be used to employ a graduate until a full-time position becomes available. Alternatively they
may be offered a gap year or period of full-time study with the promise of full-time employment when
they return.
41 CR7
Top tips. Be sure to develop all your points sufficiently. The examiner identified that this was a problem for
candidates in part (b). To earn two marks per point you should explain your point fully and relate it to the
scenario where relevant.
Easy marks. Stating the benefits of a centrally organised IS function.
Examiners comments. Although requirement (c) presented few difficulties overall, scoring on this question was
reduced by indifferent responses to the rather more substantial requirements of (a) and (b). Some candidates
clearly did not understand the concept of centralised service provision for requirement (a). In addition, the
structuring of responses to requirement (b) was poor and points raised were generally undeveloped. Some
candidates, however, produced excellent answers whilst other answers were nothing more than working notes.
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Marking scheme
Marks
(a)
10
(b)
(c)
10
5
25
not earn marks.
(a)
Advantages for a central IS function for CR7

The advantages of a centralised system to CR7 include the following.
Flexible resource
The management of CR7 have stated that the firm has to become more flexible. By establishing a central
in-house IS team, the business will have a source of specialists available at all times. If a decentralised or
outsourced arrangement is used then this flexibility is reduced due to the amount of resources that may
be available on site at any one time. Under a centralised system, resources may be switched from one
location to another.
Development of expertise
Over time the central team will become a valuable source of expertise with excellent knowledge of the
whole business. This will benefit the organisation because the team may identify the most appropriate
systems and technology that should be invested in.
Alignment with corporate objectives and culture
The central team will understand the goals of the whole organisation and its culture rather than a small
part of the business if the IS function was decentralised or indeed outsourced. This enables a common
approach to IS can be developed and an overall strategy formulated.
Shared values and corporate identity
A central IS function will help CR7 to develop shared values and a corporate identity because the team
will operate, and be seen, in all business units. This will help the separate business units develop a sense
of shared values and identity. This would not be possible with a decentralised or outsourced arrangement
because the provider would only be interested in performing a specific (IS) role.
Economies of scale
The cost of a central IS team can be spread across all business units rather than each unit setting up and
running its own IS function under a decentralised system. It is also cheaper than outsourcing where CR7
would be paying for not only the cost of the operation, but a third partys profit as well.
Communication and best practice
A centralised team ensures greater co-ordination and consistency of IS provision across all business units.
Decentralised teams or outsourcing partners may use different approaches or ideologies and this may
result in systems that do not necessarily work together effectively or for the good of the whole business.
Improved communication has the additional benefit of allowing knowledge and experience to be collected
and retained within the business. This will allow CR7 to be independent in terms of IS provision in the
future.
Future-proofing
By developing a centralised IS function now, CR7 will have the ability to decentralise or outsource its
arrangement in the future if it decides it to be appropriate. It is easier and cheaper to outsource or
decentralise, rather than break out of an outsourcing arrangement or amalgamate decentralised IS teams
in the future.
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(b)
Developing a pay structure

When developing a pay structure, CR7s HR department should firstly consider a number of aims that it
will be designed to achieve. These aims may include:
Attracting and retaining staff of a suitable quality
Rewarding and motivating employees fairly and consistently
Further the organisation's objectives by providing competitive rewards
Encouraging performance and progression through development
Recognising non-performance factors such as skill and competence
Ensuring that salary costs are controlled

Within these aims there are five main issues that should be taken into account.
Remuneration levels
Where staff are transferred into CR7 from the existing M013 operation they will have expectations of
salary levels based on the pay they received under the previous regime. The HR department should seek
to maintain remuneration levels for these staff at the very least because employment on less favourable
terms may result in employees leaving the business.
Remuneration levels of employees should also reflect what is paid to casual workers and contractors. The
HR department should review market salaries for temporary workers and contractors. There is likely to be
an expectation of employed staff that they are paid more than casual staff (to reflect their loyalty) but
maybe not quite as much as contractors (because they are self-employed and do not have the security of
continuous employment).
Differentials
Pay differentials are differences between what is paid to different categories of worker (to reflect a
difference in skill or work done) and differences between what is paid to staff that perform a similar job
(to account for differences in responsibility such as team leaders and supervisors).
It is also important for the HR department to reflect the flexibility of staff in their remuneration. This is
increasingly important to CR7 as it becomes a flexible organisation. Staff may be required to perform a
number of different roles as and when required. This means that they may have to take on more work
than they would have done otherwise and develop a wide range of skills in order to perform the work
expected of them. If this is not reflected in their remuneration then staff may become demotivated.
Incentive schemes
Many organisations, especially flexible ones, offer additional payments to incentivise staff to be more
productive or share in the profits of the business. Performance-related schemes such as additional salary
or bonuses that become payable once an individual employee meets a set target should be considered.
Similar payments based on team performance are also sometimes offered, but this may result in
dissatisfaction as hardworking employees earn the bonus and less hardworking colleagues receive a share
too.
Profit-related pay is a company-wide performance related pay scheme where all employees receive a
bonus in line with an organisations overall results. For example, 10% of a firms annual profit may be
split between the employees by way of a bonus. Such schemes have a positive effect in that they help
foster a culture where all employees work together for the good of the whole organisation.
Total reward schemes
For many individuals, pay is not the only factor that motivates them. Other factors such as the amount of
holiday, pension scheme payments, private medical insurance, gym membership and childcare support
may also be used to motivate the workforce. In a total reward scheme, the business selects a range of
possible benefits and the employees can adjust their overall remuneration package by choosing the
benefits that suit them.
CR7s HR department should consider what range of benefits should be offered to its staff and develop a
package that suits the business. In CR7s case, the HR department could tie the business need for
flexibility into the reward package by offering flexi-time and the ability to buy and sell holiday. Such
packages should help retain existing staff and help attract high quality new employees when required.
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Pay progression
In additional to a cost of living pay rise, many organisations also offer pay progression to reflect the
motivational needs of the individual and the need of a manager to reward employees as appropriate. Pay
spines are a series of incremental points along the pay scale that employees can be moved along
according to their performance at the discretion of their manager. The HR department should consider
pay spines and other methods of pay progression when developing the new pay structure.
(c)
Flexible working practices

CR7s management has already stated that it considers the use of casual, permanent and contractual
workers to be a model for its future operations. This model is known as Handys Shamrock Organisation.
Under this model an organisation consists of permanent, core workers who possess key skills and have a
high status within the organisation, casual workers who have low skills and perform less important tasks,
and a contractual fringe that perform other roles as and when required.
The other types of workforce flexibility that an organisation such as CR7 could use include the following.
Financial flexibility
A range of payment and reward systems may be used to encourage the workforce to perform. For
example, an employee is more likely to be prepared to work overtime if they can see that doing so will
help them achieve a financial incentive such as a bonus.
Functional flexibility
Functional flexibility means ensuring employees are able to switch between tasks and roles as required.
To do so requires multi-skilled teams rather than relying on specialists. Job rotation and training are often
used to help build functional flexibility.
Numerical flexibility
The use of additional people, for example temporary workers, can be used to provide the flexibility to deal
with peaks in production demand. Part time workers can also play a part, providing flexibility to cover
certain parts of the day or night without needing to employ a person full-time.
There are generally two aspects flexibility can be offered on - where people work and when they work.
Flexibility can be provided over when people work, for example through the use of flexitime or offering the
option of a compressed working week. It may be appropriate for some employees to be offered flexibility
over where they work, for example working from home.
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42.1 D
China is the largest of the BRIC economies.
42.2 B
Herzberg developed the two-factor content theory of motivation. One factor in the theory is
motivators these produce satisfaction in an individual when present.
42.3 C
The set of expectations between an organisation and its employees is known as a psychological
contract.
42.4 B
Data redundancy refers to the duplication of data.
42.5 C
Aptitude testing is used during the selection process.
42.6 C
Promotion includes all marketing communications which let the public know about an
organisations products and services.
42.7 A
Economies of scale and manufacturing experience allow firms to reduce their costs and therefore
compete successfully on price. Economies of scale, such as bulk discounts, mean organisations are
able to purchase raw materials more cheaply. Organisations with extensive manufacturing
experience know the most efficient and cost-effective methods of producing goods.
42.8 C
Stability might seem like a desirable feature in its own right, but it is covered by substantiality.
42.9 D
Predatory pricing involves setting a low price with the intention of damaging the competition.
42.10 C
A product life cycle chart plots sales volume against time.
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43.1 A
Kurt Lewin's ideas are based on the idea that change is capable of being planned.
43.2 C
The US, Canada and Mexico are the three members of the North American Free Trade Agreement
(NAFTA).
43.3 B
Loss leaders are products that have a very low price set with the objective of attracting consumers
to buy other products in the range with higher profit margins.
43.4 B
Victor Vroom's Expectancy Theory states that valence is the strength of an individual's preference
for a certain outcome.
43.5 A
A widget is an example of a web 2.0 application.
43.6 C
The TQMEX model shows the relationship between quality management and other aspects of
operations management. The answer must therefore mention these two areas, so C is correct.
43.7 A
Quality certification requires approval of such materials.
43.8 C
Rodger's theory relates to a person specification, so C is the correct answer.
43.9 B
The process of attracting suitable candidates is referred to as 'recruitment'.
43.10 B
The overall expectations an individual and organisation have of each other form a 'psychological
contract'.
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44.1 A
Producing or purchasing items as they are needed is referred to as Just-in-Time (JIT).
44.2 C
These qualities focus on the person. A job description (option A) explains what is required in a job.
Options B and D are part of an appraisal system.
44.3 D
At an assessment centre, candidates are observed and evaluated as they perform a variety of
exercises.
44.4 A
Shareholders are connected stakeholders.
44.5 C
In the context of selection techniques, reliability means the achievement of consistent results.
44.6 A
Reck and Longs positioning tool is strategic (The strategic positioning Tool).
44.7 B
Plan-Do-Check-Act (PDCA) is a cycle that breaks continuous improvement down into four stages.
44.8 B
On-line testing and user acceptance occurs after implementation. Logic testing is done before any
software is written.
44.9 C
The 5-S model describes operations management practices of structurise, systemise, sanitise and
self-discipline. It does not describe internal analysis or a form of six sigma.
44.10 A
Corrective work, the cost of scrap and materials lost are examples of internal failure costs.
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45.1 A
TQM aims to eliminate the costs of poor quality not just reduce them. It is not possible to
eliminate all quality-related costs without ceasing production. TQM does not aim to reduce the
workforce although changes in working methods may be required to improve quality.
45.2 B
Fewer (preferably no) internal failures means less time lost correcting problems and therefore
more time engaged in production. The other options are false; internal failures cause delays in
delivery, improving process quality should reduce the testing required and inspecting finished
goods is expensive as it means re-producing sub-standard production rather than focusing efforts
on producing high quality output first time.
45.3 D
The marketing strategy follows the business planning process it does not drive the company
objectives (A) or productive capacity (B). C is incorrect because it fails to consider the
requirements of the consumer.
45.4 A
Perfective maintenance is aimed at extending or improving a system. It is usually requested by

users.
45.5 A
Taylor assumed that workers are rational so would try to obtain the highest remuneration for the
least effort.
45.6 A
Kaizen is originally a Buddhist term but was adopted by the Japanese (and now by other nations)
to represent continuous improvement. The other options may involve or imply some elements of
continuous improvement but have different meanings.
45.7 A
The usual course of action to reduce inflation is to raise interest rates as this makes borrowing
more expensive and reduces overall demand in the economy.
45.8 D
The other options do not refer to recognised, formal supply sourcing strategies.
45.9 D
Schein developed the concept of 'social man'.
45.10 B
Professional accountants must not be party to anything which is deceptive or misleading. This is
specified in CIMA's Ethical guidelines and goes further than simply 'not telling lies'.
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46.1 A
Job enrichment involves adding new, more stimulating requirements to a persons job.
46.2 B
A total reward package brings together pay and non-pay elements and emphasises a positive
organisational culture.
46.3 C
Organisational culture is not a spoke in Cousins strategic supply wheel.
46.4 C
Customers participating directly in the delivery process is a feature of the service industry.
46.5 B
Sustainability is a long-term programme involving a series of sustainable development practices.
46.6 D
The four emerging world economies Brazil, Russia, India and China are sometimes referred to as
the BRIC economies.
46.7 A
Off-shoring involves carrying out some operations in a different country.
46.8 B
Core competencies provide competitive advantage so should not be outsourced.
46.9 D
A service level agreement usually includes a definition of the level of service to be supplied.
46.10 B
Gross National Product is made up of Gross Domestic Product plus net overseas earnings.
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47.1 D
Decision based software provides managers with the information and analysis tools to enable them
to make decisions.
47.2 A
Web 2.0 applications include blogs and social networking sites.
47.3 B
Virtual teamworking is made possible by developments in communications and other technology,

enabling people to work together even when they are not physically located in the same place.
47.4 C
The practical application of CAD and CAM technologies, rather than any general outlook or
philosophy, are responsible for increased control over design and production using machinery.
47.5 B
By linking in to suppliers systems, for example, a lot of paperwork and administration time (and
cost) can be saved by the sharing of order processing and payment information via EDI.
47.6 B
A manufacturer with a production orientation concentrates upon production efficiencies and cost
cutting because it believes that this will be enough to sell the product in whatever quantities can
be manufactured.
47.7 A
The macro (external) environment exerts an influence over the organisation, rather than the other
way around. It is beyond the organisations control.
47.8 B
A non-governmental organisation (NGO) operates independently from any government and

generally pursues some kind of social aim, such as Rotary International.
47.9 B
Examples include education and healthcare provided by governments.
47.10 B
The cognitive paradigm theory explains consumer behaviour as a rational process, from awareness
to eventual purchase.
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48.1 D
Corporate governance focuses to a large extent on preventing directors from abusing their power.
Prevention of fraudulent claims by contractors is not a major benefit of good corporate governance.
48.2 A
Corporate political activity aims to secure policy preferences.
48.3 C
Political risk analysis focuses on the political and cultural differences between the home and target
country.
48.4 A
Efficient regulation of companies exists if the total benefit (of regulation) to the nation exceeds the
total cost.
48.5 C
Under the stakeholder view, the people, groups and organisations with an interest in the
organisation are viewed as stakeholders.
48.6 C
Matrix operation is not a term associated with systems development or changeover.
48.7 B
If the Information Systems function is outsourced, the organisation does not need to assemble and
maintain a suitable IS workforce in-house.
48.8 D
A key focus of quality under the Japanese approach is customer satisfaction, which relies on
meeting customer needs and expectations.
48.9 C
Process design often benefits from the use of kaizen (continuous improvement).
48.10 B
Closer relationships with a supplier can help improve quality and reduce costs.
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49.1 C
Offshoring means moving work to another country (off shore). Outsourcing to another country is
an example of offshoring, but the term also refers to moving some of an organisations own
operations to another country.
49.2 A
Servqual involves comparing aspects of the service that customers receive with their expectations
of what they should receive. To do this, there must be feedback from customers.
49.3 D
Protectionism is a term that means protecting domestic industry against foreign imports and
competition.
49.4 C
Productive maintenance is an approach that is intended to ensure that every machine in a

production process performs its required tasks so that its output is not disrupted. The approach
seeks to eliminate as much non-productive time on machines as possible.
49.5 A
In an ABC system, materials are classified as A, B or C according to value, and the method used
for inventory control for each material item depends on its classification.
49.6 A
A payroll package is used to process routine payroll transactions, and so is a data processing
system (also called a transaction processing system).
49.7 D
A system (or software) development life cycle is the process of creating or altering an information
system within a structured methodology that includes planning the system, the feasibility study,
design, programming, testing, implementation and system maintenance after implementation.
49.8 A
Electronic data interchange can be used to link an organisation to its supplier (or suppliers)
through a purchase/sales order system. The ability of their different information systems to
exchange data requires the use of structured data and standard business documents.
49.9 C
Corrective system maintenance involves correcting the system when a failure occurs. Perfective
maintenance is changing a system to improve its performance. Adaptive maintenance involves
changing a system to meet the requirements of changes in the environment (for example, changes
in the law).
49.10 A
Data integrity is essential in databases, to ensure that the stored data is correct, consistent and
accessible. A centralised database facilitates the elimination of data duplication, allowing data to
be held just once on the system.
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50.1 A
Quality circles are groups of employees that meet to discuss problems relating to quality in their
area of work and how to resolve them.
50.2 D
The 7Ps in the extended marketing mix are Product, Price, Place, Promotion, People, Processes
and Physical evidence.
50.3 D
Herzberg grouped factors that affected motivation into motivator factors and hygiene factors.
50.4 A
Porter defined a value chain within an organisation as the primary activities and support activities
within the organisation. He also argued that the value chains of individual organisations are linked
in a value system of suppliers, distributors and customers. The value chain of each organisation is
a part of the total value system.
50.5 B
180 degree feedback is a form of feedback on personal performance.
50.6 B
Intrinsic satisfaction is satisfaction that comes from within an individual and satisfaction in the
nature of the job that he or she is doing. Extrinsic satisfaction comes from factors outside the
individual, such as pay, prestige and status, other perks of being a job position and social/group
interaction.
50.7 B
Direct marketing involves sending marketing material, such as a marketing e-mail or a brochure
through the post, to targeted individuals.
50.8 D
F W Taylor is associated with the scientific school of management thinking. These management
theorists held the view that work problems can be resolved scientifically through experimentation
and the analysis of the results, until an optimum solution is found.
50.9 D
Service level agreements (SLAs) are contractual agreements negotiated between an organisation
and another organisation to which it is outsourcing an aspect of its operations. The purpose of the
SLA is to specify the level of service that the external organisation is required to provide.
50.10 D
Interest rate may be managed as an aspect of monetary policy. Fiscal policy is concerned with
taxation, government spending and government borrowing.
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51.1 A
Balanced trade is one of a number of alternatives to free trade.
51.2 D
Corrective versus perfective approaches is not included in Hofstedes Five Cultural Dimensions.
51.3 A
EOQ stands for Economic Order Quantity.
51.4 C
5S and 6 Sigma are associated with the improvement of quality.
51.5 B
Assessment centres and psychometric tests are applied in the selection process. They are used on
candidates before a decision is made on who to employ.
51.6 A
CIMAs Code of Ethics is based on fundamental principles.
51.7 C
According to Herzbergs motivation theory, the absence of hygiene factors is a cause of

dissatisfaction.
51.8 B
Kolb suggested a four-stage learning cycle.
51.9 A
A person specification defines the personal attributes required of the job holder and are likely to be
based on Alec Rodgers seven point plan.
51.10 A
Lean production aims to reduce the amount of resources used in a process and a key
principle of the philosophy is the elimination of waste.
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52.1 A
Non-Governmental Organisations are independent, non-profit making organisations with social

objectives.
52.2 B
Gross National Product is Gross Domestic adjusted for foreign earnings.
52.3 D
Cattells 16PF test is a well known personality test used in employee selection.
52.4 A
Sourcing strategies can be to use single, multiple, delegated or parallel suppliers.
52.5 C
Results and enablers are features of the European Foundation for Quality Management model.
52.6 A
A person specification states the skills and qualities needed of a person to fulfil a particular role.
52.7 A
Job enlargement, enrichment and rotation are all methods of improving employee motivation by
introducing changes to an individuals role.
52.8 C
Hygiene factors are associated with Herzbergs two factor theory.
52.9 D
Internal failure costs are identified before the item or service is transferred to the customer.
Appraisal (or inspection) costs are incurred when checking that the output meets the quality
required. Prevention costs are incurred before the product is made or service delivered, to prevent
substandard work.
52.10 C
Assessment centres, interviews and psychometric testing are used in the selection process.
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53.1 C
A transition economy is one moving from being a planned economy to a market economy.
53.2 A
Corporate governance refers to how organisations are directed and controlled.
53.3 A
A computer virus damages data and software.
53.4 C
A person specification states the skills and qualities needed of a person to fulfil a particular role.
53.5 A
Where an organisation outsources its IS function, it becomes the client and the outsourcing partner
becomes the vendor.
53.6 A
Co-optation is a method used to deal with individuals who are resisting change.
53.7 A
A contrived test is designed to present the system with unusual events to see how it copes. Volume
tests are used to see how a system deals with large volumes of transactions. Realistic tests involve
the system being used in the way it will be in reality.
53.8 B
Psychological contracts exist between employer and employee.
53.9 A
According to McGregor, Theory X people dislike work and responsibility.
53.10 C
E-trading (or online trading) opens up the global market for an organisation.
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54.1 B
BRIC economies (Brazil, Russia, India and China) are all growing in power and influence. The
other options are all categories of economies which are already established.
54.2 D
According to Herzberg pay, status and working conditions are all hygiene factors.
54.3 B
Assessment centres are used in the selection process.
54.4 A
Corporate governance is the system by which organisations are directed and controlled.
54.5 A
Demerit goods are goods considered to be unhealthy or damaging to society.
54.6 A
A transaction cost is a cost incurred by an organisation as a consequence of having a business

activity performed by a third party.
54.7 C
Organisations may be marketing oriented, sales oriented, product oriented or production oriented.
Lean orientation is a made up term.
54.8 C
Corporate political activity is the involvement of companies in the political process with the aim of
influencing policies towards their preferences. Lobbying and contributing to political campaigns
would therefore form part of such activity.
54.9 A
Psychological contracts exist between employer and employee.
54.10 D
Gross National Product is a measure of the value of all products and services produced by a
nation. It is therefore a measure of growth within an economy. Inflation refers to general increases
in prices, unemployment levels refer to the proportion of the workforce out of work and the FTSE
100 level refers to the market value of the top 100 shares.
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55.1 C
Where an organisation moves part of their activities to another country, they are said to be
offshoring. Outsourcing may involve moving activities to another country, but it also involves
sub-contracting work to a third party rather than keeping it in-house.
55.2 A
The BRIC economies are Brazil, Russia, India and China.
55.3 D
Database management systems organise stored data. They ensure that data is only held once
(eliminating data duplication) and contain controls to preserve data integrity.
55.4 D
To obtain ISO 9000 certification an organisation must have its processes and procedures audited
by an independent registrar.
55.5 D
Political lobbying is used by business organisations to influence government policy. It is unrelated

to the issue of quality.
55.6 D
5S (structurise, systemise, sanitise, standardise and self-discipline) is a principle of lean

production and not an inventory management system.
55.7 A
Market segments must be identified through market research before they can be targeted, products
positioned and promotional activity commences.
55.8 C
Physical evidence is part of the extended marketing mix for services. As services are intangible, a
physical symbol or representation of the service can be provided instead. For example the ticket
provided for a show. This gives the consumer some reassurance concerning the service before it is
provided.
55.9 A
Milk, deodorant and coffee are examples of fast moving consumer goods physical products that
are bought often. Durable goods (such as hand-made shoes) are purchased infrequently and are
more expensive than fast moving consumer goods.
55.10 A
Electronic data interchange (EDI) involves the transmission of structured data using standardised
documentation between business organisations.
Answers

56.1 D
Secondary data or research is termed secondary because its intended use is not the specific
research the organisation is using it for.
56.2 C
Liberalisation is a term associated with free trade.
56.3 B
Viral marketing involves the use of pre-existing social networks to spread brand awareness or other
marketing objectives.
56.4 A
An undifferentiated policy involves producing a single product and hoping to get as many
customers as possible to buy it segmentation is ignored entirely.
56.5 A
With push control, production and inventory levels are forecasted and the focus is on pushing work
through each stage of the process, regardless of whether the next stage is ready to receive it.
56.6 B
Customer relationship management systems are software applications which specialise in

providing information concerning an organisation's products, services and customers.
56.7 C
Systems at the operational level are used to process transactions and help operational managers
track the organisation's day-to-day operational activities.
56.8 A
Building prototypes are associated with process design.
56.9 D
Internal marketing is about training and motivating employees to support the organisation's
external marketing activities.
56.10 D
Aspects of the pricing mix include factors such as any bulk purchase discounts given, credit offered
and methods of payment.
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57.1 A
Hofstede identified a number of dimensions that contribute to cross-cultural differences in beliefs

and values including uncertainty avoidance.
57.2 B
Corrective maintenance is carried out when there is a systems failure of some kind, for example a
defect in processing or in an implementation procedure. Its objective is to ensure that systems
remain operational.
57.3 C
A transaction cost is incurred by an organisation as a consequence of having a business activity

performed by a third party.
57.4 D
Total Productive Maintenance aims to reduce loss of effectiveness caused by defects, down-times
and loss of operating speed. Defects are prevented and business continuity is established.
57.5 A
The BRIC nations are Brazil, Russia, India and China.
57.6 B
Gross National Product (GNP) includes income generated domestically and income earned
overseas.
57.7 D
Common activities involved in corporate political activity include lobbying and donating to political
party campaigns.
57.8 D
Cookies are used to store information about website visitors.
57.9 D
The other parts of the supply wheel are organisation structure, corporate and supply strategy and
skills and competences.
57.10 D
SERVQUAL was developed in the 1980s by Zeithaml, Parasuraman and Berry as a method of
measuring quality in service organisations.
Answers
58 Hubbles
Top tips. The question requirement asks for 'a slide outline and brief accompanying notes of two to three
sentences'. A slide outline is in effect a list of headings, usually one or two main headings and a number of subheadings. Keep your notes brief this will help your time allocation and keep your answer focussed.
(a)
Sales orientation v marketing orientation
Companies with a sales orientation
'Let's sell what we've made'
A focus on advertising, selling and sales promotion
Companies with a marketing orientation
'Let's make what the customer wants'
All employees, and the organisation as a whole, have a 'customer focus'
Notes. Hubbles' emphasis on 'selling' implies that not enough effort has been made to establish what
customers want. If Hubbles produces items that 'strike a cord' with customers, the products should 'sell
themselves'.
Top tips. In Part (b) think of ways in which Hubbles can become customer focussed. You might have thought of
other examples.
(b)
A marketing orientation for Hubbles
Find out what customers want market research
What (and how) are competitors supplying?
Compare customer wants with all items currently on the market any gap is an opportunity
Establishing a true marketing orientation will require new ways of working, commitment from staff
at all levels and a change of culture
Some staff may not be suited to the new way of working and may have to leave; others will require
information and training
Notes. Adopting a marketing orientation will require Hubbles to change how and why decisions are taken.
The driving force behind Hubbles' products, markets, prices, and communication must be customer
needs. All staff at all levels must see their roles in the context of how Hubbles satisfies or delights
customers.
(c)
The traditional components of the marketing mix
Product the totality of what the customer purchases including product characteristics
Place (distribution) how the customer accesses or purchases the product
Promotion customers must be aware of the product and what it offers
Price linked to perceptions of quality and value for money
Recent thinking recognises the importance of a fifth component
People the people involved in producing and bringing the offering to customers are crucial
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Answers
Notes. The marketing mix is a framework that enables organisations to structure their thinking in a way
that focuses on the customer. After Hubbles has devised a customer-focussed strategy it will be in a
position to develop an appropriate marketing mix to achieve the strategy. This will require Hubbles to
meet or exceed customer needs and expectations in all areas of the marketing mix.
(d)
Hubbles and the marketing mix
Product. Identify what products customers want and focus production on these.
Place. Make it as easy as possible for customers to purchase Hubbles products. Ensure
widespread distribution; offer on-line sales with next day delivery.
Promotion. Get the message out that Hubbles has listened and has changed. Likely to require
advertising campaigns using different media to target groups.
Price. Revise pricing strategy to match the new products. Decide the balance between competing
on style and quality or on price.
People. Reorganise along customer-focussed lines. Encourage customer-focussed culture through

training programmes, incentives and staff empowerment.
Notes. Hubbles must develop a marketing mix that precisely matches the needs of potential customers in
the target market. Research the market for data relating to the age, income, sex and educational level of
target market, preferences for product features and attitudes to competitors' products.
(e)
Human resources helping purchasing
Recruiting ensuring people employed are suited to the role
Job design establishing clear responsibilities
Development and motivation developing training, appraisal and reward/incentive programmes

that result in capable, motivated staff
Discipline and conflict resolution providing a framework to limit the possible adverse effects of
misconduct and conflict
Notes. HR issues are important in all departments, including purchasing. The purchasing department
plays a crucial role at Hubble in the procurement of materials and finished goods for sale, supplier
selection and relationships, and price negotiation. HR must ensure the purchasing department has people
with the right attitude and skills to perform these tasks.
(f)
The purchasing department and organisational performance
Supplier selection, links and relationships. Establishing supplier selection criteria, quality
standards, extranet links, electronic data interchange (EDI)
Supplier contract negotiation. Guaranteed delivery times and quality enables Just in Time (JIT)
production methods to be used
Co-ordinating purchasing activities to maximise discounts
Relationship management to encourage mutual co-operation and benefits with suppliers possible
development of a supply network
Notes. The purchasing function is now recognised as being crucial to organisational success, particularly
in relation to the creation of value and in supply chain management. Purchasing policies that build close
relationships with trusted suppliers should result in higher quality which customers demand. Effective
purchasing policies therefore help meet customer needs which is key to achieving organisational goals.
Answers
59 OK4u
Top tips. Look for opportunities to break the requirements down into smaller parts. For example in part (a) you
could break your answer down into ethical and managerial failings. This will give a structure to your answer and
help you identify points to make under each heading from the scenario.
(a)
Ethical failings
Making late orders and threatening financial penalties
OK4u made late orders to its fashion suppliers and used the threat of financial penalties to force them
into meeting tight deadlines. Putting suppliers under such pressure is unfair and bad business practice by
OK4u. This resulted in suppliers having to sub-contract out work in order to keep their own costs down
and to get the work completed in time to avoid paying penalties.
Not researching where new suppliers source their products
Companies which follow ethical policies usually look into where new suppliers source their products very
carefully and even stipulate that they should avoid using sub-contractors that themselves do not meet
certain ethical standards. OK4u did not make such investigations. This failing contributed to the
unfavourable newspaper investigation.
Managerial failings
CEO trying to manage everything
OK4us CEO is also the founder. Despite the rapid growth the company went through, he still attempted
to run the business by himself. This was a mistake as he could not devote enough time to all business
areas and should have brought in a management team to help him run the organisation. A purchasing
director would have had the time to look into the new suppliers in more detail and may have been able to
identify the ethical problems before they became a problem.
Choosing to increase sales by discounting
Reducing prices is not the only way to increase sales. Promotions and advertising could also have a
similar effect and OK4u should have looked into using them. The use of such methods would not have
put pressure on the suppliers to reduce costs and may have prevented them from using sweat shop
labour.
Claiming it follows ethical policies
Despite claiming to follow ethical policies, there is no evidence of such policies being implemented by
OK4us management. It appears that the companys claims are just for marketing purposes and are not
backed up by managerial action. This is a major failing as had management implemented such policies
then many of the problems that OK4u has faced could have been avoided.
Top tips. Reasonable suggestions in Part (b) will earn good marks. However, be careful to manage your time and
avoid writing too much.
(b)
Measures to restore public confidence

Appoint a social responsibility director
The CEO should appoint a director with responsibility for corporate ethical and social responsibility
policies. For added public confidence a well known or respected figure could be awarded the role.
Develop an ethical or social responsibility policy
The director should develop ethical or social responsibility policies which are comprehensive and sincere.
Gain senior management support for the policy
Senior management should be seen by the public to be supportive and enthusiastic for the policy
otherwise they will question its merits.
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Train and support employees in following the policy

Ethical or social responsibility policies are ineffective unless they form part of the corporate culture and
are implemented by employees in their working lives. Therefore training and support should be given to all
to achieve this.
Publicise the steps the company has taken in developing and following its policy
The public must be made aware of the changes that the company has made. To be successful it is
important for the company to be sincere. If the policy appears to be for marketing or damage limitation
purposes then the publicity could backfire and damage the company further.
As part of this, a public apology should be issued with a statement that in future all suppliers, including
sub-contractors, will sign up to a code of conduct.
(c)
Delivering excellent customer satisfaction

Marketing
Brand design
OK4u was known for good product design and broad appeal which established it as one of the countrys
favourite high street brands. Branding sets customer expectations in areas such as image, price, service
and values. Customer satisfaction is achieved by meeting or exceeding such expectations.
OK4u should therefore reassess its brand image to ensure it is sending out the right expectations to
customers so they are not disappointed when they visit the shops.
Pricing
Generally customers will be satisfied if they feel that they have received value for money (even if the
product or service is priced higher than competitors). This is not just in terms of the product purchased
but is also related to the service received and corporate branding.
OK4u should therefore review its price setting strategy to ensure it is in line with customer expectations. It
may be that the discounting policy followed should be abandoned as it may cheapen the value of the
brand.
HRM
Culture
It is important that nothing OK4us customers experience when they visit one of its shops contradict the
corporate culture, expected, in particular, the new ethical stance. All employees must be seen to embody
the ethical culture. This is because customers may be attracted to OK4u because of its ethical policies
and much of their satisfaction will come from knowing they are supporting an ethical company.
Training
Staff training is important, especially in relation to sports equipment. Much customer satisfaction will be
achieved by providing expert advice on which products are most suitable for an individuals needs.
OK4u should therefore ensure all staff receive suitable training on all products sold in order to provide
excellent levels of advice.
Operations
Stock availability
An aspect of the companys initial success was that it never had any stock outs. Customers are unlikely
to be happy if they make a special trip to one of OK4us stores to find that it has sold out of the one item
they need. Good operations management will monitor stock and reorder levels and schedule deliveries
before goods run out.
Customer service
Staff should focus their attention on providing good service to the customer. Measures of customer service
could be taken and targets for satisfaction levels set, by which staff performance can be analysed.
Answers
(d)
Evaluation of strategic relationship with suppliers

Sports equipment and clothing suppliers
The suppliers of sports equipment and clothing are all personally known to OK4us CEO, and some are
close friends. This enabled strong relationships to develop over time which have been of great benefit to
the company. The main benefit of this was excellent logistics, which meant that an appropriate level of
stock was kept on the shop floors and the elimination of stock outs.
Fashion clothing suppliers
The suppliers of fashion clothing were previously unknown to OK4u. Soon after the relationships were
formed, problems began. The supply contracts were tightly negotiated by OK4u. The company was able
to pass on the costs of the discounting campaign to the suppliers. On top of this, the company pressured
suppliers with tight deadlines and financial penalties for not meeting them.
These issues have created poor strategic relationships between OK4u and the fashion clothing suppliers.
This resulted in the ethical problems and adverse publicity that the company has experienced.
(e)
Analysis of OK4us past year using the basic marketing mix

The basic marketing mix includes the variables product, price, place and promotion.
Product
The company began the year selling products which it was well known for, sports equipment and
clothing. This was clearly what the customer wanted as the business was successful. However, it then
began to sell products that the customer did not associate with it, fashion clothing, and this caused sales
to drop.
Price
To counter the fall in sales, OK4u decided to discount its products. The discounts did make the fashion
clothing more attractive to customers and sales picked up.
Place
As well as shops, place includes the logistics of a company. OK4u began the year with close relationships
with suppliers of its core business. These logistics worked well as the shops were always well stocked.
However, a lack of close relationships between OK4u and the fashion suppliers meant poor logistics
between them. It is likely that OK4us late ordering was caused by a lack of a suitable ordering and
distribution system between them.
Promotion
At the beginning of the year, OK4u was well promoted. This was largely the result of allowing local
managers to be imaginative when setting up shop displays and the use of promotion in the local area.
However, all that changed with the adverse newspaper and television reports. This created adverse
publicity and rather than inspiring desire to use OK4us shops, it actually drove customers away.
(f)
Purpose of an appraisal system

Performance appraisal is 'the regular and systematic review of performance and the assessment of
potential with the aim of producing action programmes to develop both work and individuals.'
The general purpose of any assessment or appraisal system is to improve the efficiency of the organisation
by ensuring that the individual employees are performing to the best of their ability and developing their
potential for improvement.
Objectives of an appraisal system
To establish what the individual has to do in a job in order that the objectives for the section or
department are realised.
To assess an individual's current level of job performance. This can be used both as a base line against
which performance can be measured in future, as a means of deciding how the individual has improved
since the last performance appraisal and to identify weaknesses and training needs.
To assess the level of reward payable for an individual's efforts, eg, in merit payment systems.
To assess potential. At the organisational level this permits career and succession planning. At the
individual level it permits appraiser and appraisee to assess the most effective development plans for the
appraisee.
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60 Various topics 1
Marking scheme
(a)
(b)
(c)
(d)
(e)
(f)
1
1
1
1
1
1
mark
mark
mark
mark
mark
mark
for
for
for
for
for
for
each
each
each
each
each
each
relevant
relevant
relevant
relevant
relevant
relevant
explained
explained
explained
explained
explained
explained
point
point
point
point
point
point
Marks
5
5
5
5
5
5
30
not earn marks.
(a)
Text reference. Chapter 11.
Top tips. If when you first read benefits of a collaborative process of Human Resource planning an answer
doesnt instantly come to you, dont panic. First think about the process of human resource planning, then think
about how talking and listening to employees could help this process - and the benefits this could bring.
Easy marks. Explaining the general benefits of planning for human resource needs, for example being better
prepared for the future, will earn some marks. Dont be afraid to include benefits that may seem too obvious, for
example improved morale.
Five benefits a collaborative process of Human Resource planning might bring to an organisation are
explained below.
Improved staff motivation and morale
Communicating and collaborating with staff across the organisation demonstrates a willingness to listen,
and shows employees their opinions matter. This should improve staff motivation and morale.
Enable a consistent approach to be taken across the organisation
By collaborating widely, across departmental boundaries, the process should enable an organisation-wide
policy to be developed. This in turn helps provide a sense of unity and a shared organisational culture.
Emphasise the importance of people and their development
The focus on human resources emphasises the value and importance the organisation places on its
people. The process should also help define staff training and development needs required for the
organisation to meet future objectives.
Establish future human resource needs
The human resource planning process aims to ensure the right people (with the right skills) are in place
to enable the organisation to operate efficiently and effectively. The plan may identify a future under or
over supply of people in particular areas, which will need to be dealt with.
Encourages a strategic perspective and agreed priorities
In order to plan effectively for Human Resources, planning in other areas will be required, for example an
overall strategic plan. The overall strategic plan drives the HR strategy and plan. The collaboration
process should result in the establishment of common ground and agreed priorities.
Answers
(b)
Top tips. By explaining what an internal failure cost is (the name itself provides a clue) you should be able to
identify some associated types of cost.
Easy marks. Scrap, inspection and reworking costs should leap out at you!
Internal failure costs result from inadequate quality, where the problem is identified before the transfer of
the item or service from the organisation to the customer. Types or examples include:
The cost of materials scrapped due to inefficiencies in stockholding procedures
The cost of materials and components lost during production or service delivery
The cost of output rejected during the inspection process (scrapped)
The cost of re-working faulty output
The cost of re-inspecting reworked output
The significance of internal failure costs for an organisation with a reputation for quality is that although
these costs are best avoided, they are seen as preferable to external failure costs. Incurring these costs
internally, before the product or service reaches the customer, prevents damaging the organisations
reputation. The organisation should still aim to reduce internal failure costs, perhaps through a quality
assurance program.
(c)
Top tips. Read the requirement carefully and ensure your answer includes both features and benefits.
Easy marks. Explaining the general benefits of providing good customer service, for example improved customer
retention, will earn some marks.
SERVQUAL is a method used to measure quality in service organisations.
Features of SERVQUAL
(i)
Customer focussed. SERVQUAL focuses on the customer, particularly the gap between a
customer's expectations and their actual experience.
(ii)
An emphasis on quality. By implementing SERVQUAL (or its off-shoot RATER) an organisation

demonstrates its commitment to quality in service delivery.
(iii)
A formal framework. SERVQUAL provides a comprehensive framework to measure customer

expectations and experience. The version of SERVQUAL in use since the 1990s emphasises the
role of the employee delivering the service and the tangible environment, for example facilities,
equipment and staff appearance.
Benefits of SERVQUAL
(i)
Results highlight areas for change. Areas where gaps appear between customer expectations and
the service received (service gaps) require action, for example refined processes or staff training.
(ii)
Improved customer satisfaction and retention. Closing service gaps results in improved customer
satisfaction and retention.
(iii)
A customer and quality focussed culture. Emphasising the importance of quality and
implementing a formal quality framework helps permeate a customer and quality-focussed culture
throughout the organisation.
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Answers
(d)
Top tips. Your answer must focus on the issues relevant when implementing Six Sigma, rather than just
explaining what Six Sigma is.
Easy marks. Think about the practical aspects - implementing Six Sigma requires measuring and monitoring
tools to be in place that accurately measure output.
Five key issues for a manufacturing organisation considering adopting Six Sigma are identified below.
Training
The introduction of Six Sigma will require the training of staff regarding the aims and practical workings of
the programme, including the procedures surrounding the measurement of output.
Establishing the measurement metrics
Six Sigma aims to eliminate defects. To implement Six Sigma, an organisation must decide what
constitutes a defect (from the customers perspective) and be able to measure output to establish the
frequency/rate at which defects occur.
Ensure the expected benefits outweigh costs
As with any initiative, Six Sigma should only be implemented if the benefits (for example reduced
reworking, improved customer satisfaction and retention) outweigh the costs of implementing the program
(for example changes to working practices).
Cultural shift
To be effective, Six Sigma requires a commitment to quality and the elimination of waste and defects
across the whole organisation. A cultural shift may be required before adopting Six Sigma or planned for
as part of the implementation.
Senior management involvement and commitment
Six Sigma represents a philosophy based on the elimination of defects with the ultimate aim of customer
delight. Senior management must set the tone by emphasising the importance of quality and
communicating and demonstrating their commitment to the Six Sigma philosophy.
(e)
Top tips. Read and think about the requirement carefully to establish what the examiner is getting at. A wider
group of stakeholders than shareholders should have you thinking of Corporate Social Responsibility (CSR).
Easy marks. Explaining the benefits of a proactive CSR program will earn good, relatively easy marks.
The concept that a business with shareholders has responsibilities to a wider group of stakeholders and to
society as a whole is known as Corporate Social Responsibility (CSR). An important aspect of CSR is that
companies behave ethically, in a fair and just way.
Five reasons why a company might act in a socially responsible way when considering a policy decision
are explained below.
Interdependence of business and society
The state of society as a whole impacts upon trading conditions and results. Therefore, it is in a
companys best interest to act in a way that contributes to a sustainable, stable and prosperous society.
Answers
Necessity - customers demand it

Customers now expect companies to act responsibly. Failing to do so is likely to result in customers
moving elsewhere. For example, focussing solely on shareholder returns could lead to a decision to
outsource production to an unscrupulous operator that fails to comply with minimum wage requirements.
However, customers may boycott the company if this information reaches the public domain.
Taking a wider perspective produces better balanced decisions
Focussing exclusively on shareholder interests tends to encourage a short-term, solely financial
perspective. Taking into account the interests of a wider group of stakeholders is likely to encourage a
wider, longer term perspective and result in better balanced decisions.
Staff productivity, development and retention
It makes business sense to take into account the interests of employees. Flexible working practices and
encouraging a reasonable work life balance is likely to result in improved employee commitment and
retention.
External relationship building
An important aspect of business success is building mutually-beneficial relationships with key
stakeholders, for example suppliers and customers. Decisions that consider only the needs of
shareholders may harm important supplier and customer relationships.
(f)
Top tips. Organisations make plans based on assumptions relating to market conditions, regulations and laws.
Think about the effects of changes to these factors.
Easy marks. Identifying political instability and the potential for this to cause economic instability will earn some
marks.
The nature and possible effects of five risks relevant when an organisation is considering doing business
in a country that has a government and political system it is unfamiliar with are identified below.
Political instability
Organisations are able to plan and operate more effectively in a stable trading environment. The risk of
instability can make long-term planning difficult, and unforeseen political changes could have adverse
effects, for example favouring local producers.
Unfamiliar with pressure groups and lobbyists
Failing to understand the motivation, methods and influence of political lobbyists could result in conduct
that offends, for example employing an excessively high proportion of ex-pates. The effect of this could be
to create a backlash, for example a boycott.
Unexpected changes to economic policy
There is a risk that the government will pursue unfavourable economic policies, for example increasing
taxation rates. The effect of this would be to make the venture less profitable.
Lack of understanding of political processes
Political processes may differ from those the organisation is used to, and may also change at short notice.
For example an organisation may commit resources to a planning application only to find the government
agencys requirements change.
Totalitarian government
There is the possibility that the current government, or a future government, could implement totalitarian
policies, for example state appropriation of assets. This could result in the loss of the funds invested in the
project.
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61 Various topics 2
Marking scheme
Marks
(a)
(b)
(c)
(d)
(e)
(f)
1 mark for
1 mark for
1 mark for
1 mark for
1 mark for
1 mark for
each
each
each
each
each
each
relevant explained point

5
5
5
5
5
5
30
not earn marks.
Text reference. Chapter 2, 4, 8, 9, 11, 12

Top tips. The examiner has stated that accuracy, brevity and clarity are called for in all Section B answers.
Easy marks. Make the point in part (a) that this is a total outsource - an external supplier is to provide the
entire IS/IT service. Think about the effect on the organisations current staff, and how the relationship with the
vendor company is to be managed.
Examiners comments. There was mixed performance.. Well prepared candidates who applied their
knowledge to the scenario scored heavily.
Common Errors
(b) Some candidates failed to relate IS/IT to the function; others just described virtues e.g. time saving without
reference to application of process involved.
(e) Some candidates described the advantages of internal recruitment rather than the possibilities available.
(a)
An organisation that has decided to outsource its IS function needs to address the flowing issues.
Budget
A budget should have been set as part of the decision on whether or not to outsource. Now that the
decision to outsource has been made, the budget should be reflected in the service level agreement and
control should be exercised over expenditure.
Communication with staff
Communication with existing staff is essential to ensure all are aware of what this means for them and
the organisation. Some staff may be offered positions with the organisation the function is outsourced to,
others may be made redundant.
Negotiating with a range of vendors
The vendors who are invited to tender for the contract must be reputable and able to fit with the
organisations culture and operations.
Choosing the appropriate vendor
The service provider and the organisation must establish an effective working relationship. For this reason,
it is vital to make the right choice of outsourcing vendor. Factors such as organisation culture need to be
considered when entering into such a close and critical relationship.
Answers
Drawing up the contract/service level agreement

A key factor when negotiating with external vendors is the contract. The contract must state clearly the
obligations and responsibilities of both parties. It should specify minimum levels of service and the
penalties for failure to meet these standards. Such standards might include response time to requests for
assistance/information and deadlines for performing tasks.
Timescale, handover and exit strategies
Timescales must be clearly set out, for example how the transition to the outsource company would be
handled and how long the contract would last. Organisations should avoid tying themselves into a long
term outsourcing agreement if requirements are likely to change. Arrangements for an exit route, such as
a move back in-house, should be considered.
(b)
The information systems within an organisation should complement and support other functional areas,
one of which is human resources. Human resource (HR) management includes the activities of recruiting,
training, developing and rewarding people.
HR planning. Planning processes are assisted by the use of IT, for example spreadsheets or specialised
packages to construct budgets and the use of the Internet and the web to gather information required to
formulate HR strategy.
Recruitment and selection. IT can be used in the advertising of job vacancies, perhaps using a third party
jobs website able to reach large numbers of potential candidates cheaply and quickly. Organisations can
also advertise vacancies on their own corporate intranet and website.
Technology allows the recording and monitoring of information relevant for appraisal. IT can also be used
to identify skills and performance gaps, for example a skills database could be maintained to enable the
organisation to record the skills held within the organisation.
Training and development ensure skills remain up-to-date, relevant, and comparable with the best in the
industry. Training content and material will often be delivered using technology such as DVDs and webbased training courses.
The reward system should motivate and ensure valued staff members are retained. At the basic level,
payroll operations in most businesses use a system of direct bank transfer of salaries IT systems are
essential for this, as well as the capturing of all payroll-related information (needed for income tax returns
for example). IT may also be used to gather information to establish and compare salary and reward
levels.
A human resources page or section within the organisations intranet provides an easily accessible source
for HR policies and procedures. This could include employment manuals, job descriptions, grievance
procedures, payroll dates and other general information.
(c)
A manufacturers promotional activity will vary dependent upon the sort of distribution channel that
operates.
One way of classifying distribution channels is as zero level, one level and two level. Promotional activity
for a manufacturer would differ depending upon the type of channel.
A manufacturer operating a zero level channel would sell direct to the final customer. Promotional activity
would focus on the final customer.
Promotional activity aimed at the final customer is sometimes referred to as pull marketing as it
attempts to pull the customer towards the product. Examples include for example empowering customers
to purchase direct using e-commerce or encouraging purchase at a factory shop attached to the
production facility. Often, pull marketing involves heavy expenditure on advertising and consumer
promotion to encourage purchase.
A manufacturer operating a one level channel would sell to retailers who in turn sell to final customers.
The manufacturer may conduct promotions directed at the final customer and also at retailers (to
encourage them to source products from them rather than other manufacturers).
A manufacturer operating a two level channel would sell to a wholesaler, who in turn sells to retailers,
who in turn sells to final customers. The manufacturer may conduct promotions directed at wholesalers
(to encourage them to source products from them rather than other manufacturers) as well as at the final
customer.
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One and two level channels are examples of indirect distribution. Promotional activity for indirect
channels should include an element of pull marketing (to stimulate final customer demand) and also
push marketing, which is aimed at intermediaries.
Push marketing attempts to push the product from supplier down the distribution chain. This typically
involves advertising in trade publications, trade promotions, promotional stands at trade conferences and
competitive trade discounting.
(d)
A marketing mix for an online company selling branded sportswear is suggested below. It is important
that the elements of the mix are coordinated and consistent, and tailored appropriately for the identified
target market.
Product
The product is a branded sportswear range promising quality and durability. It offers high quality clothing
for dedicated sports people including elite, high profile athletes. The brand values are quality, innovation
and performance.
Price
High prices reflect a premium position in any market, whether the product is sold traditionally or online.
The customers are serious athletes who rely upon the strong brand name and expect high quality, and are
prepared to pay for it. Loyal customers may be able to benefit from discounts.
Place (distribution)
The website is the place of business, which could lead to cost savings that could be passed on to the
customer. Orders can be sent directly to the customer (anywhere in the world, potentially) within 24
hours of placing the order this requires a well stocked warehouse. Use of specialist courier firms will
ensure a high level of service. A scale of delivery charges will need to be developed.
Promotion
The website will need to be innovative, attractive (lots of pictures) and easy to use. Search Engine
Optimisation is important, so the site appears prominently (first page) when a user searches for
sportswear or related terms. Advertising may also be embedded in related sites, such as those promoting
large sporting events or lifestyle-related activities. Stalls could be held at major events (such as the
London Marathon) and sponsorship of events at grass roots level could be considered (eg youth football
competitions). Word of mouth recommendation will also be important.
(e)
There are a number of internal options available to an organisation wishing to fill a job vacancy. These
internal options should be cheaper than involving a recruitment agency, but will require more internal
time and effort.
Nevertheless, there is no reason why internal methods cannot be used for recruitment, shortlisting and
selection.
Possibilities include:
Internal advertising using company notice boards, the company intranet, e-mail messages or
newsletters to attract applications from suitable candidates (whether looking for promotion or a
sideways move).
Speaking to employees (utilising the grapevine) to identify suitable internal candidates without
advertising the position. Care should be taken to ensure internal HR policies and relevant
employment legislation are complied with.
Advertising the vacancy using the organisational website. Many company websites have a Jobs at
X area where interested candidates can browse the jobs on offer and even make an application
without the need to apply via a recruitment agency.
Contacting previous applicants whose details have been held (with their permission) with a view
to future vacancies.
Training existing employees to expand their skills making them suitable for a wider range of
positions.
Answers
(f)
In the context of human resource management, motivation is an employee's desire to perform their role.
Herzberg developed a 'two-factor theory' of motivation. This distinguishes between factors that motivate
(motivators) and other factors that he believed dont actually motivate but can cause dissatisfaction
(hygiene factors). Hertzberg saw salary as a hygiene factor, not a motivator.
An organisation looking to motivate through non-financial means should focus on improving motivating
factors.
Recognition. Outstanding employee performance can be rewarded in a variety of non-financial

ways. The organisation could establish schemes such as employee of the month to recognise
exceptional performance. It is important that such a scheme be properly and fairly managed.
Job redesign. Job redesign aims to improve performance by building more interest, variety,
challenge and collaborative working into jobs, all of which might motivate employees.
Job enlargement and rotation. Job enlargement increases the width of the job by adding extra
tasks. Job rotation allows for a little variety by moving a person from one task to another.
Introducing variety can reduce boredom and increase motivation.
Promotion and/or increased responsibility. Additional responsibility often motivates as it makes

someone feel valued and respected. This could be achieved by adding elements of planning and
control to a role.
Reduce the dissatisfaction caused by hygiene factors. If hygiene factors are currently causing
dissatisfaction (and by implication reducing motivation), the situation could be improved by addressing
issues such as the following.
Social satisfaction. By encouraging social relationships, good working relationships and strong
work teams can be formed. Employees will enjoy coming to work if they feel that they are working
with people they know and get on with.
Regular, meaningful communication. Employees like to feel important enough to be kept informed
about the organisation they work for.
Consistent leadership and management. A responsive and approachable, yet strong and
consistent, management team is more likely to motivate employees than one that is perceived as
distant and out of touch.
Encourage employee pride. The company might seek to enhance its status among current and potential
employees, and the wider community, by seeking out awards such as a listing in rankings such as The
Best 100 Companies to Work For.
62 Various topics 3
Top tips. Parts (a) - (e) all specify that five points are required. This makes it clear that the examiner requires
one substantive point per mark in this question.
Easy marks. Reproducing basic book knowledge will earn many of the marks on offer in these six subquestions. If a part requires application of knowledge, such as part (e), ensure you phrase your answer in such a
way that makes it clear how the points youre making relate to the situation described.
Examiners comments. Well prepared candidates who applied their knowledge to the requirements of the subquestions and used purposeful examples scored highly.
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Answers
Marking scheme
Marks
(a)
(b)
(c)
(d)
(e)
(f)
1
1
1
1
1
1
mark
mark
mark
mark
mark
mark
for
for
for
for
for
for
each
each
each
each
each
each
relevant
relevant
relevant
relevant
relevant
relevant
explained
explained
explained
explained
explained
explained
point
point
point
point
point
point
5
5
5
5
5
5
30
not earn marks.
(a)
Five reasons for the growth in outsourcing by organisations are:

Focus on costs
Were currently in tough economic times. During these times organisations tend to focus on costs.
Outsourcing facilitates accurate prediction of costs and budgetary control. The outsource provider should
enjoy economies of scale that enable them to provide a cost-effective service. This links with competitive
rivalry as if other organisations save money by outsourcing you may have no choice but to follow suit.
High outsource service provider standards
In areas that require specialised knowledge, the external provider is likely to have access to a much larger
pool of expertise than would be possible in-house. This access to expertise should result in a higher
quality service than could be provided by in-house staff.
The need for flexibility
Contract permitting, outsourcing provides the flexibility to scale resource use up or down depending upon
demand. The same level of flexibility is more difficult to achieve through the use of in-house employees.
Developments in technology and an increasingly global approach to business
In many areas, for example call centres and data processing, developments in information and
communications technology have made it feasible to use outsource suppliers based overseas (for example,
India).
Need to focus on core competencies
The growth in outsourcing has been fuelled partly by the need for businesses to focus their efforts and
resources on their core competencies. To establish or preserve competitive advantage, an organisation
should focus on what it is they do that other businesses dont or cant do as well. This has encouraged
the outsourcing of administrative tasks such as payroll.
(b)
Five ways in which emerging economies have benefited as a result of foreign direct investment in their
countries by multinational enterprises are:
Job creation
Foreign direct investment by multinational enterprise creates employment opportunities for the local
population. Even if some senior management are expatriate, a large proportion of jobs in the venture are
usually taken by the local population.
Taxation revenue and infrastructure improvements
The government should benefit from increased domestic taxation take, for example through income tax
paid by local employees. This revenue could be used to improve the local infrastructure, making the
country more able to support increased commercial activity.
Answers
Spread of expertise
Foreign direct investment often funds ventures that involve both local and expatriate staff. This facilitates
the spread of expertise and good practice that benefits the local economy.
Stimulate the local economy
The domestic economy should benefit from wages earned by employees based in the home country. Much
of this income will be spent locally, benefiting local businesses and encouraging economic growth.
Raise confidence and encourage other foreign investment
By investing in the foreign country the multinational enterprise is demonstrating confidence in the local
country and its business environment. This can encourage further investment by other multinational
enterprises.
(c)
Five significant ICT changes for retail organisations are:

Electronic payment
The proportion of retail transactions paid for using cash and cheques has dropped significantly over the
past two decades. Electronic payment is becoming the norm, utilising technology such as chip and pin
and new contactless payment systems.
Online sales (e-commerce)
Even traditional high street retailers now do a significant proportion of their business online. Integration
between the website and physical retail outlets is becoming increasingly important, with in-store pick-up
often offered now for orders placed online (as well as the delivery option).
Customer database analysis and loyalty schemes
Computerised inventory and sales systems enable retailers to capture huge amounts of transaction data.
This has led to improved inventory control and store design (enabling items often purchased together to
be arranged closer together). Customer loyalty cards enable the database to include purchaser-specific
data, facilitating targeted marketing offers.
Self-service checkout terminals
Many retailers (for example supermarkets) have introduced self-service checkouts that utilise barcode
scanning and point of sale payment technology. The technology has made it feasible for untrained
members of the public to process their own transactions.
Price comparison websites
There are now many price comparison sites on the web, including sites covering retailers (for example
supermarkets and electronic products). These sites make it significantly easier for consumers to identify
the best deals. Retailers have responded to this challenge with price matching schemes.
(d)
Five forms of waste within manufacturing organisations that lean process improvements aim to eliminate
are:
Inventory holdings
The purchase and holding of unnecessary raw materials, work in process and finished goods is wasteful.
A lean process is characterised by minimal inventory holdings at each stage of the production process (as
in Just In Time).
Unnecessary waiting or idle time
Lean process improvements aim to eliminate delays that add time to the process without adding value.
For example, if employees are required to wait for a previous step in the process to complete, this is
wasteful. It may be possible to redesign the process in a way that eliminates this.
Transport or motion delays
Lean process improvements aim to identify and eliminate actions that do not add value. Part of this
involves ensuring the production layout is efficient and based on work flow, to remove unnecessary
transportation or movement of goods and people.
Defective units
Defective production requires re-work or is written off, so is extremely wasteful. Lean process
improvements would focus on defect prevention (rather than inspection and rework) by building quality
into the process.
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Unnecessary or over-processing
Lean techniques aim to identify and eliminate unnecessary steps or procedures (non added value work).
This involves analysing a process and thinking if this wasnt done, would the impact be significant?. The
ultimate test of whether an activity is necessary is the impact removing it would have on the customer.
(e)
Five examples of ways in which lean waste elimination principles might be applied to improve efficiency
in service organisations such as hospitals and offices are:
Reduce waiting times
Time spent waiting, whether by customers (patients) or employees, is inefficient. For example, lean
techniques could be applied to improve flexibility in a hospital accident and emergency department to
reduce patient waiting time (the aim being a balance between capacity and demand).
Eliminate non-value adding activities (ensure all who are allocated hospital beds do need them)
If a resource is being consumed by an activity that adds little value, this is inefficient. In the context of a
hospital, lean techniques could focus on identifying patients that are currently allocated a hospital bed,
but whose condition could just as effectively be treated as an out-patient. This would leave more bed
nights available for patients that definitely require on-site care.
Raise standards to reduce complaints
Dealing with complaints consumes resources without adding to output, so is wasteful. Lean waste
elimination principles could be applied to improve hospital processes and raise quality standards. For
example introducing more flexibility in working patterns could reduce staff idle time and patient waiting
time. This would improve patient satisfaction and reduce the number of complaints.
Job redesign
Waste elimination principles could be applied to enable an office worker to work more efficiently. This
could involve giving an employee the authority to take action, within agreed limits, to keep work moving.
For example, the authority to approve transactions that meet certain criteria may be extended to a wider
group of people to reduce the chance of this causing a delay.
Focus on workflow
Office layout could be based on how work flows through the department. Likewise with hospitals, for
example the accident and emergency department could be redesigned to better reflect how patients move
through the system (for example having the initial assessment area immediately next to the patient
reception and registration area).
(f)
Five key aspects of a programme to implement Total Quality Management (TQM) within a manufacturing
organisation are:
Senior management commitment
Successful implementation of TQM requires an acceptance that everyone in the organisation is
responsible for improving processes and systems. It is especially important that senior management are
committed to the implementation and that they display this commitment.
Clear implementation strategy
Implementing TQM requires thorough planning and a clear implementation strategy. One of the first steps
should be to explain to staff why TQM is being implemented, the benefits it will bring, why their
commitment is important and how the implementation will be conducted. How the implementation
processes and procedures will be documented is also important.
Establish a TQM steering committee or similar
As with all organisation-wide initiatives, it is important to establish a team that spans the whole
organisation to ensure a co-ordinated approach is taken. This committee or team also provides a focal
point for TQM queries to be fed to, and a mechanism to cascade information to all areas of the
organisation.
Training
Employee participation is an essential element of TQM. Training will be required to ensure employees are
able do whats expected of them. For example, training may be required in process mapping, creative
problem solving techniques and in the operation of quality circles.
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Reporting - monitoring and feedback

An important part of the implementation will be the setting of appropriate quality standards and
establishing systems to monitor results against targets. A process is required to report feedback and for
the modification of standards and targets if required.
63 Various topics 4
Top tips. Part (e) specifies that five points are required. This makes it clear that the examiner requires one
substantive point per mark. The examiner is probably looking for five relevant points in answer to each of the
other parts too. Part (b) can be answered in more than one way from the point of view of the information and
from the point of view of the information that the system produces. Depending on the approach taken, points in
the answer may be different. In part (d) the answer presents controls within the two broad categories of general
controls and application controls, but answers may be presented in a different way.
Easy marks. If you have learned the theories of Hofstede and Reck and Long, easy marks can be earned in parts
(c) and (f).
Examiners comments. Well prepared candidates applied their knowledge to the requirements of the subquestions and scored heavily.
Common Errors
(a) - failure to link competences to contracting out; instead describing one or the other
(d) - a lack of knowledge
Marking scheme
Marks
(a)
(b)
(c)
(d)
(e)
(f)
1
1
1
1
1
1
mark
mark
mark
mark
mark
mark
for
for
for
for
for
for
each
each
each
each
each
each

control, 0.5 marks per example
relevant explained point, including an introduction
5
5
5
5
5
5
30
not earn marks.
(a)
A competence is something that an organisation does well. A core competence is something that the
organisation does very well and better than competitors, so that the organisation gains competitive
advantage. Because of the strategic importance of core competences, they should never be outsourced.
The other competences of an organisation are non-core, and these can be categorised into
complementary and residual competences.
Complementary competences are related to core competences but are not themselves core. An
organisation may decide to retain these in-house or they may decide to outsource. However if an
organisation does outsource a complementary competence, it should do so only to a highly trusted
supplier and a strategic relationship would have to be established with them.
Residual competences are competences that are neither core nor complementary. These may be most
suitable for outsourcing. If one supplier is in any way unsatisfactory it should be possible to switch the
outsourced activity to another supplier.
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Answers
Quinn and Hilmer identified three tests for whether it might be appropriate to outsource an activity.
Competitive advantage test.
If the competence provides an opportunity for the organisation to obtain a competitive advantage, it
should not be outsourced.
Risk of market failure.
This refers to the impact that the activity has on the organisations ability to deliver its products or
services to market. If this impact is low, the activity is safe to outsource.
Potential to reduce risk.
If it is possible to take measures with the supplier to reduce the risks from outsourcing (such as the risks
of failure of the supplier), it is safer to outsource the activity.
(b)
Assessment criteria for review of decision-making information system could include:

Benefits provided by the system
A review of the system should consider the benefits that the system provides and the value of these. For
a decision-making system, value should be assessed in terms of how decision-making has been affected
and the effect that these decisions have had on the organisations revenues, costs and profits.
Costs
The costs of the system should be considered and compared with the expected costs of implementing and
operating the system, and also with the benefits obtained.
Timeliness of information
Since the system provides information for decision-making, it is critically important that it should provide
information to management at a time that will help their decision-making process. If information is
delivered too late to affect the decision, it has no value.
Quality of information
The quality of the information that is provided should be assessed. The information should be reliable
(sufficiently complete and accurate for its purpose) and relevant.
Secure
The system should be secure against unauthorised access. It may be possible to review security by
obtaining data about hacking or other incidents of unauthorised access.
Ease of use
An information system should be understandable and easy to use so that users do not have problems with
obtaining the information they require or understanding it in the form that it is output.
(c)
Hofstede suggested that the way in which issues relating to organisations and their management are dealt
with in a country depends on its cultural characteristics, which can be assessed in terms of several
dimensions.
Power-distance dimension
This refers to the extent to which society and organisations tolerate an unequal distribution of power. In
organisations with high power-distance, senior management exercise dominance over subordinates. When
power-distance is low, individuals feel more equal and there is a tendency to delegate authority.
Uncertainty avoidance
This refers to the extent to which individuals tolerate ambiguity and uncertainty. When uncertainty
avoidance is high, individuals are reluctant to act. People rely on clear rules. When uncertainty avoidance
is low, individuals are willing to work in conditions of uncertainty and to respond to the unexpected and
unknown.
Masculinity versus feminism
This refers to the extent to which society encourages what are often considered masculine qualities such
as competitiveness and assertiveness, or the extent to which it encourages feminine qualities, such as
attention to others and concern for the quality of life. In countries with a masculine culture, both males
and females tend to be more assertive and competitive.
Answers
Confucian dynamism: long-term versus short-term orientation

Long-term versus short-term dynamism refers to the extent to which individuals are driven by short-term
considerations and goals, and the extent to which they show greater concern for the longer-term.
Hofstedes term confucian dynamism refers to his observation that in some countries of Asia some
individuals have a long-term orientation and in the short term prefer application and thrift.
(d)
There are many controls within IS/IT systems. One way of categorising controls is into general controls
and application controls.
General controls
General controls relate to the environment in which IS/IT applications operate.
Examples of general controls include:
Routine backing up of all files and keeping the back-ups in a safe location (possibly a fire-proof safe or
possible taken off site at the end of each day).
Access controls to restrict access to computer networks by means of user identification and passwords.
There may also be physical controls to restrict the access of individuals to rooms containing computer
equipment.
Organisational controls may be applied to reduce the risks of human error and fraud, such as the
segregation of duties.
Disaster recovery plan. Organisations should have a disaster recovery plan, so that in the event of a major
disaster (such as a terrorist attack) computer operations are able to continue, from different locations and
using different equipment.
Application controls
Application controls are controls that are applied to specific computer applications to ensure the
completeness and accuracy of data and its security.
Batch total controls. When data transactions are processed in batches, batch total checks can be applied
to ensure that all the items in the batch have been processed.
Data validation checks. Software checks can be carried out on specific items of data within data records
to ensure that they appear to be valid. Input items that fail data validation checks are either rejected or
reported for investigation.
Identification and authorisation checks. These checks can be carried out for specific application systems
as well as for the computer or network in general.
Software update controls. Controls should be applied to ensure that any changes to the application
software are authorised and implemented according to established procedures, with appropriate tests and
checks, and that the different versions of the software are clearly distinguished from each other.
(e)
Five major developments leading to globalisation.

Reduction in trade barriers
Reductions in trade barriers and initiatives that encourage free trade between countries have been
extremely significant. Many countries have committed themselves to the general principle of free trade
and decided to concentrate on what they do best importing what others are able to produce more
efficiently.
Improvements in communications
Improvements in communications have also had an important impact on globalisation. Organisations
across the world are able to communicate with each other instantly. Easy and low-cost- communication
makes it easier for individuals in different countries to do business with each other.
Improvements in transportation
Improvements in transportation have included the building of larger cargo ships, containerisation, largercapacity aircraft and better road networks. Better transport links have enabled goods to be shipped from
seller to buyer more quickly, encouraging international trade.
Production efficiency improvements
Production systems have become more efficient. As a result production plants are able to produce in
much larger quantities able to meet demand in a number of countries, encouraging the growth of
international trade and global brands.
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Answers
Movement of capital and technology: the influence of multinationals

Multinational organisations have moved capital and technology to countries where production efficiencies
are greater. Multinationals are also able to organise their operations so that goods are transferred from
production subsidiaries to markets around the world. Investor institutions (and other investors) have been
prepared and able to invest in businesses in countries around the world.
(f)
Reck and Long provided an analysis of the way in which the purchasing function has developed over time
and has become part of the strategic planning and management of organisations, and an important
element in an organisations value chain. They identified four stages of development.
Passive
The purchasing function performs a passive role, reacting to purchase orders from within the organisation
and processing the purchase transactions. The focus here is on efficient transaction processing, such as
obtaining items quickly and getting them delivered to where they are needed. There is no organisationwide purchasing policy, and there may not be a separate purchasing department.
Independent
In this second stage of development, there is a more professional approach to purchasing and a senior
purchasing manager may be appointed. There is more focus on negotiation with suppliers to get the best
prices. There are often improvements in IT systems for purchasing, and the purchasing department is now
a more recognisable independent function within the organisation.
Supporting
In this stage of development, the potential for the purchasing function to support wider organisational
goals is recognised. A centralised purchasing function is established, which applies organisation-wide
policies and systems for purchasing and supply. There is more emphasis on centrally-negotiated contracts
with selected suppliers, and careful selection of suppliers. Policies and procedures for supplier
management are also developed.
Integration
In this fourth and final stage of development, supply is fully integrated into the activities of the
organisation, and is an element in strategic planning and strategic management. Purchasing and supply
strategy is aligned with the overall strategic objectives of the organisation. The importance of creating
strategic partnerships with key suppliers is also recognised, as a way of creating more value in the value
system.
64 Various topics 5
Text references. Chapter 1 for parts (b), (d) and (f); Chapter 4 for part (c); Chapter 5 for part (a) and Chapter 12
for part (e).
Top tips. Parts (d) and (e) specify that five points are required. This makes it clear that the examiner requires
one substantive point per mark. The same principle should be applied to the other questions. One mark will be
awarded to each relevant point that is clearly explained.
Easy marks. Many of the sections in this question require an explanation of the advantages/ benefits or the
disadvantages of something. If you are familiar with the subject matter of the question, (FDI, outsourcing,
succession planning, protectionism) you should be able to think of some advantages or disadvantages.
Examiners comments. The main weakness in this question was part (e), succession planning, where many
candidates gave a vague response relating to HR planning and many candidates did not attempt this part of the
question at all.
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Answers
Marking scheme
Marks
(a)
(b)
(c)
(d)
(e)
(f)
1
1
1
1
1
1
mark
mark
mark
mark
mark
mark
for
for
for
for
for
for
each
each
each
each
each
each
relevant
relevant
relevant
relevant
relevant
relevant
explained
explained
explained
explained
explained
explained
point
point
point
point
point
point
5
5
5
5
5
5
30
not earn marks.
(a)
Purchasing is often considered more significant than supply. The significance of purchasing has been
explained by Reck and Long.
Reck and Long describe the evolution of the purchasing function through four stages, from passive to
independent to supportive and finally to integrative.
The term purchasing is associated with the initial passive status of purchasing and the term supply is
associated with a more advanced status.
In its reactive stage, purchasing involved reacting to purchase requests from other departments and
processing the transactions in the most efficient manner possible.
In its integrative stage, supply involves the development and implementation of proactive supply
strategies. An example of a proactive strategy is to regard key suppliers as partners, and an appropriate
strategy is therefore to manage the relationship with the supplier for the mutual benefit of both supplier
and buyer.
Supply is therefore more significant than purchasing because the objectives and strategies for purchasing
are aligned with the overall objectives and strategies for the organisation. It is a strategic activity whereas
purchasing is operational.
As a strategic activity, supply is capable of providing much more value for the organisation over the long
term.
(b)
MNEs use two forms of foreign direct investment to establish a business interest in countries of Asia and
Latin America.
1 Acquisition of existing business
An MNE may acquire an existing business through acquisition. The acquired business becomes a
subsidiary of the MNE. Benefits of this form of FDI to the host economy include:
The MNE may provide technological expertise and new investment to the business it has acquired, so that
the country gains from the raising of technological standards and production efficiency. China for
example, has benefited considerably from the technological input from MNEs that have acquired some of
its companies (or acquired partial control).
If the acquired business is struggling to survive, acquisition by an MNE may help it to survive. This would
save jobs in the host country.
If an MNE invests more money in the subsidiary it has acquired, there should be a general increase in
economic activity. The benefits will be felt not only by the employees of the acquired business, but also
by stimulating the surrounding economy.
2 Investment in a greenfield operation
Occasionally an MNE may establish a greenfield operation, which means creating a new business where
nothing existed before. Foreign direct investment often funds ventures of this type that involve both local
and expatriate staff.
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Answers
Benefits of this form of FDI are similar to those described above for acquisitions.
In addition, when there is a greenfield investment, the MNE may need to invest in the development of the
infrastructure of the host country, for example by improving roads or railways or improving supplies of
water or electricity.
(c)
Direct approach to system changeover

Management might choose to implement a new IT system in full and at one time (direct changeover)
rather than introducing parts of the new system in stages (phased changeover), or operating the old and
the new systems together for a while (parallel running), or introducing the new system in one or two
selected areas or offices first (pilot schemes).
Reasons why direct changeover may be used include:
Old system collapsing
The system being replaced may be experiencing severe operational difficulties and continual breakdowns
or processing faults, so that management consider it essential to replace it as soon as possible with a new
system.
Low cost
Management may decide that direct changeover will be less costly than any other method of
implementing the new system, and make this choice in order to save money.
Acceptable risk
Usually direct changeover increases risk, but if management take the view that there are unlikely to be
any operational problems with introducing the new system in full immediately, then the risk of direct
change may be acceptable. This could be the case, for example, when the new system will use wellestablished off-the-shelf software that has been used successfully in many other organisations.
Operational urgency
Management may consider that there are important operational reasons for introducing the new system in
full at once. For example the new system may be scheduled to coincide with other operational changes,
and all the changes may have to be implemented at the same time.
Non-critical system
The system may not be critical to the efficient functioning of operations. For example it may not be used
extensively at first, so that there would be time to deal with any problems that may arise before going
live.
(d)
Five disadvantages of outsourcing are:

Loss of control
There will be some loss of management control, because the organisation will have to deal with problems
though the management of the organisation providing the outsourcing service, instead of dealing with the
problems directly.
Loss of core competences / competitive advantage
There is a risk that the organisation will outsource operations that are important for its competitive
advantage, and by doing so will lose the skills, abilities and resources in-house to do this work. As a
consequence it will rely on an external organisation for a core competence. Competitive advantage is also
lost, as competitors could also outsource to the same (or a similar) external organisation.
Risk of external organisation suffering difficulties
Outsourcing creates some risk that important data or operational capability will be lost in the event that
the external organisation becomes insolvent and goes out of business.
Service level agreement
A service level agreement must be negotiated with the external organisation. There will be some risk that
the external organisation will fail to deliver the promised level of service. There may also be a problem if
the outsourcing organisation wants to renegotiate the level of service.
Answers
Operational difficulties
When operations are outsourced to an organisation in another country, there may be operational
difficulties arising from language differences, time zone differences and cultural differences.
(e)
Five disadvantages of succession planning are:

Large pools of talent keeping all people satisfied
Large pools of talent could make it difficult to decide who to prepare for promotion, and the choice of
some individuals over others could result in employee dissatisfaction. Talented individuals who have been
overlooked may decide to leave.
External candidates
There may be better candidates outside the organisation. An HR policy of succession planning is likely to
focus on internal candidates, so the best individuals may not be selected.
Unexpected vacancies
Unexpected vacancies may occur, before individuals have been identified to fill the vacancy or prepared to
take over in the position. When vacancies arise unexpectedly, planning becomes a reactive measure.
Resources required
Succession planning, like any other planning activity, requires resources. The time and cost needed for
succession planning activities may not justify the benefits obtained.
Jobs for life: career progress
The concept that individuals should expect a job for life with the same organisation, and expect career
progression within the organisation, is probably now out-dated and can lead to employee complacency.
(f)
Five arguments in favour of protectionist measures.

Protect established domestic industries
It may be considered necessary to protect established domestic industries, and jobs, against foreign
competition. This may be a favoured policy, for example, during an economic downturn, when the
government tries to prevent a rise in unemployment due to the demise of an established domestic
industry.
Encourage the development of a fledgling industry
A government may wish to encourage the development of a fledgling industry, in order to stimulate
economic growth and / or the development of that industry. To do this it may be necessary to protect the
young domestic industry against competition from established foreign producers. The government may
therefore provide protection whilst the industry is becoming established (for example means of import
duties on foreign goods or government subsidies to the industry).
Reduce reliance on imports of key products
The government may be concerned about the countrys reliance on imports of key products, for example
fuels and food products, and want to ensure that there is a domestic industry capable of producing those
products.
Protect cultural identity
A government may take measures against imports from some countries in order to protect the countrys
cultural identity. For example in the past there has been resistance by some governments to the
Americanisation of their society.
To prevent dumping
A government may consider that foreign suppliers are dumping unwanted products on to their market at
a low price, thereby creating unfair competition and threatening domestic producers. Measures may be
taken to prevent the import of dumped items, in order to protect domestic industry.
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65 Various topics 6
Top tips. As with all Section B questions, present your answer in small paragraphs which cover one point each.
This will enable the marker to see your points clearly and award you marks.
Easy marks. Identifying five forms of protectionism in part (a) is a straight forward test of book knowledge.
Examiners comments. Well prepared candidates applied their knowledge to the requirements of the subquestions and scored heavily.
Common Errors
(d) - generally less well answered : a possible lack of subject knowledge
(e) - several candidates, incorrectly in this context, believed that ABC stood for activity based costing
Marking scheme
Marks
(a)
(b)
(c)
(d)
(e)
(f)
1
1
1
1
1
1
mark
mark
mark
mark
mark
mark
for
for
for
for
for
for
each
each
each
each
each
each
relevant
relevant
relevant
relevant
relevant
relevant
explained
explained
explained
explained
explained
explained
point
point
point
point
point
point
5
5
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30
not earn marks.
(a)
Five forms of protectionism include:

Quotas
These are a form of import control, they restrict the quantity of a product which can be imported.
Tariffs/customs duties
These are a form of taxation which are placed on imported goods. The aim is to make the imports more
expensive and discourage the local market from buying them.
Subsidies
These are a form of state aid which are given to local producers to give them a trading advantage over
foreign competitors. They effectively reduce the costs of production for local producers and enable them to
sell their products at a lower cost than the imports.
Campaigns
A government may start a media, or other type of campaign, to encourage its citizens to buy locally
produced goods rather than foreign imports.
Technical barriers
A government may set strict quality, environmental, health and safety or packaging regulations which
dissuade foreign competitors from entering the local market.
(b)
Corporate social responsibility (CSR) describes a wide range of obligations that an organisation may feel
it owes to its secondary or external stakeholders. CSR is driven by the expectation in society that
companies are accountable for the social and ethical effects of their actions.
Answers
Caroll and Buchholtz argued that there are four main layers, or dimensions to corporate social
responsibility. These include:
Economic responsibilities
An organisation has economic responsibilities to its shareholders (for example, to provide a return on their
investment), employees (to provide a salary and other employment conditions) and customers (to provide
a good product at a fair price). Economic responsibilities form the basis of all other responsibilities.
Legal responsibilities
A countrys laws form the basis of societys moral views and therefore obeying the law is the foundation of
compliance with social responsibility. An example of an organisations legal responsibility is to look after
its employees health and safety whilst they are at work.
Ethical responsibilities
Society often expects an organisation to act in a fair and just way even if the law does not require it to do
so. An example of this is where an organisation pays suppliers in less developed countries a fair price for
their products even if this is more than the normal market price (such as under the Fairtrade scheme).
Philanthropic responsibilities
These are other responsibilities which are desired rather than required of organisations. Examples include
making charitable donations and supporting local communities.
(c)
Foreign Direct Investment (FDI) occurs where large (and often multinational) companies invest overseas.
Investments are usually in the form of manufacturing plants which produce the companys products to sell
in the host nation or other countries in the area.
Political risk is the risk to an organisation of incurring losses due to non-market and financial factors. It is
usually related to government policy (for example trade rules, investment incentives, currency controls,
the economy and the tax regime).
Assessing political risk is highly important to organisations that engage in FDI for the following reasons:
Cost: FDI almost always involves a substantial investment by an organisation and should a project fail
due to political risk factors, the cost to the organisation would be extremely high.
Time: FDI projects are usually long-term investments which are not easy to withdraw from. It is important
that an organisation appreciates the political situation before committing itself and becoming locked-in.
Effect on other operations: An FDI investment which becomes affected by political factors may have a
knock-on effect on the organisations other operations. For example, should the political situation mean
that no products can be produced or exported, the short-fall would need to be made up by other operating
units around the world. Even if this is possible, there will be a period where output (and therefore sales)
falls whilst alternative production plans are made.
(d)
Cousins Strategic Supply Wheel depicts various aspects of the relationship between an organisation and
its suppliers. Each of the aspects is inter-related to the firms corporate and supply strategy as well as to
each other.
An organisation which has price-based procurement and policies is likely to have opportunistic
relationships with its suppliers as it seeks to achieve short-term cost reductions. It is unlikely to form
close relationships with its suppliers nor create a collaborative, or integrated, supply strategy.
Cousins Strategic Supply Wheel will be of help to an organisation which wishes to move away from
price-based procurement towards a collaborative, or integrated supply strategy. The model identifies
factors the organisation should consider and also ensures these are balanced focusing on one aspect
will be to the detriment of another. For the change to be successful each of the following areas must be
addressed.
Organisation structure: Whether the organisation is centralised or decentralised will affect the closeness
of the supply relationship and how the parties interact.
Performance measures: Measures must be introduced to monitor supplier relationships and control the
procurement strategy.
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Competences: The organisation must have the necessary skills within the workforce to achieve the new
strategy. This may require training.
Cost/benefit: The benefit of the change in strategy must exceed the cost of implementing and operating it.
Relationships: The organisation must be willing to move away from opportunistic relationships towards
collaborative relationships with its suppliers.
(e)
It is important for an organisation to manage its inventory carefully for a number of reasons. Firstly,
production may be interrupted if materials run out and this may affect customer satisfaction and
goodwill if orders cannot be fulfilled. Secondly, holding costs for some materials may be high so it is
important to keep inventory at economic levels to minimise these costs. Thirdly, it is important that
inventory is not wasted through spoilage or obsolescence so inventory levels must be appropriate to the
useful life of the goods.
Therefore it is important for an organisation to select an appropriate inventory management system and
the four main types are described below.
Continuous or perpetual inventory system
This system records every receipt and issue of inventory as it occurs so that there is a continuous record
of the balance of each item of inventory. Once inventory falls to a pre-determined level, an order for a
fixed amount is issued to replenish the stores.
Periodic inventory system
This system checks inventory levels at specific time intervals and orders for new inventory may be made
depending on the inventory level which is recorded.
ABC system
This system is based on the Pareto 80/20 rule that suggests 20% of items are likely to account for 80%
of the costs. It is a selective approach which classifies inventory items as expensive (A items), in a
middle-cost range (B items), or inexpensive (C items). A and B items are subjected to careful stores
procedures to minimise costs. C items are not subject to such strict control and can be ordered in large
quantities because the cost savings from control do not justify the administrative cost of managing them.
Just-in-time (JIT) system
This system is based on the idea that goods should not be produced until they are needed. This means
production is triggered when demand for goods is created (such as when a customer places an order).
Inventory is not required until production commences and therefore at its extreme, JIT is known as
stockless production the aim is to keep inventories as close to zero as possible. This system requires
very close relationships with suppliers to ensure inventory can be delivered quickly, reliably and flexibly.
(f)
Different types of workforce flexibility an organisation could use include the following.
Financial flexibility
A range of payment and reward systems may be used to encourage the workforce to perform. For
example, an employee is more likely to be prepared to work overtime if they can see that doing so will
help them achieve a financial incentive such as a bonus.
Functional flexibility
Functional flexibility means ensuring employees are able to switch between tasks and roles as required.
To do so requires multi-skilled teams rather than relying on specialists. Job rotation and training are often
used to help build functional flexibility.
Numerical flexibility
The use of additional people, for example temporary workers, can be used to provide the flexibility to deal
with peaks in production demand. Part time workers can also play a part, providing flexibility to cover
certain parts of the day or night without needing to employ a person full-time.
There are generally two aspects flexibility can be offered on - where people work and when they work.
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Flexibility can be provided over when people work, for example through the use of flexitime or offering the
option of a compressed working week. It may be appropriate for some employees to be offered flexibility
over where they work, for example working from home.
By providing flexible options that help ensure employees are able to juggle work successfully with other
commitments, employers hope their workforce will be less likely to spend time worrying about outside
factors. As a result, the workforce should perform better.
66 Various topics 7
Text reference. Chapters 1, 5, 6, 7, 11
Top tips. Part (a) gives you the opportunity to earn full marks by making and explaining five advantages of
trading globally. As long as your suggestions are sensible you will score well.
Dont forget to include basic definitions (such as what 5-S is in part (d)) as these help ease you into your answer
and show the marker that you have a good base of knowledge.
Easy marks. Providing some examples of ethics and CSR policies in part (b).
Examiners comments. With regard to sub-question (b), candidates often described ethics and CSR but failed to
link the two concepts.
Many responses to sub-question (e) were generic and talked about stock management or chase strategies etc,
therefore not answering the question set.
Sub-question (f) was the least well answered of all the Section B sub-questions. Candidates often simply defined
operations management and continued to write all they knew about the topic area rather than answering the
question set. Other candidates just described operations management tools or just described sustainability
without linking the two. Additionally, some candidates discussed the operational level of management and not
operations management.
Marking scheme
Marks
(a)
(b)
(c)
(d)
(e)
(f)
1
1
1
1
1
1
mark
mark
mark
mark
mark
mark
for
for
for
for
for
for
each
each
each
each
each
each
relevant
relevant
relevant
relevant
relevant
relevant
explained
explained
explained
explained
explained
explained
point
point
point
point
point
point
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5
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30
not earn marks.
(a)
Opportunities for trading globally

Larger market
An organisation can take advantage of customers and markets around the world which were previously
untapped sources of sales and revenue.
Reduced costs
An organisation which trades globally may be able to take advantage of suppliers in other parts of the
world that can supply goods or services at a cheaper price and this will reduce the organisations costbase.
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Expertise
Organisations which lack expertise, for example in IT and communications, can use the skills of
individuals and businesses in other countries which do have the expertise. This is more likely to be
beneficial to organisations in less developed nations that see an opportunity to gain a technological
advantage over their local competitors.
Investment
Organisations that operate globally can seek to raise finance from a wider range of investors for example
banks and stock markets in foreign countries. This may open up sources of finance that were previously
unavailable, or at lower interest rates than those which are available in the home nation.
Tax incentives
Some countries offer organisations tax or other financial incentives to set up operations in their
jurisdiction. If an organisation didnt operate globally then they would not be able to take advantage of
such opportunities.
(b)
Business ethics
Business ethics can be defined as 'the application of ethical values to business behaviour'. CIMA
Businesses have ethical values, based on the norms and standards of behaviour that their leaders believe
will best help them express their identity and achieve their objectives. Some of these ethical values may
be explicit, for example, expressed in a mission statement or in employee training programmes. Others
may be unwritten rules and customs that form part of the organisations' culture: 'the way we do things
around here'.
Corporate social responsibility (CSR) refers to an organisations approach to helping its local community
and reducing the environmental impact of the organisation.
Examples of corporate social responsibility include organisational policies to recycle materials, use energy
from renewable sources and to keep the happiness and welfare of employees as a core value to the
organisation.
Whilst CSR is based on ethics, it often takes a wider stance, for example an ethical stance may be to
support suppliers in developing nations but a CSR policy might be to ensure the suppliers employees are
paid a fair wage.
(c)
Foreign direct investment and political risk

Foreign direct investment (FDI) occurs where an organisation from one nation acquires an organisation in
another nation or sets up operations itself in that nation (known as Greenfield investment).
Political risk is the risk of an organisation incurring losses due to non-market factors, however it may also
occur in relation to financial factors.
There are a number of groups that may pose significant political risk to organisation thinking of engaging
in FDI.
The government/government agencies risks include initiating industry regulation or changes to the tax
system
International organisations such as the World Bank and UN which may bring pressure to bear on a
government to change terms of trade
Organised interest and protest groups such as trade unions and single issue groups that may cause
disruption to trade in the form of strikes or protest action
Foreign governments with influence governments in different nations may form alliance and
agreements that can affect existing trade arrangements
Terrorist groups may pose a threat to property and safety of employees
Political opposition groups political groups which are currently not in power may have political
influence, or, over the lifetime of an investment, come into power and make changes to regulations and
trade policies.
Answers
(d)
5-S Practice
5-S is often associated with lean production and the overriding idea behind it is that there is 'a place for
everything and everything goes in its place'. Discipline, simplicity, pride, standardisation and repeatability
are emphasised in the 5Ss as being critical to efficiency.
The 5-S and their meanings:
Seiri (structurise) to segregate or discard. Introduce order where possible.
Selton (systemise) to arrange and identify for ease of use. Approach tasks systematically.
Seiso (sanitise) to clean daily. Be tidy, avoid clutter.
Seiketsu (standardise) to revisit each 'S' frequently. Be consistent in your approach.
Shitsuke (self-discipline) to sustain via motivation. Do the above daily.
(e)
Responding to changing demand

In order to respond to changing demand, organisations need to be flexible in the following areas:
Workforce flexibility
Staff numbers may need to be increased or decreased, or the mix of skills or experience within a
workforce may need to adapt to changing circumstances and this can be achieved in a number of ways.
Overtime existing staff may work longer hours to meet demand. Overtime can be withdrawn when
demand falls.
Temporary/part-time staff if the extra hours cannot be met from overtime but the increase in demand is
not expected to last long, then temporary or part-time staff may be employed.
Hire staff/make redundancies if the fluctuation in demand is expected to be permanent or last for a
long-time then the organisation may look to hire new full-time permanent staff or make existing staff
redundant.
Outsourcing if demand is difficult to forecast then an organisation may pass the risk of under or over
employing staff to a third party organisation that would be responsible for supplying a product or service.
Multi-skilled workforce an organisation would be able to move employees from one business area to
another in response to changing demand if employees are sufficiently skilled or experienced.
Inventory control
An organisation could build buffer stocks of goods for sale in order to meet spikes in demand. However,
the organisation will face increased inventory holding costs as a consequence.
Marketing control
An organisation could attempt to manipulate demand through changes to its pricing strategy or by
increasing or reducing promotional activities.
(f)
Sustainability and operations management

Sustainability is a long-term programme involving a series of sustainable development practices, aimed at
improving organisational efficiency, stakeholder support and market price.
For many organisations, sustainability in relation to operations management involves developing
strategies that help ensure the organisation only uses resources at a rate that lets them be replenished
and where any emissions made are at a rate that the environment can absorb.
Operations management can support sustainability in reducing waste, using less energy and recycling.
Policies to reduce waste
Plan production processes to reduce waste
Minimise packaging associated with the product
Policies to reduce energy
Selecting suppliers in the local area to reduce transport costs
Design processes to minimise energy used in production
Policies promoting recycling
Plan production processes to reuse raw materials
Design products so that they can easily be recycled by the customer once used
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67 Various topics 8
Text reference. Chapters 1, 5, 8, 10, 11
Top tips. As with other answers in this kit, remember that our answers reflect one approach that you may take.
Equally valid answers could take other approaches or cover different (though just as relevant) material. For
example, in part (a) you might have come up with different suggestions for CPA.
Easy marks. Stating different types of corporate political activity in part (a).
Examiners comments. Well prepared candidates applied their knowledge to the requirements of the subquestions and scored highly.
Common Errors:
A common error for (a) was to explain government influence on businesses
Not all candidates used the model given as a framework for their answers
Marking scheme
Marks
(a)
(b)
(c)
(d)
(e)
(f)
1
1
1
1
1
1
mark
mark
mark
mark
mark
mark
for
for
for
for
for
for
each
each
each
each
each
each
relevant
relevant
relevant
relevant
relevant
relevant
explained
explained
explained
explained
explained
explained
point
point
point
point
point
point
5
5
5
5
5
5
30
not earn marks.
(a)

Corporate Political Activity (CPA) refers to the involvement of companies in the political process with the
aim of influencing policies towards their preferences. There are a number of methods which could be
used, including:
Lobbying this involves contacting government ministers and senior civil servant in order to put the
companys point of view across. This may include the use of professional advisers who have the necessary
contacts.
Political donations organisations may seek to support political parties that share their views and
objectives to help ensure they get into power and retain it.
Buffering this involves an organisation being proactive in warning the government or advising it on the
implications on new legislation it is thinking of enacting.
Bridging this involves ensuring the organisation is aware of legislation has it is developed so that the
organisation meets and complies with it when it is passed.
Marketing an organisation with strong political views may make use of marketing techniques to
influence public opinion and therefore put pressure on the government to develop or change policy.
(b)
Provision of a service versus production of a product

The transformational process model can be used to differential services from products.
Answers
Inputs
Product inputs are in the form of raw materials whereas service inputs are the skills and attributes of
individuals.
Processes
The production of a product usually occurs away from the customer, for example a television is
manufactured at a factory which might be on the other side of the world from a customer. By contrast,
the provision of a service usually involves direct contact between employee and customer.
Production of many goods often involves machinery such as robots or automated processes. Services are
mainly performed by human labour.
Since machines specialise in performing the same task repeatedly, and humans can vary the service they
provide, goods tend to be generic and services more tailored to the needs of the customer.
Outputs
By their nature, services are inseparable from the person performing them whereas as products are
separate from the process that created them.
Service outputs have no physical form. Very often, the customer is given some physical evidence that the
service was provided (for example a travel ticket) but this is separate from the service provided. Goods, by
contrast, are tangible objects.
(c)
Production, sales and product orientation

Organisations that do not take a market or marketing orientation may take up a production, sales or
product orientation instead.
Production orientation
Under a production orientation, management believe that success is achieved through producing goods or
services of optimum quality as cost-efficiently as possible. The major task of management is to pursue
improved production and distribution efficiency.
It also assumes that customers will want to buy products that have been produced efficiently.
Perhaps the most well-known example of production orientation was the Model T Ford, one of the earliest
motor cars to be produced for the mass market. Henry Ford famously said that Ford's customers could
have the (mass-produced) Model T in any colour, so long as it was black.
Sales orientation
Under a sales orientation the tendency is to make the product and then actively and perhaps aggressively
sell it. Underlying this philosophy is a belief that a good sales force can sell just about anything to
anybody.
Selling is preoccupied with the seller's need to convert their product into cash. Marketing is concerned
with satisfying the needs of the customer by means of the product and the whole cluster of things
associated with creating, delivering and finally consuming it.
Product orientation
Product orientated organisations focus on product development, for example the introduction of new
product features. This approach is based upon the belief that a more advanced product or one with more
features will be perceived as superior.
(d)
Influences on an individual making a purchasing decision

There are many influences on a consumer purchasing decision, these include:
Reference groups
A reference group is an actual or imaginary group that influences an individual's evaluations, aspirations
or behaviour. They influence a buying decision by making the individual aware of a product or brand,
allowing them to compare their attitude with that of the group, encouraging the individual to adopt an
attitude consistent with the group, and then reinforcing and legitimising the individual's decision to
conform.
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Cultural factors
Culture comprises the values, attitudes and beliefs in the pattern of life adopted by people, that help
them integrate and communicate as members of society. Culture comprises cultural artefacts, lifestyles,
and so on. For example, alcohol consumption is part of the culture of many countries in Western Europe,
whereas it is frowned on in Muslim and some other countries.
Family life cycle
Where an individual is in their family life cycle will influence the types of products that they decide to
buy. For example, couples at the early stages of their marriage before having children will have different
needs and consumption patterns from those, say, after their children have left home.
Economic circumstances
An individuals buying decisions are also heavily influenced by their economic circumstances. An
individual's economic circumstances consist of spendable income: its level, stability and time pattern,
Savings and assets, including the percentage that is liquid, borrowing power and attitude toward spending
versus saving.
Attitude
An attitude describes a person's enduring favourable or unfavourable cognitive evaluations, emotional
feelings, and action tendencies toward some object or idea. Attitudes lead people to behave in a fairly
consistent way towards similar objects and therefore whether or not they generally desire them. Attitudes
tend to settle into a consistent pattern to change one attitude may entail major changes to other
attitudes.
(e)
Herzbergs two-factor motivation theory

Herzberg identified two groups of work related factors which caused satisfaction and dissatisfaction
respectively. He called these factors motivators and hygiene factors.
Motivators produced satisfaction when present and were capable of motivating the individual. Examples
of motivators include: Advancement, recognition, responsibility, challenge, achievement, growth in role
and autonomy.
Hygiene factors could not give satisfaction or provide motivation when present. Their absence, however,
caused dissatisfaction. Examples of hygiene factors include: Salary, interpersonal relationships, working
conditions, job security and status.
Job enrichment
Job enrichment increases the depth of responsibility by adding elements of planning and control to the
job, therefore increasing its meaning and challenge. The worker achieves greater autonomy and growth in
the role.
Relationship
Herzbergs theory and job enrichment are unrelated. However, job enrichment may be a powerful
motivator because it provides a number of motivators suggested by Herzbergs theory.
(f)
Targeting
Before an organisation can target the most lucrative part (or segment) of the market it must identify what
the segment is. To do this requires market research and market segmentation. Once the segment is
identified, the organisation should manipulate the marketing mix so that its offering appeals to the
segment identified.
Market research
Market research is the process of gathering, recording, analysing and reporting data and information
relating to the company's market, customers and competitors.
Primary and secondary data may be used in the research. Primary research being conducting new
research into the market, for example by doing customer surveys or hiring specialist researchers to
analyse the market. Secondary research is conducted on data that has already been collected, for
example by analysing data from websites or reviewing trade journals.
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Competitor analysis
As part of the market research, it is important for the organisation to investigate the competitors that are
already in the market segment. By looking at their strengths and strategies, the organisation will be able
to decide whether or not entering the market is viable.
Market segmentation
Market segmentation may be defined as the subdividing of a market into distinct and increasingly
homogeneous subgroups of customers, where any subgroup can conceivably be selected as a target
market to be met with a distinct marketing mix.
Although the total market consists of widely different groups of consumers, each group consists of people
(or organisations) with common needs and preferences, who perhaps react to 'market stimuli' in much
the same way. Each market segment can become a target market for an organisation, and would require
a unique marketing mix if the organisation is to exploit it successfully. The organisation can then position
its offer to account for the roles of each segment.
Examples of market segments include: Area, age, gender, income, education, class and lifestyle.
68 Various topics 9
Text references. Chapters 3, 4, 7, 10
Top tips. Keep your answers on each part focussed on what is required. It is all too easy to write to much on
some of the parts and this may cause you to run out of time later on. Parts (a), (d) and (e) each ask for five
items, therefore do not write more than a sentence or two on each.
Easy marks. Stating the advantages of an in-house IS function in part (a).
Examiners comments. Candidates appeared to have most difficulty with (e) which exposed a lack of detailed
understanding of the technique and its potential. Otherwise generally this question was reasonably well
answered.
Marking scheme
Marks
(a)
(b)
(c)
(d)
(e)
(f)
1
1
1
1
1
1
mark
mark
mark
mark
mark
mark
for
for
for
for
for
for
each
each
each
each
each
each
relevant
relevant
relevant
relevant
relevant
relevant
explained
explained
explained
explained
explained
explained
point
point
point
point
point
point
5
5
5
5
5
5
30
not earn marks.
(a)
Advantages of an in-house IS function

There are a number of advantages of an in-house IS function, here are just five examples:
Confidentiality
In-house IS functions offer a greater degree of security for organisations with highly confidential or
sensitive information than if the system was outsourced.
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Importance
In some organisations, information and its provision is inherent to operations and management. Therefore
keeping an in-house IS function respects its importance.
Organisations with in-house IS functions are more likely to be able to use the systems for competitive
advantage. Also, having dedicated IS staff will help ensure any opportunities for using the systems to gain
competitive advantage should not be missed.
Flexibility
Having an in-house IS team will mean that the organisation will avoid becoming locked-in to
unsatisfactory contracts with third party suppliers. It will help it to respond to change more quickly than if
a third party was involved.
Awareness of costs and benefits
Organisations with in-house IS teams will be more aware of the actual costs and benefits of having an IS
function than those which outsource. Managers need to know the costs and benefits in order to get the
most out of the resources available.
(b)
Computer Aided Design (CAD)

Computer Aided Design (CAD) packages are software which allow product design and so on to be quickly
created and amended.
Computer Aided Manufacturing (CAM)
Computer Aided Manufacturing (CAM) packages are software that allow machine tools and related
equipment to be controlled by the computer system.
Benefits of CAD and CAM
CAD and Cam both bring a number of benefits to an organisation. These benefits include:
Reduced labour costs
CAD helps to speed up the design process so that fewer designers are required compared to a manual
design process. CAM may enable the production processes to be automated or have reduced human
input. Both will help reduce an organisations labour costs.
Reduced error rates
Reducing human input in the design and manufacturing process should reduce the instances of human
error and associated costs. This is of course providing the software is operating correctly.
Reduced wastage
The design and manufacturing processes can be made more efficient and raw materials can be used more
effectively, reducing the amount of off-cuts and so on. This reduced waste will help save the organisation
raw material costs.
Meeting specific customer needs
Both Cad and Cam offer an organisation the opportunity to tailor products and production processes to
individual customers. This should help increase customer loyalty and repeat orders.
Improved quality
The design and manufacturing process can be made more simple and procedures can be built-in to help
ensure quality of output.
(c)
Materials requirements planning (MRP I)

MRP I is a technique for deciding the volume and timing of materials in manufacturing conditions where
there is dependent demand. The purpose of an MRP I system is to calculate the quantity of materials
required, for each type of material, and determine when they will be required.
There are numerous benefits to an organisation which uses an MRP I system. These include:
Improved operations
MRP I enables manufacturing organisations to determine when to order material, by working back from
when they will be required for production, and allowing the necessary lead time for production or for
purchasing from the external supplier. This should make the whole process more reliable and
straightforward.
Answers
Reduced its stock levels

Precise planning of when materials will be needed means less stock needs to be held in store.
Identify and warn of production problems
Proper planning enables issues such as bottlenecks to be anticipated and action taken to rectify them.
Supplier relationships
MRP I can assist with just-in-time management by forging close relationships with suppliers. This is made
possible as lead times should be reliable and last-minute orders can be avoided.
Customer relationships
Improved planning should improve customer relationships as delays caused by stock-outs should be
avoided and more accurate delivery times can be quoted.
(d)
Five stages of the consumer decision-making model

The five stages of the consumer decision-making model are:
Need/problem recognition
The customer recognises a need or a problem to solve. This is a motive to search for a solution.
Pre-purchase/information search
Marketers can provide product information, tailored to need. The customer might come up with
alternatives.
Evaluation of alternatives
Marketers can make products available for evaluation and provide comparative information about
competing products. The important thing, though, is to get the product onto the short-list of options.
The purchase decision
The product is selected and the purchase is made.
Post-purchase evaluation
Experience 'feeds back' to the beginning of the process, providing positive or negative reinforcement of the
purchase decision. If the consumer is dissatisfied, they will be back at the problem recognition stage
again. If the consumer is satisfied, the next decision process for the product may be cut short and they
may skip straight to the decision, on the basis of loyalty.
(e)
Queuing theory
Queuing theory seeks to balance customer waiting (or queuing) time and idle service capacity. The
theory states that customer satisfaction and throughput increases if a single queue is used rather than
several, shorter, queues. The theory also involves the use of mathematics to help guide operations
generally. In relation to the operations of a hospital this may involve:
Anticipating demand
Some times of day are likely to be busier than others so demand may be anticipated and appropriate
staffing numbers determined to meet the changing demand.
Waiting times
Calculations can be made regarding expected waiting times for people already in the queue. This
information made be provided on an electronic display or given to staff to notify patients.
Appointment systems
Peaks and dips in demand can be managed by an appropriate booking system so that patients requiring
non-urgent treatment can be seen at a certain time without having to wait around.
Performance analysis
Average waiting times and so on can be analysed at a higher level so that performances between
hospitals can be compared and benchmarked. Such analysis can be used to monitor hospital
management and policies determined to improve waiting times for patients generally.
(f)
Difficulties arising from lack of system training and support

There are a number of difficulties associated with a lack of training and support in regards to a new
system. These include:
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Lack of user acceptance

Support and training are necessary for users to accept the new system. Systems which are not accepted
by users may ultimately be unsuccessful.
Errors
Lack of training may mean users do not know how to use the system correctly. This may result in errors in
the data or information as a consequence of input or processing mistakes.
Reduced morale
Lack of information may reduce overall staff morale as they may fear job losses or changes to working
practices.
Poor performance
Users who do not know how to use the system correctly cannot use it efficiently. This may mean the
overall performance of the system suffers.
Loss of benefits
There may be a number of benefits to the organisation or employees which are not realised because the
users do not know they are available.
69 Various topics 10
Text reference. Chapters 3, 4, 5, 7, 9 and 11
Top tips. Note the use of headers and short paragraphs in this answer. Using this style enables the marker
to spot your points quickly and makes it easier for them to award you marks.
There are numerous other points that you could have made in part (c). These include: taking out the
middle-man/disintermediation, customer habits and expectations in the use of technology, the ability to
personalise or customise products and services, and changes in social structures, with more women
working and so less time for people to shop in physical shops (eg. the rise in online supermarket shopping).
Easy marks. Explaining the growth of online trading in part (c). Even if you had not studied this area in
detail you could probably come up with five suggestions based on your knowledge of the Internet generally.
Examiners comments. Candidates appeared to have most difficulty with 2(e) which exposed a lack of
detailed understanding of the policy. Some candidates did not answer this part of the question and others
wrote 'everything I know about.. pricing.
Marking scheme
Marks
(a)
(b)
(c)
(d)
(e)
(f)

Up to 2 marks for explaining variable pricing, 1 mark for each relevant example
5
5
5
5
5
5
30
not earn marks.
Answers
(a)
Process mapping
Process mapping aims to identify and represent the steps and decisions involved in a process in
diagrammatic form. The benefits of the technique include:
Managerial effectiveness
Process mapping aids a managers understanding of a process as it describes the flow of information,
materials and documents. A manager needs to understand a process before they can manage it
effectively.
Production efficiency
The technique demonstrates how inputs are turned into outputs and this will help managers determine
how efficient the process is. Where inefficiencies are identified they can be addressed.
Reduce bottlenecks
Process mapping helps managers to identify the causes of bottlenecks and delays in the production
process. Once identified, these bottlenecks can be reduced which should help improve the flow of
materials and reduce lead times to the customer.
Improve decision making
Decisions are necessary during production and mapping the process will identify the points where
decisions are needed and the nature of the decision. This will help the organisation ensure that staff with
suitable qualifications and experience are at hand when required to make the decisions.
Improve the timing of processes
Some production processes require two or more sub-assemblies to be ready at the same time for
example a car engine and its chassis. If the timing between the two processes is not correct then valuable
floor space will be lost storing one sub-assembly whilst it is waiting for the other. Process mapping can be
used to synchronise the two sub-processes so the assemblies are ready at the same time.
(b)
Forecasting need for additional staff

The following factors should be taken into account by an organisation when forecasting the need for
additional staff:
Assess external demand - business environment
The organisation should assess the business environment. In particular it should consider factors that
affect demand for its products or services, for example, whether the economy is growing and whether
there any political, social or legal developments that will affect it. If this assessment determines that
demand is not going to increase then it is unlikely that the organisation will require additional staff.
Assess internal demand - organisational objectives
The organisation should assess its own objectives and strategy. If it is planning to enter new markets or
develop new products or services then it is likely that additional staff will be needed. However, if it is
planning to withdraw from markets or stop producing products or services then it may actually be looking
to reduce staff numbers.
Existing workforce skills and experience
Before recruiting new staff, an organisation should establish whether any additional demand can be met
from its existing workforce. An audit of existing staff skills and experience should take place to determine
whether staff could be moved from one department or production line to another rather than going to the
expense of recruiting new people.
Existing workforce productivity
Another method of filling demand from existing staff is to review staff productivity. For example high rates
of absenteeism or low morale would indicate that an organisation is not getting the best out of its staff
and any shortfall in demand may be able to be met by simply increasing the output from its current
workforce. If productivity is an issue then the organisation should look at ways to improve it before
recruiting.
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Other methods of addressing shortfall

If there is a relatively small shortage of staff, or if the shortfall is only expected to be temporary, then the
organisation should consider other ways of covering the gap. Such methods could include paying staff
overtime, and enlarging or enriching existing jobs.
(c)
Growth of B2C trading

There are a number of reasons why business-to-consumer trading has grown through online trading, for
example:
Increased size of market
In theory, e-commerce allows all business organisations to trade globally because a website can be found
and accessed from almost anywhere on earth. This means businesses are no longer restricted to their
home or local markets and this is a great incentive for trading online. However, the degree to which global
trading is possible will differ between industries due to the cost and practicality of delivering goods and
services on a global scale. This point is especially relevant to companies that service a specialist or niche
market.
Cost reduction
Pure online trading allows many types of business to be set up and run on a very low cost base. A
physical presence, such as a shop, is no longer a pre-requisite to trade and therefore overheads such as
rent and rates are substantially reduced. Therefore e-commerce has reduced the barriers to entry for many
industries, allowing more businesses to trade.
Better marketing
Websites can store and analyse customer data concerning buying habits, spending patterns and personal
tastes and preferences. This data can be used to improve the efficiency and effectiveness of the
organisations marketing effort. For example many websites will send emails to previous customers with
details of special offers based on products they have purchased. Such customer data is extremely valuable
and obtaining it is a great incentive for an organisation to start e-trading.
New products and services
The Internet is itself a source of new products and services. Online music stores such as i-tunes and
Amazon are a prime example of a market that did not exist up until relatively recently and which only
came into existence because the Internet is a conduit for distribution. Organisations can therefore use the
Internet to develop new offerings or find new ways of selling existing products.
Better management information
Online stores are often fully integrated into an organisations information system and therefore are a
source of real-time management information. For example, demand can be monitored on a minute-byminute basis. This allows management to make decisions far quicker, enabling them to react to change in
time to make a difference.
(d)
IS/IT and furniture making

There are various ways in which IS and IT can transform the operations of a furniture making business,
including:
Computer Aided Design (CAD)
CAD involves a business using computer software to design its products. The advantages of CAD to a
furniture maker would be a more efficient and timely design process as fewer design staff should be
required and furniture designs can be quickly amended or adapted if necessary. This means the business
can store a range of basic templates for chairs and tables that can quickly be turned into new designs as
fashions and customer tastes change.
Computer Aided Manufacturing (CAM)
CAM involves the use of software to control tools and machinery. The furniture maker could use CAM to
control machines to cut fabric or wood quickly and in great quantity. This would speed up the production
process and reduce its cost base as fewer human staff would be required.
Answers
Materials Requirements Planning (MRP I)

The purpose of MRP I systems is to determine the timing and volume of raw materials required by a
manufacturing operations where demand for goods can be forecasted. Such a system would enable the
furniture maker to organise its purchasing and adopt a just-in-time management system so that it holds
very low inventory levels whilst being able to fulfil its orders. This would enable the business to reduce its
working capital requirements and inventory holding costs.
Manufacturing Resource Planning (MRP II)
MRP II evolved out of MRP I and is a system to enable a business to plan and monitor all of its resources,
such as marketing and finance, as well as inventory. It would offer the furniture maker features such as
production and capacity planning, forecasting, purchasing, operations control and financial analysis.
According to Brown, benefits of MRP II include reduced stock-outs, reduced inventory holding costs,
better utilisation of facilities and more reliable lead times to customers.
Optimised Production Technology (OPT)
OPT is a computer-based method for scheduling production that focuses its attention on capacity
constraints (or bottlenecks) in the production process. It would help the furniture maker identify
bottlenecks and develop a production schedule around them so their effect is minimised. It can also be
used to work out ways of overcoming the production constraint and therefore improve productivity.
(e)
Variable pricing policy

A variable pricing policy (also known as price discrimination) is a profit maximising technique that
involves a business charging different prices to different customers. It is usually employed where an
organisation can segment its market in detail, often by time or region, in order to target customers willing
to pay more for its product or service. Examples include:
Airline and train operators
Many airlines and train operators vary their prices according to the time of day that the customer is
travelling. Prices are generally higher in peak periods when demand is higher and lower in off-peak
periods when demand is low.
Online auctions
Prices paid by customers on online auction sites are determined on a real-time basis which changes as
bids are placed. The final price paid will be determined by demand and ultimately the price someone is
willing to pay for an item.
Retail shop sales
Retail shops, such as clothing stores, use sales to vary their prices at different times of year (for example
winter and summer) in order to increase demand and clear out old stocks ready for when they take
delivery of new season garments.
Petrol stations
Petrol stations charge customers in different parts of the country different prices for petrol and diesel. The
price charged can vary due to the affluence of the area or the degree of competition in the area from other
petrol stations.
(f)
Resistance to change
There are a number of reasons why a department may wish to continue using manual records rather than
a new computer system, including:
Lack of training
Switching from a manual to a computerised system represents a major change in how work is to be done.
If individuals are not provided with enough suitable training on the system then they may simply not
understand how to use it.
Lack of commitment from senior management
For any system implementation to be a success, senior management must be fully committed to the
system and be seen to be fully committed to it. If the management team does not demonstrate this then
the end users may not take the new system seriously and be reluctant to changeover to it.
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Poor system design

The system is likely to have been developed by a team of programmers and engineers, who are not the
same people who will be using it on a day-to-day basis. Flaws in design or general user-unfriendliness
may put users off from operating the new system.
Disruption to work process
As mentioned above, the switch to the new system represents a major change in work processes. People
are generally reluctant to accept change as it means letting the ways of the past go and having to learn
new ways of working. Unless good reasons for the change are communicated to the end-users it is
unlikely that the system will be accepted.
Lack of testing
If insufficient resources were allocated to system testing, or users were not involved in the testing then it
is possible that the system is not fit for the purpose it was intended for. If this is the case then the end
users would not want to waste their time using it.
Text reference. Chapters 3, 4, 6, 9 and 10
Top tips. Part (f) offers you a great opportunity to earn the maximum marks available. There are many benefits
that IT systems bring and your experience of the real world may benefit you here. If you get stuck, you can
always think about the purposes of IT systems and adapt that to make your answer (as we have done in the
answer below).
Easy marks. Stating benefits of IT systems in part (f).
Examiners comments. Few candidates offered good answers to (a). Many simply stated the general benefits of
system testing with little mention of 'realistic' or 'contrived'. Others dealt with one aspect with little reference to
the other.
With regard to (b), TPM was often confused with TQM and in question (c), EDI was frequently explained as such
things as the use of emails and/or video conferencing with no mention of B2B trading.
With question (d), merit goods were often described simply as goods worth having without explaining why or
relating to education. Question (e) was generally quite well answered as was (f) though some candidates gave
only benefits over manual systems.
Marking scheme
Marks
(a)
(b)
(c)
(d)
(e)
(f)
1
1
1
1
1
1
mark
mark
mark
mark
mark
mark
for
for
for
for
for
for
each
each
each
each
each
each
relevant
relevant
relevant
relevant
relevant
relevant
explained
explained
explained
explained
explained
explained
point
point
point
point
point
point
5
5
5
5
5
5
30
not earn marks.
Answers
(a)
Realistic and contrived tests

To ensure a range of scenarios are tested on installation, realistic and contrived tests are used.
Realistic tests
These involve using the system in the way it will be used in reality ie the actual environment, users and
types of data.
Contrived tests
These are designed to present the system with unusual events to ensure these are handled correctly, for
example that invalid data is rejected.
(b)
Total Productive Maintenance (TPM)

Quality issues do not just affect production processes. They filter into every part of the organisation
including the maintenance of production equipment. Total productive maintenance or TPM originated in
Japan and is defined as 'the productive maintenance carried out by all employees through small group
activities'. TPM is designed to contribute to an organisations quality system by maintain and increasing
productivity and quality of operations. This is achieved through:
(c)
Reduced instances of breakdowns
Production consistency and uniform output
Reduction in waste and cost of quality
Improved accuracy of production schedules
Facilitation of an on-time delivery
Electronic Data Interchange (EDI) and Business 2 Business operations

Business 2 business operations refer to the dealings between two business organisations rather than a
business and a private individual. Like most business dealings there is a buyer and a supplier.
Electronic data interchange (EDI) is a system whereby a business is connected with another business in
purely administrative terms. It involves the creation of standardised electronic documents (such as order
forms) that can be transmitted between supplier and buyer to save duplication of effort in regards to
getting the information into each computer system.
EDI has transformed the business buyer/supplier relationship in many ways. For example
(d)
The reduced duplication of effort has cost savings in terms of staff required to input and process data
Cost savings due to the electronic format used (paper and postage costs)
Improved communications and less scope for errors in the order/delivery process
Closer links between businesses, including electronic payments, improves trust and enables strong
long-term relationships to be built that benefit both organisations
Merit goods
Merit goods are goods or services provided free for the benefit of society by the government, for example
education or healthcare. They are provided because they are considered of great importance to society as
a whole and should therefore be available to all.
Education is a merit good for the following reasons:
An educated workforce is important to the long-term economic success of a country
It provides stability and social cohesion
It enables people to develop themselves personally and professionally, reducing the need for reliance
on welfare support
Just because a merit good is free does not mean that it will be taken up and in terms of education, the
government needs to promote its importance because:
Parents with low-levels of education may be unaware of the benefits education can bring
Children are often adverse to attending school because they do not see the long-term benefit to them
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(e)
The place mix

Place deals with how the product is distributed, and how it reaches its customers. It consists of two main
areas:
Channel
This is where the products are sold, such as supermarkets and corner shops, but not all possible outlets
will be used. Zero level distribution is where the organisation sells directly to the customer. In one level
distribution, the organisation sells to the retailer, who sells to the customer. Two level distribution involves
the organisation selling to a wholesaler who in turn sells to the retailer.
Logistics
This covers the location of warehouses and the distribution system. The speed of delivery and efficiency is
an important issue in place. An organisation can distribute the product itself (direct distribution) or
distribute it through intermediary organisations such as retailers.
(f)
Reasons for making such an investment

In addition to cost savings, investment in technology can bring a business a number of additional benefits.
Information about business transactions or events may be required for a number of reasons.
Documentation of transactions can be used as evidence in a case of dispute. There may be a legal
requirement to record transactions, for example for accounting and audit purposes. These are all
important reasons to invest in a suitable system.
Decision making
Information is required to make informed decisions. Information and information systems enable these
informed decisions to be made quickly and efficiently.
Planning
Planning requires a knowledge of, among other things, available resources, possible time-scales for
implementation and the likely outcome under alternative scenarios. Information systems can provide a
number of planning tools that improve the planning process.
Control
Once a plan is implemented, its performance must be controlled. Information is required to assess
whether it is proceeding as expected or whether there is some unexpected deviation from the plan. It may
consequently be necessary to take some form of corrective action. Information systems can be used to
monitor and control the outcomes of plans.
Just as individual operations need to be controlled, so overall performance must be measured in order to
enable comparisons against budget or plan to be made. This may involve the collection of information on,
for example, costs, revenues, volumes, time-scale and profitability. The collection, analysis and
presentation of such data can be performed by information systems.
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Answers
Text reference. Chapters 1, 4, 5 and 7
Top tips. On first glance, part (f) seems tricky because it takes a relatively small part of the syllabus (political
risk) and requires you to apply your general business knowledge. The answer is relatively straightforward if you
thought about the most basic of business concepts risk and reward. At the end of the day, a business is only
going to make an investment if the appropriate level of reward is there.
Easy marks. Stating the benefits of JIT in terms of competitiveness in part (c).
Examiners comments. Common errors:
(e) - rather than illustrate types of test, a large number of candidates identified changeover methods such as
direct, parallel run, etc.)
(f) - several candidates identified the risks without explaining the reasons for continued investment
Marking scheme
Marks
(a)
(b)
(c)
(d)
(e)
(f)
1
1
1
1
1
1
mark
mark
mark
mark
mark
mark
for
for
for
for
for
for
each
each
each
each
each
each
relevant
relevant
relevant
relevant
relevant
relevant
explained
explained
explained
explained
explained
explained
point
point
point
point
point
point
5
5
5
5
5
5
30
not earn marks.
(a)
Relationships with suppliers based on price alone

Historically, purchasing was viewed as a clerical function related to the day-to-day purchase of goods.
High importance was placed on price, but this has changed in recent years. Purchasing today, in most
organisations, is viewed as a strategically important function that impacts significantly on organisational
performance. If the focus is on price then a number of disadvantages occur.
Loss of quality of goods supplied
The main disadvantage is that there is no incentive to develop close links between buyers and suppliers.
The reason being is that the relationship is likely to be short with the buyer switching to another supplier
when a cheaper price is on offer. The lack of a relationship will almost certainly result in a loss of quality
of goods supplied as the supplier does not value the buyers business as much.
Less control over supply
It is important for a business to have a degree of control over the supply process to ensure the right
materials are delivered on-time. This may not be possible if there is not a strong relationship between
buyer and supplier.
Less scope for competitive advantage
Porter recognised that management of the supply chain could be a source of competitive advantage. He
referred to the importance of supply chains being responsive and reliable. If the end-user is the focus of
all members of the supply chain then the quality of the end-product will be improved, providing a
competitive advantage over the competition. This is only possible with close relationships between buyer
and supplier, something that is not possible if the focus is on price.
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Risk of loss of supply

The lack of business relationship may mean that the supplier decides not to supply a buyer if another
buyer comes in and offers a higher price for the same goods. This weakens the supply chain and may
jeopardise a businesss operations.
Increased cost
There can be a high administrative cost involved in searching for and negotiating with suppliers on a
frequent basis to achieve the best possible price, and switching supplier where needed to.
(b)
Sustainable practices
For organisations, sustainability involves developing strategies that balance environmental, economic and
social needs. The eventual aim is that the organisation only uses resources at a rate that allows them to
be replenished, and that emissions of waste are at a level the environment is able to absorb.
The benefits of such practices to an organisation include:
Improved quality
By attempting to reduce waste and rework, an organisation may also improve the efficiency of its
production process and improve the quality of its output.
Reduced costs
Reduced wastage and improved efficiency of business process should help the organisation to reduce its
products cost-per-unit.
Increased product attractiveness
Products can be designed to minimise the amount of resources needed to produce and package them.
This further reduces costs but also makes the product more attractive to buyers looking for products made
in a socially responsible manner.
Lean production
Sustainability is related to lean production, something that most modern operations aspire too. The
compatibility of sustainable practices and lean production should help ensure both are achieved.
Workforce benefits
Existing employees may be motivated by the sustainable practices and potential new employees may be
attracted by them. This should strengthen the quality employees and the length of time that they remain
with the organisation for. Therefore recruitment costs and costs associated with losing experienced staff
are reduced.
(c)
Just-in-time (JIT)
Just-in-time (JIT) is an approach to operations based on the idea that goods and services should be
produced only when they are needed. JIT is also known as 'stockless production' and may be used as part
of a lean production process. In its extreme form, a JIT system seeks to hold zero inventories.
JIT may contribute to the competitive of an organisation in a number of ways:
High quality goods
Under JIT, goods from suppliers must be of high quality because any quality failings will reduce
throughput and harm the production process. Ensuring only quality products enter the production system
goes a long way to ensuring a high quality finished product comes out.
Speed of production
Under JIT, throughput in production must be fast so that customer orders can be met through production
rather than out of inventory. This speed of production may help the organisation win new business and
offer a fast service for existing customers.
Reliability of production
Production must be reliable in a JIT system because there is no margin for hold-ups or equipment
downtime. A reliable production process may be attractive to potential new customers as they see that
orders will be delivered on time.
Answers
Flexibility
To respond immediately to customer orders, production must be flexible, and in small batch sizes (often a
batch of one). This flexibility may flow through the whole organisation and this enables the business to
respond quickly to changes in the competitive environment.
Lower costs
As a consequence of high quality production, and with a faster throughput and the elimination of errors,
costs of production will be reduced and costs of holding inventory potentially eliminated.
(d)
Trade policies
Free trade encourages the easy movement of goods, services labour and capital between different
countries. It involves an absence of quotas, tariffs, subsidies and discriminatory taxation or other barriers
that may hinder trade and is sometimes referred to as liberalisation or liberal trade policies.
Alternatives to free trade include protectionism, balanced trade and ethical trading policies.
Protectionism aims to restrict trade with one or more other countries to protect home country producers
from overseas suppliers. It is sometimes referred to as economic nationalism and involves the adoption of
one or more barriers to trade such as quotas, tariffs and subsidies mentioned above. The reasons why
such a policy may be adopted include the protection of fledgling domestic industries or as a counteraction against foreign industries that are considered to be receiving unfair help from their governments.
The objective of balanced trade is to manage the imports and exports between two nations so that neither
runs up a large trade deficit. It may be viewed as being halfway between free trade and protectionism but
the trade barriers are managed by the parties in the spirit of co-operation to both their benefit.
Ethical policies are a recent development and include Fairtrade as an example. Such policies developed
alongside sustainability and corporate social responsibility and have the aim of paying suppliers in
developing nations a fair price for their products.
(e)
Testing new systems

To ensure new systems are thoroughly checked when they are installed, four types of test are often used.
Realistic tests
These involve using the system in the way it will be used in reality ie the actual environment, users and
types of data.
Contrived tests
These are designed to present the system with unusual events to ensure these are handled correctly, for
example that invalid data is rejected.
Volume tests
This type of test presents the system with large numbers of transactions to see how the system copes.
Acceptance tests
This type of test is undertaken near the end of the implementation phase and is conducted by users to
ensure that they are happy that the system meets their needs.
(f)
Risks of overseas investment

Political risk is the main risk organisations face when investing overseas and is the risk of incurring losses
due to non-market factors. These factors are usually related to government policy, for example trade rules,
investment incentives and the tax regime. It is also related to financial factors such as currency controls
and the economy, and stability factors such as rioting and civil war.
Despite the risk, organisations can and do continue to invest overseas. Some reasons for this include:
Risk and reward
Most businesses are happy to take a degree of risk if there is the strong possibility of a high level of
reward. Therefore if the potential reward from an investment significantly outweighs the potential risk
then an investment is likely to take place.
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Insurance
Insurance policies are available to organisations that offer a degree of protection against political risk.
Although expensive, they may be attractive if they bring the level of risk down so that it is significantly
less than the potential reward.
Confidence
A business seeking to invest may be reassured by the confidence of other parties such as analysts and
other businesses investing in the country that the risk is not as bad as it fears.
Government aid
Many governments offer significant aid in the forms of grants and tax breaks to organisations that invest in
their country. This extra reward for making the investment may be enough to persuade a business that
the investment is worth the risk.
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MOCK EXAMS
236
CIMA
Paper E1 (Operational)
Enterprise Operations
Mock Exam 1
Question Paper
Time allowed: Reading time
Answering question paper
20 mins
3 hours
This paper is divided into three sections

Section A
Answer ALL sub-questions in this section
Section B
Answer ALL of the six short answer questions
Section C
Answer BOTH of these questions
DO NOT OPEN THIS PAPER UNTIL YOU ARE READY TO START UNDER
EXAMINATION CONDITIONS
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Mock Exam 1: Questions
SECTION A 20 marks
Instructions for answering Section A
Each of the sub-questions numbered from 1.1 to 1.10 inclusive, given below, has only ONE correct answer,
worth two marks.
Question 1
1.1
For firms wishing to build market share in a market new to them, 'penetration pricing' involves pricing
A
B
C
D
1.2
(2 marks)
'Carrot and stick' theories

Content theories
Process theories
Satisfaction theories
(2 marks)
Suppliers, manufacturers, distribution channels and customers value chains

Customers and sales staff
Production and sales departments
Economy, efficiency and effectiveness in the use of resources
(2 marks)
Inventory management using a method that concentrates effort on the most expensive items is called:
A
B
C
D
1.7
Expectations, attitudes and flexibility

Experience, past progression and characteristics
Qualities, responsibility taken and life experience
Physical make-up, interests and disposition
Porters value system reflects the value created through the relationship of:
A
B
C
D
1.6
(2 marks)
Motivation theories that assume that behaviour is caused by, and directed towards, the satisfaction of
personal needs are referred to as:
A
B
C
D
1.5
An expert system
A knowledge transfer programme.
A smart system
A management information system
Attainments, general intelligence, circumstances and special aptitudes are part of Rogers seven-point
plan for person requirements. What are the remaining points?
A
B
C
D
1.4
(2 marks)
A system that simulates the problem solving techniques of human experts is known as:
A
B
C
D
1.3
High enough to convey an impression of quality

Low enough to challenge buyer loyalties
Low enough on a few items to attract customers to a wider product range
To cover fixed costs only
PDCA
JIT
Five S
ABC
(2 marks)
A duplication of an organisations data in two or more files is called:

A
B
C
D
An integrated data set

Second life
Data redundancy
Entropy
(2 marks)
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1.8
A company that concentrates on product features it instinctively believes to be 'right' is referred to as:
A
B
C
D
1.9
Production orientated
Product orientated
Early stage entrepreneurial
(2 marks)
Teleworkers is a term applied to staff using communication technology and working:

A
B
C
D
In an unstructured way
In the telecommunications industry
Off-site, for example from home
In a call centre
(2 marks)
1.10 The induction process refers to:

A
B
C
D
A test used as part of employee selection

An understanding of expectations between the individual and the organisation
Ways of familiarising new employees to the organisation
Feelings of complacency or dissatisfaction caused by a reward system
(2 marks)
(Total = 20 marks)
SECTION B 30 marks
Answer ALL parts of this question
Question 2
(a)
Describe the benefits an information system centred around a database should bring to an organisation.
(5 marks)
(b)
Explain the benefits of effective management information systems and executive information systems.
(5 marks)
(c)
Explain the issues organisations should consider if switching from business-to-business trading (B2B) to
business-to-consumer trading (B2C).
(5 marks)
(d)
Explain how the effectiveness of staff training events can be assessed.
(e)
Identify the advantages to an organisation of using specialist providers as well as employees in delivering
a training programme.
(5 marks)
(f)
Describe the ways in which organisations might encourage the development of the use of quality circles.
(5 marks)
(5 marks)
(Total = 30 marks)
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SECTION C 50 marks
Answer BOTH questions
Question 3
Banking services within the country of Everland are provided exclusively by a few well established banks, all
offering broadly similar 'traditional' banking services. Overall, the industry performance is viewed from within as
satisfactory and historically all banks have maintained stable profits and employment levels. Marketeers would
describe the industry as being classically 'product oriented'. The profile of senior Everland bank officials and
managers is of well qualified professionals, possessing long banking industry experience and considerable
financial skills. Within the combined workforce other business skills (in, for instance, HR or marketing) are
noticeably lacking.
In the external environment, the government will soon pass new legislation that will effectively break the
oligopoly-type position of banks and open the market up to other providers. Senior bank officials, however, are
unconcerned, feeling that banks are in 'reasonable shape' to face any new challenge.
You work for the Everland Banking Advisory Group (EBAG), an independent body, and have been asked to
analyse the banking industry in the country of Utopia to identify lessons that might be learnt. Your investigation
reveals that since the sector opened up to more competition, a much wider range of financial institutions offer
banking services. Despite this, banks in Utopia have all prospered over the past few years. This is thanks to
wide-ranging changes in how they operate, the products and services they offer and their organisational
structures. You identify some significant trends within the banking industry of Utopia, including:
The use of marketing techniques
A clearer focus on customers (who have become increasingly more demanding)
A new generation of bank employees, many with commercial backgrounds
Banks now exhibiting a strong sense of ethical and social responsibilities towards customers.
Required
(a)
Identify the main threat to Everland banks and discuss the types of change that they could be making in
order to survive and prosper.
(10 marks)
The importance of ethics and social responsibility in all areas of business has attracted increased
attention in recent years.
(b)
Discuss (with examples) the main ethical issues relevant organisations operating within the banking
sector.
(10 marks)
(c)
Explain social responsibility and identify issues relevant organisations operating within the banking sector.
(5 marks)
(Total = 25 marks)
Question 4
QW9 is a large insurance company. The industry conditions are very competitive and QW9 is under constant
pressure to achieve higher standards of customer service and improve profitability for shareholders.
You have recently taken up a post in QW9's central project and technical support team working directly for the
Director of Strategy, who is also relatively new to the organisation. In an initial briefing with you, the Director
explains that he has met with most senior managers and discussed their feelings on the strengths and
weaknesses of the company. He has concluded that there are a number of areas that need to be addressed,
including two from the area of human resource management, namely, performance related rewards and
performance management.
Performance related rewards. QW9 experiences difficulty in recruiting staff even though it pays
comparable salaries to its rivals. Senior managers do not feel that there are problems with either staff
morale or the external image of the company The Director of Strategy explains that although QW9 offers a
number of benefits to its employees beyond basic pay, this is not made explicit enough either internally or
externally. The Director has so far identified a good pension scheme, flexitime, personal insurance cover
at reduced rates, a subsidised canteen and a social club. You have also heard it said that the balance
between a professional and personal life is a distinguishing feature of being an QW9 employee. It is the
Director's view that all benefits should be examined and a 'total reward package' approach should be
progressed. This would draw together all the financial and non-financial benefits (including working
practices, development opportunities and the challenge of working for QW9 itself) into an integrated
package which would be available to all employees.
Performance management. A formal performance appraisal system supported by standardised procedures

and paperwork has operated for a number of years. The scheme has clear organisational objectives
centred on staff development and improved performance rather than as a basis for paying individual
annual bonuses. It is, however, not well regarded by either managers or staff and its objectives are not
being met. Senior managers complain about the time that is taken up with the process. Exit interviews
are conducted whenever someone leaves QW9, and a review of a sample of recorded comments indicates
staff feelings on the scheme very clearly: 'appraisal is just a paper exercise', 'a joke', 'a waste of time and
effort'.
Required
(a)
Discuss the advantages and disadvantages of QW9 developing a 'total reward package' approach.
(10 marks)
(b)
Explain the possible reasons why the objectives of the formal appraisal system are not being met.
(10 marks)
(c)
Explain the purpose of a total reward package scheme and identify three areas, relevant to the design of
such a scheme, that QW9 should investigate.
(5 marks)
(Total = 25 marks)
(Total for Section C = 50 marks)
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Answers
DO NOT TURN THIS PAGE UNTIL YOU HAVE

COMPLETED MOCK EXAM 1
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Mock Exam 1: Answers
A plan of attack
Before the three hours writing time starts, you are allowed 20 minutes to read through the paper. Use this time
wisely in effect it gives you an extra 20 minutes to gain the marks you need to pass.
What should you do in this 20 minutes?
topic areas covered.
The second ten minutes, we suggest you simply start working through the Section A questions by writing your
answers on the question paper. These answers can then be transferred very carefully to your answer booklet
when the exam starts. Remember though, you must not write in your answer booklet during the reading time.
Using the time in this way should mean that later in the exam, when you reach Section C, you have sufficient
time to read both questions carefully and plan your answers to them.
Turn back to the question paper now, and we'll sort out a plan of attack for Mock exam 1.
First things first

It's usually best to start with the multiple choice and objective test questions (ie do Section A first). You should
always be able to do a fair proportion of these, even if you really haven't done as much preparation as you should
have, and answering even a couple of them will give you the confidence to attack the rest of the paper.
Allow yourself 36 minutes to do the objective test questions - no more.
The next step Section B

Attempt Question 2 immediately after you've completed Section A. You've got to do this question so there's no
point delaying it. The question is split into six separate sub-parts, each worth 5 marks. This is the format CIMA
have used in all E1 exams to date - Section B questions have not yet been based on a scenario.
Take a look at the question requirements.
Part (a) requires you to use your knowledge of databases and the advantages they can provide.
Ensure your answer to part (b) covers both management information systems and executive information
systems.
Part (c) requires suggestions that relate specifically to switching from business-to-business trading (B2B)
to business-to-consumer trading (B2C).
In part (d), think about how the effects of training can be measured.
Training specialists should be effective as training is their business. They also bring an outside
perspective. These factors are relevant in part (e).
Read part (f) carefully. Dont explain what quality circles do focus on how their development could be
encouraged.
Section C
Once you've done Sections A and B, you are required to answer two longer questions available in Section C.
Question 3. You must spot the key threat in the scenario and make reasonable suggestions in Part (a). In
Parts (b) and (c) use your understanding of ethical and social issues and apply it to the banking sector.
Dont be afraid to draw on real-world knowledge gained from wider reading and media coverage.
Question 4. Part (a) could be answered using text book knowledge of reward packages, but your answer
to Part (c) must be related to the scenario. The same applies to part (b) dont provide general reasons
for appraisal system failure, your points must be relevant to the scenario.
General advice
Don't forget that all questions in the E1 exam are compulsory.
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No matter how many times we remind you.

Always, always allocate your time according to the marks for the question in total and for the parts of the
question. And always, always follow the requirements exactly.
You've got spare time at the end of the exam..?

If you have allocated your time properly then you shouldn't have time on your hands at the end of the exam. If
you find yourself with five or ten minutes spare, however, go back to any parts of questions that you didn't
finish because you ran out of ideas or time. A fresh look may spark new thoughts.
Forget about it!

And don't worry if you found the paper difficult. More than likely other candidates would too. If this were the real
thing you would need to forget the exam the minute you leave the exam hall and think about the next one. Or, if
it's the last one, celebrate!
SECTION A
Question 1
1.1
Penetration pricing involves setting a relatively low price for a product in order to increase the
organisations share of the market.
1.2
Expert systems allow general users to benefit from knowledge and techniques of human experts.
1.3
Rodgers seven-point plan consists of: circumstances (background), attainments, disposition,

physical make-up, interests, general intelligence and special aptitudes.
1.4
Content theories, such as Maslows Hierarchy of Needs, assume motivation is directed at fulfilling
personal needs.
1.5
Porters value system reflects the importance of adding value at all stages in the supply chain
from the first supplier in the chain to the end-user or customer.
1.6
ABC inventory management focuses on the most expensive items as a priority as their value
justifies the extra administrative effort.
1.7
Duplicating data is known as data redundancy.
1.8
A product oriented organisation focuses on product development and features.
1.9
Teleworking means working away from the organisations premises, usually from home .
1.10 C
Induction involves familiarising an individual with the organisation after they have been selected
for a position and have accepted the role.
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SECTION B
Question 2
Text reference. Chapters 3, 4, 6, 11, 12.
Top tips. Use short, clear paragraphs in your answer to make it easier for the marker to award you marks.
Easy marks. Some marks are available for demonstrating your knowledge of measuring the effectiveness of
training and the advantages of using a specialist training provider.
Marking scheme
Marks
(a)
(b)
(c)
(d)
(e)
(f)
1 mark for
1 mark for
1 mark for
1 mark for
1 mark for
1 mark for
each
each
each
each
each
each

5
5
5
5
5
5
30
not earn marks.
(a)
Benefits of information systems based around a database include:
Reduced data duplication/data redundancy. Having a centralised pool of data reduces the chance
of data duplication and redundancy. For example, stock and customer information are held and
maintained centrally.
Provision of tailored reports. Databases should facilitate more flexible reporting. For example,
procurement managers should be able to produce reports on slow moving products by different
types of supplier.
Ease of access to information for staff. Databases should enable staff to find data quickly (eg to
answer customer queries).
Reduced IT maintenance costs. As data is maintained centrally, maintenance (eg checking data
accuracy, adding new types of data) should be an easier task.
Enhanced security. One centralised database is easier to protect than data spread across many
locations.
(b)
The benefits of effective management information systems (used by all grades of managers) include:
Provision of timely information enabling managers to take informed decisions as and when
required (from daily stock re-ordering to assessing weekly or monthly staffing requirements).
Reducing inventory holding costs by enabling Just-in-Time.
Providing competitive advantage as customers are provided with effective customer service (eg
monitoring customers to identify their requirements in advance).
Other benefits, relating to executive information systems (used at senior manager or board level) include:
(c)
(d)
(e)
Provision of summary, company-wide data enabling directors/senior managers to identify key

areas for further investigation and action.
Allow the monitoring of competitors (eg active review of website changes) to ensure the
organisation is aware of and can react to (or anticipate) changes in the competitive environment in
a timely basis.
Issues to consider when transferring from business to business (B2B) trading to consumer trading (B2C)
include:
Payment methods. B2C trading will normally mean customers pay for goods immediately, B2B
normally allows payment on account. Facilities for on-line payment will be needed on the website.
Web-enable databases. For example, inventory databases need to be accessible to customers.

B2C customers will expect to see stock availability prior to placing orders.
Database web search. Company websites should include search facilities that allow customers to
find products they require.
User-friendly website. B2C customers require a clear, well presented, easy to navigate site.
Investment in the website may be necessary.
Regular price reviews. The Internet allows for easy comparison between supplier prices.
Companies may need to review prices charged compared to competitors on a regular basis to
ensure competitiveness.
The effectiveness of staff training events can be assessed by:
Requiring attendees to complete course assessment sheets after the training is completed.
Requiring delegates to complete tasks at the end of the event that test the skills taught.
Requiring delegates to complete tasks some time after the training event to demonstrate retention
of relevant skills.
Having the trainer complete an assessment that identifies gaps in knowledge provision or
deficiencies in the skills of delegates.
A critical review by human resources staff to ensure training objectives have been met.
Advantages of using specialist providers to deliver a training programme include:
Specialists focus on a relatively narrow area so should deliver high quality training; employee
trainers may not have these skills.
External trainers should have in-depth knowledge of the applications being trained; again
employee trainers may not have this knowledge.
External trainers are less likely to be distracted by other work commitments.
Combining external trainers' expertise with employee trainers knowledge of the business should
'cover all bases' (eg allow the inclusion of business specific examples in the training material).
External trainers could pass on their knowledge to employee trainers, who will then be able to
support staff post-training.
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(f)
The development of the use of quality circles could be encouraged by:
Rewarding the circle for suggestions that are implemented (eg a share of any savings made).
Providing a budget and support to run the quality circle in terms of room provision, refreshments,
staff to take minutes etc.
Ensuring management are supportive and prepared to act on useful suggestions from the circle.
Providing an explanation as to why suggestions not implemented were rejected.
Management asking the circle for suggestions and comments on specific issues and problems
facing the company, without anticipating the outcomes.
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SECTION C
Question 3
Top tips. In part (a), resist the temptation to provide a general discussion about not responding to environmental
change. Ensure your discussion is relevant to banks in Everland.
In parts (b) and (c), dont be afraid to draw on knowledge of the banking industry gained from media coverage.
Try to avoid being overly political or controversial provide a logical, reasoned discussion.
Easy marks. The identification of the main threat (legislation).
Marking scheme
Marks
(a)
Explanation of the main threat (legislation)

Maximum of 2 marks per relevant explained change referenced to the scenario
2
(Max)
8
10
(b)
Up to 2 marks for each relevant, well-explained point
(c)
Explanation of corporate social responsibility
Up to 2 marks for each relevant, well-explained point
10
5
25
not earn marks.
(a)
Threat to Everland banks

Everland banks have enjoyed an oligopoly-type position over the years (a small number of service
providers have dominated the market with little competition). The new legislation presents a threat as it
aims to weaken them and introduce competition into the market.
Changes that should be made
The banks of Everland need to make changes to their marketing, organisation, human resources and
information systems in order for them to improve their customer focus and to survive.
Marketing changes
Products should be designed to meet customer needs. Market research is required to determine what the
needs are.
Market segmentation should be considered to focus certain products on specific groups.
The use of customer service questionnaires or other methods of analysing satisfaction levels should be
investigated to monitor how well customer needs are being met.
Organisational changes
Structural changes should be made that reflect the need to provide improved customer service. For
example, setting up of a customer services department.
The strategic importance of marketing should be reflected by the inclusion of a marketing department,
headed by a marketing director to co-ordinate resources and activities.
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Human resources
Marketing and customer service professionals should be recruited at the expense of traditional bankers.
A broad range of skill sets and experience should be brought in by employing staff from markets outside
banking.
Recruitment, selection and promotion policies should reflect the new skills/experience mix. Senior
management must also reflect this diversity to counter the lack of marketing, HR and customer service
experience.
Training should be given to promote customer focus and new marketing techniques.
Information technology systems
Systems should be updated to focus on the need for customer focus and quality of information.
New systems may be needed to monitor marketing and customer satisfaction.
Systems should allow feedback from customers and marketing campaigns to be available to senior
management who can use it to make strategic decisions.
Systems should allow awareness of customer needs such as ethical behaviour or social responsibility to
filter out to all staff.
(b)
Ethical issues relevant to organisations in the banking sector include:

Providing appropriate lending and support to businesses and households
In times of recession, banks have an important role to play in supporting recovery. Businesses require
access to funds to enable them to survive in the short-term and invest for the medium and long terms.
Banks that are excessively risk averse can hinder economic recovery.
Reasonable, transparent and understandable charges
Banks have been criticised in recent times for levying excessive, punitive charges on customers. Charges
should be transparent and in some way related to what they are charged for. In the past, some banks
have been accused of excessive charges.
Marketing and selling responsibly
Banks should not encourage customers to take services that they do not need or are inappropriate. For
example, income protection insurance should not be automatically added into personal loan repayments.
Ethical investment
Some banks make a point of marketing themselves as ethical, and only provide funding for projects that
meet their ethical standards.
Encouraging a culture of financial responsibility and saving
Banks have been accused of lending excessively and recklessly in the recent past (for example 120%
mortgages). Many in society believe banks should be encouraging a culture of financial responsibility and
saving.
(c)
Corporate social responsibility describes a range of obligations that an organisation has towards external
stakeholders and to society as a whole. Issues in the banking sector may face include:
Providing essential services in rural areas
Banking is an many ways an essential service. A local bank in a rural areas provides a convenient,
accessible service for local individuals and businesses. Some believe banks have a responsibility to
provide good geographical coverage, rather than only operating branches in busy locations.
Green policies
All areas of business are now expected to follow green, sustainable policies where practical. Many banks
offer paperless banking.
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Question 4
Top tips. Analyse this question carefully. Consider working on your answers to parts (a) and (c) at the same time
because they are on the same subject. Strong answers to Part (b) will discuss several substantive reasons which
are clearly linked to the scenario.
Easy marks. General advantages and disadvantages of 'total reward packages'.
Marking scheme
Marks
Up to 2 marks per relevant advantage and disadvantage
(a)
(b)
Up to 2 marks per valid explained point
10
(c)
Up to 2 marks for explaining total reward package
1 mark per issue identified
10
5
25
not earn marks.
(a)
Advantages of a total reward package scheme to QW9

Carrington (2004) identified a number of advantages of such schemes that are relevant to QW9.
They make a positive statement about the culture of the organisation.
Organisations that offer total reward packages are often seen as forward thinking and caring about the
needs of their employees. This will not only further aid recruitment, but will boost the overall image of
the organisation within the market place as it demonstrates an investment in its people.
The creation of a more inclusive rather than a 'them and us' attitude.
Staff morale and attitude may improve at all levels because the package of benefits is available to all
rather than a select group of (possibly) senior employees.
Improved recruitment and retention as a result of employer branding.
Being seen as a good employer will further assist recruitment and retention of staff. Recruitment is
improved as QW9 may become considered as a 'good place to work' making it more competitive when
attracting new staff. Retention is improved as employees find that their needs (financial and otherwise)
are met so why would they want to move?
Disadvantages of a total reward package scheme to QW9
It may not be a success
Whilst total reward packages have worked for many companies, there is no guarantee that QW9's scheme
will also be a success. The company will run the risk of the scheme failing. Failure may cause problems
such as loss of the company's image exactly the opposite of what was trying to be achieve.
It may not solve the problem
It appears that the main reason for introducing the scheme is to solve the problem of poor recruitment.
However, this problem may not be caused by a lack of a total reward package. It is possible that other
causes such as choosing inappropriate recruitment methods are to blame. Therefore, introducing the
scheme may not resolve the issue.
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It may cause organisational stagnation

Staff may become 'too comfortable' and even complacent about their jobs. Employees with a satisfactory
total reward package may not push themselves further as there would be few other benefits to be
achieved. Reduced staff turnover limits the amount of fresh blood being introduced into the organisation,
resulting in fewer fresh ideas and reduced competition for higher status jobs.
Alternative approach
Other advantages and disadvantages that you might have mentioned include:
Advantages
Attract suitable potential employees
QW9 operates in a competitive industry and must attract the highest quality staff to achieve high
standards of customer care. However it is having problems attracting suitable applicants. By packaging all
the benefits on offer and communicating it effectively in recruitment literature, QW9 may resolve this
problem.
Improve staff motivation
Pay is not always a motivator and therefore it is important to offer a range of benefits that meet a diverse
range of motivational needs. For example, flexitime allows staff to maintain a healthy work life balance
which will maintain interest and motivation in the job for a long period.
Disadvantages
It ignores other factors
The scheme ignores some other important factors concerning staff welfare and motivation. Those in highly
stressful roles will still be stressed and employees working in under staffed departments may not be able
to take full advantage of benefits such as flexitime.
Staff dissatisfaction
Not all staff will be happy with the benefits on offer and many may just prefer more money. Those who do
not want the benefits on offer may feel left out and leave the organisation.
(b)
Tutorial note. This answer is more detailed than you need for ten marks as it shows a range of possible
answers. Five well explained points is enough to earn full marks here.
Limited information is available regarding QW9's appraisal system. However, it is clear that the
organisation has taken a formal approach using standardised forms with clear objectives for staff
development and performance improvements.
Problems with the system can be considered under two headings, firstly inherent problems with the
design and implementation of the system, and secondly problems concerning its operation.
Design and implementation problems
The system may have been poorly designed in the first place. For example, it may be based on systems
used by other organisations and no thought given to whether it is suitable for QW9.
The design of the system may have reflected the needs of the organisation at an earlier time but is no
longer relevant because the company has 'moved on'.
There may have been a lack of consultation and communication with senior managers when the system
was being developed. They may view it as being imposed on them and therefore are not interested in
making it work.
Appraisal schemes should provide benefits which justify the cost and effort put into them. Senior
management comments such as 'a waste of time and effort' indicate that there is an imbalance between
what is put into the scheme and what comes out. This may have been caused by the system being put
into place because one was thought to be needed rather than as a true method of improving staff
development and performance.
Operational problems
Senior managers may have insufficient time to conduct the appraisal process properly. This may reduce
the scheme into a form filling exercise just to meet HR requirements, missing the point of the scheme and
its objectives.
The scheme focuses on staff development needs. Invariably this means additional departmental training
costs that will have an impact on the profits each manager makes. Therefore, it is not necessarily in the
interest of some managers to have large numbers of staff undergoing training. This of course is a shortsighted view as training should in the long-run improve profitability, but managers may not wish to wait
for such benefits to materialise.
The scheme is not linked to annual bonuses. Employees are likely to act in a manner that maximises
their bonus, which may be at odds with the objectives of the appraisal system.
Standard procedures indicate a bureaucratic or mechanical approach to appraisals. Senior mangers will
be faced with a large volume of identical paperwork that needs to be processed in addition to their
existing work load. There is likely to be a temptation to rush through the process with not much thought
to the objectives just to get it done.
Appraisal schemes often involve subjective judgements and opinions by senior managers over their staff.
There is a risk that employees are not assessed correctly or consistently meaning that some staff who do
not require training are offered it whilst others that need help to improve their performance are not.
(c)
Total reward package

A 'total reward package' comprises monetary and non-monetary, motivators offered to staff. These
packages recognise that individuals are all different and may not be motivated by money alone. The key
principle is that employees can pick and choose what benefits they receive rather than everyone receiving
the same. Employees can tailor their remuneration packages to suit their needs at any given time
QW9 should investigate a number of important areas that are relevant to the design of the total reward
package. These areas are:
What benefits are already on offer and what other benefits could be offered.
What employees think about current and potential benefits.
The costs and consequences of the new scheme.
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CIMA
Mock Exam 2
Question Paper
20 mins
3 hours

Section A
Section B
Section C
260
SECTION A 20 marks
worth two marks.
Question 1
1.1
A lean approach is associated with which ONE of the following?

A
B
C
D
1.2
The stock market

Government regulation
Multinationals
Supply and demand
(2 marks)
The relationship between price and demand in a particular market

Price inflation
Levels of savings and investment
Unemployment amongst young people
(2 marks)
Under an ABC inventory management system which ONE of the following items should be monitored
most closely?
A
B
C
D
1.6
(2 marks)
Which ONE of the following is NOT a macroeconomic factor?

A
B
C
D
1.5
High levels of consumption tax

Subsidies for domestic (home) producers
Customs duties
Embargoes
Under a free market economy prices are determined by which ONE of the following?
A
B
C
D
1.4
(2 marks)
Which ONE of the following is NOT normally a barrier to international trade?

A
B
C
D
1.3
Supply sourcing strategies

Demographic profiling
Employee selection criteria
Removal of waste
'A' classified items

'B' classified items
'C' classified items
All items equally
(2 marks)
Which ONE of the following characteristics is NOT normally associated with a Non-Governmental
Organisation (NGO)?
A
B
C
D
Furthering humanitarian causes

Championing social causes
Making profits
Exercising independence
(2 marks)
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262
1.7
When government regulation and restriction is absent the effect is

A
B
C
D
1.8
(2 marks)
Mintzberg's design of an effective organisation does NOT include which ONE of the following
categories?
A
B
C
D
1.9
protectionism.
economic nationalism.
liberalisation.
a mixed economy.
Technostructure
Outsource partners
Operating core
Strategic apex
(2 marks)
Which ONE of the following is NOT a feature of a service?

A
B
C
D
Intangibility
Immediate consumption
Inventory management
Involvement of the consumer
(2 marks)
1.10 Reck and Long's strategic positioning tool measures the contribution of which ONE of the following
organisational functions?
A
B
C
D
Quality control and assurance

Purchasing and supply
The management of systems
The management of human resources
(2 marks)
(Total = 20 marks)
SECTION B 30 marks
Question 2
(a)
Describe FIVE types of loss that a company may face when investing in another country unless the risks
are managed.
(5 marks)
(b)
Distinguish a wide area network (WAN) from a local area network (LAN) providing an example of each.
(5 marks)
(c)
Explain the relationship between system implementation and a systems development life cycle (SDLC).
(5 marks)
(d)
Describe the potential disadvantages of introducing Just-In-Time (JIT) operations within a manufacturing
organisation.
(5 marks)
(e)
Explain FIVE ways in which advances in technology have allowed international trade to expand. (5 marks)
(f)
The implementation of a new information system may sometimes meet with staff resistance.
Explain TWO management strategies for overcoming resistance that have the advantage of speed but
could raise ethical and possibly legal concerns.
(5 marks)
(Total = 30 marks)
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SECTION C 50 marks
Question 3
A professional management body is funding a major research project into the relationship between certain HR
systems and workplace motivation. As part of this project the University of S2013 has been engaged to
investigate the use of staff performance appraisal systems in large organisations. The University's work involves a
number of stages:
Stage 1: questionnaires issued to all large organisations to understand the range of performance appraisal
systems operating.
Stage 2: initial results from stage 1 discussed with a group of senior managers (such as HR directors and
chief executives).
Stage 3: focus group meetings with employees at all levels within the organisations surveyed to
understand employee motivations, attitudes and experiences.
Stage 4: final report to the professional body and subsequent dissemination of findings.
Stage 3 has now been completed and a number of interesting issues have emerged:
The use of formal performance appraisal systems varies significantly between sectors from 80% of
financial service organisations to only 50% in the retail sector.
Organisations not using an appraisal system do not feel that the potential benefits of a formal system
justify the time and cost involved in operating it.
Of the systems in operation, 90% involved an annual meeting between employees and their appraiser,
normally their line manager.
15% of organisations used the outcomes from the system to help determine pay.
There was little relationship between levels of motivation and the existence of a staff performance
appraisal system. (Motivation was more closely related to issues such as organisational reputation and the
operation of environmental action and sustainability programmes.)
Employees were generally critical of their own organisation's system of formal staff performance
appraisal.
Required
(a)
Describe the potential benefits of a formal staff performance appraisal system for a large organisation.
(10 marks)
(b)
Explain the possible reasons for employees being critical of their own organisation's system of formal staff
performance appraisal.
(10 marks)
(c)
According to the research findings, environmental action by organisations and sustainability programmes
are highly regarded by employees. Explain why this might be the case.
(5 marks)
(Total = 25 marks)
Question 4
Repville is a region that has long been associated with growing fine quality fruit. Up until a century ago all
produce was transported by rail for sale at markets in the countrys major cities. This changed when a
cooperative of the regions fruit producers called Repville Cooperative was formed and part of the fruit harvest
was preserved, bottled and sold more profitably to an intermediary. Today, Repville is a private company and its
products account for the entire regions harvest. The very word 'Repville' is associated with high quality, uniquely
flavoured jams and marmalades. These products are sold in exclusive outlets and delicatessens throughout the
country and are easily recognised by their distinctively coloured and shaped glass bottles which are similar to
those used a century ago.
The company recently appointed a new Head of Strategy from XYZ where she was Marketing Director. (XYZ is a
fast growing low cost international producer of household furniture which appears in many stores, in some cases
bearing the stores name). Having reviewed Repvilles marketing and other operations she has produced a draft
strategy which she has discussed with senior managers at a company 'away day'. Key features of the strategy
include a doubling of revenues within five years and a need to strengthen existing marketing practices. Part of
her proposals for strengthening marketing practices will involve the purchase of Customer Relations Management
(CRM) software. (She favours particular software that is used by XYZ and is 'tried and tested').
Reactions to the draft strategy are 'mixed' and although senior managers favour a growth strategy, some believe
that revenue projections are too ambitious. Others fear that rapid growth may damage the brand. One manager
warned that 'Consumer goods vary enormously by type, Repville operates an entirely different marketing model to
XYZ, and what worked at XYZ may not work here'.
Required
(a)
Discuss different marketing possibilities for increasing revenue which will not damage Repville's brand.
(10 marks)
(b)
Explain the differences between Repville and XYZ in terms of marketing considerations.
(c)
Describe the advantages of the Head of Strategy's idea for strengthening customer relations management
by using CRM software.
(5 marks)
(10 marks)
(Total = 25 marks)
(Total for Section C = 50 marks)
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Answers

268
A plan of attack
First things first

It's usually best to start with the multiple choice and objective test questions (ie do Section A first). You should
always be able to do a fair proportion of these, even if you really haven't done as much preparation as you should
have, and answering even a couple of them will give you the confidence to attack the rest of the paper.
Allow yourself 36 minutes to do the objective test questions. No more.

Attempt Question 2 immediately after you've completed Section A. You've got to do this question so there's no
point delaying it. The question is split into six separate sub-parts.
Read the question requirements carefully.
For part (a), remember you only need to describe types of loss, not types of risk.
There are two marks on offer for describing each type of system. This should earn you most of the marks.
In part (c), remember that you are describing the relationship between the two concepts.
When answering part (d), remember that you are looking for disadvantages of JIT.
Your answer to part (e) can be quite wide because technology has had a massive impact on international
trade.
Part (f) is a little tricky because you need to think of strategies that are quick to implement AND may
have ethical or legal concerns.
Section C
Once you've done Sections A and B, you are required to answer the two longer questions in Section C.
Question 3. To earn the marks on offer in part (a) you should generate ideas, in general, of the benefits
that a performance appraisal system might bring.
Part (b) can be approached in general too, but you should try to link your points to the scenario if
possible. You may be able to use your personal knowledge of appraisal systems here.
In part (c) you should think about why employees might enjoy working for a business that operates
sustainably. Try to come up with as wide a range of ideas as possible.
Question 4. The trick to answering part (a) is not to come up with general marketing ideas. Setting out
what is important to Repville at the start will help you stay on track.
In part (b), try to build up a picture of the two companies. They could be considered complete opposites
so generating differences should not be too difficult.
In part (c), remember you only need to come up with advantages.
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General advice


Forget about it!

SECTION A
Question 1
1.1
Lean production or lean process improvement involves the systematic elimination of waste.
1.2
Subsidies, customs duties and embargos are all barriers to international trade. Consumption tax
affects all goods sold, both domestically produced and imported.
1.3
In a free market, prices are determined by market forces supply and demand.
1.4
Inflation, investment and unemployment are all macroeconomic factors. Price and demand within
a particular market is a microeconomic factor.
1.5
In an ABC system, items are ranked according to their value A is high value, B is medium
value and C is low value. High value A items are monitored the most closely.
1.6
Non-governmental organisations are defined by the World Bank as private organisations that
pursue activities to relieve suffering, promote the interests of the poor, protect the environment,
provide basic social services or undertake community development. They are generally not profitoriented.
1.7
Free trade is sometimes referred to as liberalisation or liberal trade policies. This occurs when
governments do not interfere in international trade.
1.8
Mintzbergs organisation includes, the operating core, technostructure, middle line, strategic apex
and support staff.
1.9
Services are intangible and therefore cannot be stored.
1.10 B
Reck and Longs strategic positioning tool identified a four-phase development of purchasing within
organisations.
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SECTION B
Question 2
Text references. Chapters 1, 3, 4, and 7.
Top tips. Keep your paragraphs short and use headers to help the marker identify the points you are making.
Easy marks. Stating the six strategies in part (f).
Examiners comments.
(a) - Candidates would often describe the risks involved when investing in another country without dealing with
the types of loss a company might face.
(b) - This sub-question was generally poorly done. The differences between a WAN and a LAN were not well
distinguished.
(c) - Some candidates confused SDLC and Implementation.
(d) - This sub-question was generally well answered with potential disadvantages of JIT well described.
(e) - Answers were sometimes too vague e.g. explaining that there could be improvements in transport due to
technology but without explaining how the technology had helped.
(f) - This sub-question was generally well attempted though some candidates simply listed theoretical
alternatives.
Marking scheme
Marks
(a)
(b)
(c)
(d)
(e)
(f)
1
1
1
1
1
1
mark
mark
mark
mark
mark
mark
for
for
for
for
for
for
each
each
each
each
each
each
relevant
relevant
relevant
relevant
relevant
relevant
explained
explained
explained
explained
explained
explained
point
point (max 2 marks each for explaining WAN and LAN)
point
point
point
point
5
5
5
5
5
5
30
not earn marks.
(a)
Types of loss that a company may face when investing in another country
There are a number of types of loss that an organisation may face when making an overseas investment.
It is important that the risks are managed appropriately.
Loss of business assets
Investing overseas means spending capital on buildings, plant and equipment. After the investment is
made there is a risk that the organisation may lose ownership of these assets due to the actions of the
government. For example by compulsorily purchasing shares in the overseas operation.
Loss of profit
There is a risk that the organisation will not achieve the profit that it expects will be created from the
investment. Governments may change corporation tax rates or introduce other policies that make business
operations more expensive and exports from the country may be affected by trade disputes between
nations.
Loss of business
Business agreements and contracts on which the investment was made may be cancelled or renegotiated.
Loss of business infrastructure
Wars, political unrest or terrorism may result in damage to property, such as land and buildings, owned
by the organisation.
Loss of employees
Wars, political unrest or terrorism may cause a loss of employees or put off experienced staff from
relocating to the country of operation. Hiring new employees may prove difficult.
(b)
Differences between a wide area network (WAN) from a local area network (LAN)
The two main types of network are Local Area Networks (LANs) and Wide Area Networks (WANs).
The difference between the two is where the networked devices are located.
Local Area Networks are often found within an office and are often used to connect printers and other
peripherals to computers.
Wide Area Networks are used when the devices are dispersed geographically even around the world.
Very often this type of network is not owned by one particular organisation, instead several organisations
are involved in supplying one small part of the network.
Examples:
LAN the network within an office of a business organisation

WAN the Internet
(c)
System implementation and the systems development life cycle

Implementation is one part of the systems development life cycle (SDLC). The SDLC is a process where a
new system is created or an existing system is amended. It involves a number of different staff and
managers at each stage. The main stages of the SDLC are Planning, Analysis, Design, Development and
Implementation.
The main steps in the implementation phase of an information system are as follows.
Installation of the hardware and software
Testing
Staff training and production of documentation
File conversion
Changeover
The items in the list above do not necessarily happen in a set chronological order and some may be done
at the same time for example staff training and system testing can be part of the same operation. The
requirements for implementation vary from system to system.
(d)
Just-In-Time (JIT) operations

Just-in-time (JIT) is an approach to operations based on the idea that goods and services should be
produced only when they are needed neither too early (so that inventories build up) nor too late (so that
the customer has to wait). JIT is also known as 'stockless production' and may be used as part of a lean
production process. In its extreme form, a JIT system seeks to hold zero inventories.
Disadvantages
The following are disadvantages of the JIT system:
Investment
For a business to switch to a JIT system a significant investment in new systems is required.
Risk of lost sales
Because the business does not keep inventories it may not be able to respond quickly to a sales
opportunity and may lose sales as a consequence.
Risk of human and system failings
The lack of any buffer inventory means that the business is reliant on all systems and human operators
performing as they should. If a system fails or there is human error there is no fall-back position.
Reliance on suppliers
Under a JIT system, the business is heavily reliant on the quality of their suppliers goods and on their
ability to delivery on-time as required.
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(e)
The role of technology in the expansion of international trade

Technology has had a number of roles in the expansion of international trade.
Production methods
Mass-production techniques such as automated assembly technology have enabled large-scale production
and reduced unit costs as a consequence.
Transportation
Technology forms part of the rail, road, sea and air transportation systems. They have contributed to
faster, more efficient transportation of goods around the world.
Communication
The Internet, mobile technology and video conferencing have contributed to improved communications
between business organisations around the world. This has led to more business opportunities being
created.
Methods of payment
Technology, such as electronic funds transfer, have allowed payments to be made internationally, quickly
and efficiently with a good level of security. This has enabled businesses to attract customers from around
the world.
Logistics
Couriers and delivery agents are now, through the use of technology, to track and trace shipments
wherever they are in the world, enabling a high degree in confidence that materials and products will be
delivered when expected. Technology has also played a role in storage systems, such as for perishable
items such as food, extending the shelf-life of the goods while they are being transported.
(f)
Management strategies for overcoming resistance to change

Kotter and Schlesinger (1979) identified six methods of dealing with resistance to change and restraining
forces. Four of them are not able to resolve the issue quickly as they take time to develop, however two
are quick but they do raise ethical and legal concerns.
The first four strategies are:
Education and communication.
Participation and involvement.
Facilitation and support.
Negotiation and agreement.
The last two strategies that raise ethical and legal concerns are:
Manipulation and co-optation.
This method involves the presentation of partial or misleading information to those resisting change or
'buying-off' the main individuals who are at the heart of the resistance. The ethical concern here is that
people are being misled and manipulated to achieve this strategy.
Explicit and implicit coercion.
This involves the use or threat of force to push through the change. A very last resort if parties are
operating from fixed positions and are unwilling to move. The use of threats is at best unethical and might
actually be illegal in some countries.
SECTION C
Question 3
Text reference. Chapter 12
Top tips. Dont forget that you will be awarded marks for the points that you make providing they are relevant to
the scenario. The marking scheme indicates that you will earn 1 to 2 marks per point in parts (a) and (b).
Generally, this means that to score 10 marks you need to make a minimum of 5 well-explained points. In part
(c) you will only gain 1 mark per valid point so these points do not require such a degree of explanation.
Easy marks. Stating the benefits of a performance appraisal system in part (a).
Examiners comments. In requirement (a) many candidates lost marks by describing the mechanism of
appraisals and the effects on employees rather than the organisation.
Requirement (b) was reasonably well answered.
Requirement (c) was reasonably well attempted by many candidates. The most common error was dealing only
with aspects of CSR in general without relating to employees.
Marking scheme
Marks
(a)
(b)
(c)
10
10
5
25
not earn marks.
(a)
Benefits of performance appraisal systems

The University survey indicates that many large organisations do not believe that the benefits of an
appraisal system outweigh the costs. However, this may not be the case when the following benefits of
performance appraisal systems are considered.
Performance review and quality control
One benefit of an appraisal system is that it acts as a formal basis for performance review. An individual's
level of performance is compared against a standard in order to identify whether they performed as
expected. When the performance of an entire team is considered, it is possible to identify shortcomings in
overall group performance that may explain performance variances in the management accounts.
Where short comings are identified, steps can be taken to rectify them. For example, training and
development programmes based on identified training needs can be established.
Performance review also acts as a means of quality control. For example, the number of sub-standard
goods or poor service provided, can be traced to an individual and put right in the future with training.
Reward review and cost control
The outcome of the performance review acts as a measure of the extent to which an employee is
deserving of a bonus or pay increase as compared with their peers. In times of limited budgets, bonuses
and pay-rises can be targeted at those who are deserving of them. This means wages costs can be
controlled by linking performance with reward.
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Potential review and staff retention

Appraisals also act as an aid to planning career development and succession, by attempting to predict the
level and type of work the individual will be capable of in the future. It may be cheaper to promote staff
from within the organisation rather than to buy them in from the outside. The other benefit is staff
retention, the money invested in an individuals training and experience is not lost because they are
retained within the organisation.
Organisational goals and budget
The organisations goals and budget can be drilled down to the level of an individual worker. The key
deliverables that an individual has to produce to enable the organisation to achieve its objectives can be
established. These objectives will be what the individual is judged against at their next appraisal.
Areas of an individuals performance that require improvement can be identified and training and
development needs established. This information can be used by managers to decide how best to spent
their training budget.
Communication and motivation
The appraisal process involves a flow of information from senior management to the individual employee
and back. This means that communication between different levels in the corporate hierarchy will be
improved.
Employee motivation should also be improved because they have a chance to air their views concerning
their work and as a consequence of the reward and potential reviews.
(b)
Criticisms of performance appraisal systems

The following are possible reasons why employees are critical of their performance appraisal systems:
Poor design
There are any number of faults in the design of a performance appraisal system that may cause
complaint. For example, a poorly designed process, standard procedures that seem irrelevant to certain
business areas and high degrees of subjectivity in determining performance grades will cause
dissatisfaction in the workforce because it will be seen as a bureaucratic process that is yet another
process to keep the HR department in work.
Poor implementation
Any system, no matter how well designed, will cause dissatisfaction if it is not properly implemented. In
terms of appraisal systems this may include failings in training mangers to run the process, to training
new managers after the system has been established and to run refresher courses periodically. Enough
resources should be allocated to the system in terms of staff hours and money to ensure that it runs as
expected. If the system is not implemented properly then staff at all levels will not be enthusiastic in
supporting it.
Lack of managerial support
Managers at all levels, from the very senior directors down to the operational managers must be
committed to the system. This is to ensure that it is taken seriously and not seen as another timewasting
activity that takes them away from their day-to-day work. To achieve this, the managers need to see
tangible benefits for their department as a consequence of the appraisal process. This can only be
achieved if they are given the necessary support to train, develop and motivate their staff as identified by
the appraisal process. If no training budget is available or if they cannot reward staff as they would like,
then they may view the system as a waste of time.
Review outcomes ignored
Staff at levels below management will be dissatisfied with the system if their needs, as identified by the
appraisal process are ignored. Primarily, this means that high performing staff will be unhappy if they are
not suitably rewarded and staff who desire training and development are not supported in their goals of
personal improvement. The survey report supports this because it found that only 15% of organisations
used the outcomes of the system to help determine pay.
Inappropriate objectives set

All individuals within an appraisal system will have goals set for the next appraisal period (often the next
financial year). Dissatisfaction will be caused if the objectives are considered too demanding or beyond
the control of the individual. This may cause motivation problems from the very start (where an individual
decides that they dont have a chance of achieving the goal so decide not to try) or during the year (where
it is clear that they are not going to achieve the goal based on their current performance).
Other areas that you may have covered include:
Outdated system
System does not fit with organisation
Poor communication
Lack of appraisal planning and appraisal technique
(c)
Sustainability
The University research found that staff motivation is closely linked to environmental action and
sustainability programmes. There are a number of reasons why this may be the case.
Organisational culture
An organisation that adopts sustainability programmes and environmental action will develop a culture
that attracts new employees who share its ideals. Employees, who did not necessarily share these values
before they were introduced may enjoy the positive nature of the new culture. Both types of employee will
be motivated by the organisation.
Employer branding and social standing
Being environmentally friendly can boast the image and brand of an organisation through positive news
reports and increased awareness in the wider community. Employees will find this motivating, especially
if they are given a role to play, in terms of meaningful work and responsibility, that supports the
organisations practices.
Employee feedback
Organisations that develop such cultures often listen to their employees and encourage their feedback. For
example, by hearing employee suggestions that improve sustainability in operational areas. Employees are
more likely to be motivated if they are listened to and see their suggestions being actioned by senior
management.
Job security
Reducing waste and improving operational efficiency are both objectives of sustainability policies.
However, they also have benefits such as reduced operating costs (as less energy or water is consumed).
Sales revenue may increase as the organisation attracts customers that like what the company stands for
and therefore profitability may rise. All these factors may give employees comfort that their jobs are
relatively secure.
Pride
Working for an organisation that is socially responsible may be a source of pride for many employees
because it differentiates it from other organisations. Being different and having their own identity are
important to many employees who share the values of the organisation.
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Question 4
Top tips. Read the examiners comments regarding parts (a) and (b). Answer the question set and avoid wasting
time explaining matters that you are not required to or duplicating points already made.
Easy marks. Suggesting advantages of using CRM software in part (c).
Examiners comments. Overall, candidate performance was poorest in this question.
Requirement (a) was often well attempted though many candidates wrote extensively about various methods of
promotion (TV, magazines, social advertising) to the detriment of other possibilities.
In requirement (b) many candidates repeated the points made in their answers to requirement (a).
Requirement (c) was generally reasonably well answered.
Marking scheme
Marks
(a)
(b)
(c)
10
10
5
25
not earn marks.
(a)
Marketing Repvilles brand

Repville has a brand that is characterised by tradition, high quality, distinctive products that are sold in
exclusive locations. It is important that any marketing initiatives do not damage this reputation.
Strategies for increasing revenue include:
Market penetration
Market penetration involves increasing revenue of existing products in existing markets and is a key
strategy because it involves Repvilles current market the one that it knows best. To increase revenue by
following this policy, the organisation should look at attracting new customers into this market and then
selling to them, increasing the price of its products to current customers, encouraging existing customers
to buy greater quantities or the same quantities more often, and to attract new customers from its
competitors.
Market development
Market development involves expanding into new markets using existing products. Care should be taken
using this policy as Repville will have little or no knowledge of the market and will be up against
competitors that do. An example would be to target a different age group than it currently does. It is
important that Repville takes time to understand the new customer for this strategy to be a success.
Product development
This involves the redesign or repositioning of existing products or the introduction of completely new ones
in order to appeal to existing markets. For Repville this may include, for example, introducing new flavour
jams or introducing new product lines such as bread products to accompany existing products.
Diversification
Diversification involves producing new products for new markets. It is a combination of product and
market development and is a risky strategy because the organisation is moving into areas in which it has
little or no experience with untested products. For example it may come up with a new type of preserve
made from a superfood that is highly nutritious and could be sold to the sports market.
Co-branding
Co-branding is where two separate, but compatible brands are used to support each other. For Repville
this could mean finding a hotel or restaurant chain to stock its products and promote its name on its
menus. Diners would experience the product for themselves and may decide to switch to Repvilles
products when eating at home. The risk is that adverse publicity or damage to the reputation of the cobrand may damage Repvilles reputation too.
Other strategies that you could have mentioned include:
Improving brand awareness
Adjustments to product mix
Adjustments to product mix
Adjustments to promotional mix
Adjustments to place mix
Adjustments to price mix
(b)
Differences between marketing Repville and XYZ

The main differences between the marketing of Repville and XYZ include:
Type of product
XYZ sells household furniture and Repville sells food based products. This raises a number of issues. For
example, although preserved, Repvilles products are food and will eventually perish. However, this is not
normally a problem because they are fast moving consumer goods that people buy frequently. In contrast,
XYZs furniture is a durable good that consumers buy infrequently but do not have a shelf life. The
different types of product, and speed that they have to be sold, creates a number of differences in
marketing needs such as Repville may need to discount the price if it has large quantities of stock that
is about to perish.
Company growth
XYZ is a fast growing company and Repville is a more established company that is settled in its market.
Marketing of XYZ will be focused on growing the business and perhaps being aggressive in-terms of price
and method of promotion. Repville is more concerned with protecting its brand and developing new
revenue streams based on its existing products. Both companies will require different strategies to achieve
their goals.
Cost and price
XYZ is a low-cost producer and is likely to compete by offering a low price for its products. That said, the
price of its products will be high compared to Repville, but its products are purchased less often. XYZs
price is low as compared to its competitors.
Cost is not so important to Repville because its customers expect to pay a premium for a higher quality
product that is made using higher cost ingredients.
The two businesses therefore adopt different pricing strategies one high cost, the other low-cost.
Point of sale
XYZ sells its products through many stores internationally. Repville only sells its product in exclusive
national outlets. Therefore the two companies will operate different marketing campaigns one nationally
and one internationally. The scale of Repvilles marketing will be far more limited to that of XYZ and
therefore different promotional channels will be used.
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Brand
Branding has little importance for XYZ because its products are not distinctive the company
manufactures furniture for stores that is sold under the stores name. For Repville, branding is of high
importance (just like other fast moving consumer goods) because its packaging, traditional image and
quality make the brand unique. Consumers dont just buy jam, they buy Repville jam.
Other points that you could have made include:
Consumers purchase to meet different needs
Consumer buying process different
Volume of sales is different
Differences in other aspects of the marketing mix
(c)
CRM systems
Customer Relationship Management (CRM) systems are software applications which specialise in
providing information concerning an organisation's products, services and customers. Most CRM systems
are based on a database which stores data about customers such as their order history and personal
information such as address, age and any marketing feedback they have provided.
Advantages of CRM systems
There are a number of advantages to CRM systems, including:
Better customer relations
By storing information about the customer, the business will be in a better place to understand their
needs and to provide them with a better service. This will support Repvilles plan to increase revenue
because new customers may be identified, existing customers may be retained and past customers may
be encouraged to return.
System integration
A CRM system can become the heart of an organisations operations. It may be used to connect other
business systems and automate process that are currently done manually. This will help make the
business more organised and integrated with all aspects of the business (such as purchasing,
manufacturing and sales) becoming co-ordinated.
Reduced costs
CRM systems co-ordinate processes and automate others. They help remove duplication of effort and
reduce the time taken to undertake certain tasks. This should help reduce the overall costs of the
business and help make the organisation more efficient. Therefore the cost of the system should be
recovered within a relatively short time.
Motivation
Employee motivation may be increased as staff feel that the business is investing in them and giving them
the tools to do their job effectively.
If Repville adopts a CRM system and gains the benefits identified above then it will have an advantage
over its competitors proving they do not have such a system. If competitors already have such systems
then it is important that Repville adopts one too in order to keep up with them.
CIMA
Mock Exam 3
Question Paper
20 mins
3 hours

Section A
Section B
Section C
282
SECTION A 20 marks
worth two marks.
Question 1
1.1
Loss of goodwill and the expense of product recalls are known as which ONE of the following?
A
B
C
D
1.2
Staff selection
Career counselling
Focus group market research
Societal marketing
(2 marks)
A number of different companies

An organisations infrastructure
After sales service
A strategic apex
(2 marks)
Regular reporting on stockholding of products (inventory) is an example of which level of

organisational information?
A
B
C
D
1.6
(2 marks)
Most supply chains involve which ONE of the following?

A
B
C
D
1.5
Staff retention
Supply networks
Buyer behaviour
Assessment centres are associated with which ONE of the following activities?
A
B
C
D
1.4
(2 marks)
The psychological contract is an important factor when considering which ONE of the following?
A
B
C
D
1.3
External failure costs

Costs of lean
Excess production costs
Transaction costs
Strategic
Tactical
Integrative
Techno-structural
(2 marks)
A lack of physical presence and extensive use of IT are typical features of which sort of organisation?
A
B
C
D
Non-governmental organisations (NGO)

Multinational enterprises (MNE)
Shamrock organisations
Virtual organisations
(2 marks)
283
284
1.7
1.8
Which ONE of the following features is NOT normally a result of gaining ISO9000?
A
Improved marketing
Improved quality
B
Work rationalisation
C
D
Improved industrial relations
The quality management thinker Philip Crosby is most closely associated with which ONE of the
following ideas?
A
B
C
D
1.9
(2 marks)
Fitness for purpose

The fishbone diagram
Zero defects
Business process re-engineering
(2 marks)
Herzberg's dual (two) factor theory involves which ONE of the following?
A
B
C
D
Theory X and Theory Y workers

Hygiene factors and motivators
Low and high power-distance
Carrots and sticks
(2 marks)
1.10 Personal characteristics, qualifications and necessary experience expected of a particular post holder
are normally all found in which ONE of the following documents?

A
B
C
D
Job description
Person specification
Reference letter
Summary appraisal meeting record
(2 marks)
(Total for Section A = 20 marks)
SECTION B 30 marks
Question 2
(a)
Describe FIVE different improvements a manufacturing organisation might experience as a result of

(5 marks)
introducing Total Productive Maintenance (TPM).
(b)
Describe the different organisational benefits of Information Systems (IS) and Information
Technology (IT).
(c)
(5 marks)
An individual employee's productivity level is influenced by a number of factors including those

within the control of the organisation and those unique to a particular individual.
Describe briefly FIVE factors unique to a particular individual that are likely to influence an
employee's productivity.
(5 marks)
(d)
Distinguish quality circles from quality control inspection.
(e)
The ideas and principles established by the well-known theorist F.W. Taylor have implications for
both operations and management even today.
(5 marks)
Describe briefly FIVE of these ideas and principles.

(f)
(5 marks)
Systems review represents a stage in a systems development lifecycle.

Describe the main areas that should be considered as part of such a review.
(5 marks)
(Total for Section B = 30 marks)
285
286
SECTION C 50 marks
Question 3
OK4u is a company with diverse operations across two continents. Originally a small textile manufacturer, OK4u
now also operates a large electronics company, hotels, a leisure chain and owns a household cleaning brand.
The company is not listed in the UK and therefore is not subject to the UK Listing Rules and Corporate
Governance Code (which are intended to help achieve good corporate governance).
Last year, the fortunes of OK4u's major rival, IPP, took a downturn following a fraud investigation. Certain
allegations were made against AK, the high profile entrepreneur at the heart of IPP's business empire and IPP's
share price collapsed. AK, who acts as IPP's Chairman and Chief Executive, now faces charges of theft totalling
millions of dollars. Press reports suggest that his individual control over finances allowed him to transfer funds,
take money for personal use and borrow to buy IPP shares without requiring another director's counter-signature.
Each quarter, exceptional profits were reported and the share price soared - until the dramatic collapse. One
influential newspaper suggested that AK's individual power was able to grow because of a lack of corporate
governance and a 'cultural tolerance in the countries within which IPP operated'.
Naturally, OK4u wishes to distance itself from the actions of its rival, particularly as both companies operate in
the same markets. In a press statement, OK4u confirmed its commitment to 'serve rather than exploit our
stakeholders'. Following a complete review, led by an independent management consultant, the company has
appointed a new Director of Compliance and Ethics. Her role is to implement the consultant's report, encourage
ethical operations and strengthen OK4u's system of corporate governance. She has also announced an intention
to establish a minimum professional standard amongst all OK4u's managers and is interested in the lessons that
can be learnt from existing established codes of professional practice.
Required
(10 marks)
(a)
Explain the benefits of good corporate governance for both OK4u and IPP.
(b)
Explain, using Hofstede's thinking on national culture, how cultural tolerance could have allowed AK's
power to grow.
(10 marks)
(c)
Describe FIVE features of CIMA's Code of Ethics for Professional Accountants that OK4u's Director of
Compliance and Ethics could learn from.
(5 marks)
(Total for Question Three = 25 marks)
Question 4
YY has worked for the manufacturing company RU2 all his adult life and is currently Production Manager.
Although he can be uncooperative and single-minded at times, he is respected for his experience, honesty, direct
speaking and the results he achieves.
Change is coming to RU2 and many senior managers have gradually been replaced by younger managers with
different ideas and approaches. A new Managing Director (MD) was appointed six months ago but YYs first
dealing with him did not go well. YY requested that some of the production machinery be upgraded but his
request was declined until a full written proposal including an investment appraisal analysis was produced. No
proposal has been produced and no machinery has been upgraded since this time.
When RU2s Senior Sales Manager retired last month he was replaced by a new Marketing Manager. (The job
advertisement referred to RU2 as a company 'undergoing significant change and looking to develop a more
customer-led approach'). YY is irritated to find that the MD has approved the purchase of a Customer
Relationship Management (CRM) system straightaway. YY told colleagues that the CRM system will be 'a waste
of money that could be spent elsewhere'. Now the new Marketing Manager is, for the first time, developing a
comprehensive marketing plan and she has invited a number of senior colleagues across the organisation to help
contribute to the plan including YY. YY immediately declined the invitation telling the Marketing Manager that
she would do well to 'concentrate on the basic job of selling rather than wasting time drawing up pointless
plans'.
Required
(a)
The new Managing Director wants RU2 to have more of a marketing focus and become more customerled. Describe the impact on RU2 of such a development.
(10 marks)
(b)
Explain the benefits of developing a marketing plan for RU2.
(c)
Identify the range of possible costs associated with a Customer Relationship Management (CRM) system.
(5 marks)
(10 marks)
(Total for Question Four = 25 marks)
(Total marks for Section C = 50 marks)
287
288
Answers

290
Mock Exam 3: November 2013 exam answers
A plan of attack
First things first

It's usually best to start with the multiple choice questions (ie do Section A first). You should always be able to
do a fair proportion of these, even if you really haven't done as much preparation as you should have, and
answering even a couple of them will give you the confidence to attack the rest of the paper.
Allow yourself 36 minutes to do the objective test questions. No more.

Attempt Question 2 immediately after you've completed Section A. All parts of the question are compulsory, and
question 2 is possibly less demanding than questions 3 and 4 (as, in this exam at least, there isnt a scenario to
consider in question 2). The question is split into six independent sub-parts.
Part (a) would have been challenging if you were not very familiar with Total Productive Maintenance but,
using common sense to interpret the name of the concept literally, strong marks could have been
generated for discussing the benefits of regular maintenance of equipment.
You dont need to write a great deal in part (b) as you just need to identify benefits of IS and IT before
describing how they can be of benefit to an organisation.
In part (c) dont get bogged down in motivation theory just think about general ideas that may affect
and individuals productivity.
To score well in part (d) you must describe quality circles and QC inspection before considering how they
are different.
In part (e) you must know Taylors ideas. If you do then identifying and describing five should not be a
problem. If you dont know Taylors ideas then you should leave this question and use the time
productively on another.
Part (f) requires you to think what areas a systems review covers. It may help to consider the purpose of a
review if you are stuck for ideas.
Section C
Once you've done Sections A and B, you are required to answer the two questions in Section C. Almost all
Section C questions will require you to relate the points you make to the organisation and situation described in
the scenario.
In question 3 part (a) think about what corporate governance is before relating this knowledge to the two
organisations.
Part (b) requires you to apply Hofstedes theory. If you do not know this theory then you should move on
and use the time on another question.
Keep your answer to part (c) closely related to the scenario. You just need to describe five features so
dont waste your time considering any more.
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292
Question 4 part (a) requires you to think about what a marketing focus is and what it means to become
customer-led.
If youre struggling in part (b), then start by describing what a marketing plan is. Once you have done this,
some benefits should come to mind.
In part (c) you just need to identify possible costs. Keep your answer focussed on this requirement.
General advice


Forget about it!

SECTION A
Question 1
1.1
External failure costs arise from inadequate quality that is identified after the product or service has
been transferred from the organisation to the customer.
1.2
Psychological contracts exist between an organisation and its employees.
1.3
Assessment centres are used in the process of selecting new staff. They refer to the process of
selection rather than to a specific building.
1.4
A supply chain is an interconnecting group of organisations which relate to each other through
linkages between different processes and activities involved in producing products/services to the
ultimate consumer.
1.5
Information at the tactical level within an organisation is designed to help middle managers
monitor and control operations.
1.6
A virtual organisation, or company, is actually a collection of separate companies, each with a

specific expertise who work together to compete for bigger contracts/projects than would be
possible if they worked alone. They often rely on new technology such as remote networking, the
Internet and extranets.
1.7
ISO 9000 is a process standard that is granted to organisations on a certified or compliant status
basis. It relates to the quality of an organisations processes rather than the products or services
produced.
Becoming ISO 9000 certified should result in: Improved marketing (because ISO accreditation
allows an organisation to differentiate itself from its competitors), improved quality (due to
improved internal processes) and work rationalisation (as focus on the quality of their processes
will allow the business to improve efficiency through analysis of its current ways of working).
1.8
Crosby (1979) wrote about quality costs. One of his absolutes of quality management is zero
defects.
1.9
Herzbergs two-factor content theory identifies motivators and hygiene factors.
1.10 B
A person specification sets out the skills and qualities required of the person who will fill a role.
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294
SECTION B
Question 2
Top tips. Note that in part (d) you are required to distinguish. This means to set out the differences between the
two concepts. Describing both concepts is not enough.
Easy marks. Identifying the benefits of IS/IT in part (b). You should have enough general knowledge about
technology to come up with five points.
Marking scheme
Marks
(a)
(b)
(c)
(d)
(e)
(f)
1
1
1
1
1
1
mark
mark
mark
mark
mark
mark
for
for
for
for
for
for
each
each
each
each
each
each
relevant
relevant
relevant
relevant
relevant
relevant
explained
explained
explained
explained
explained
explained
point
point
point
point
point
point
5
5
5
5
5
5
30
not earn marks.
(a)
Total Productive Maintenance (TPM)

Total Productive Maintenance (TPM) is defined as the productive maintenance carried out by all
employees through small group activities. The idea is to ensure maintenance is planned and staff are
trained in maintenance skills to enable equipment to be used effectively and early management of
equipment achieved.
Improvements that TPM may bring an organisation
Reduced breakdowns
By maintaining equipment effectively, the chance (and therefore instances) of machine breakdowns
should be reduced.
Production consistency
Well maintained equipment supports consistent output with more products meeting the production
specification.
Reduction in waste and costs
TPM should improve the efficiency of equipment, resulting in less material wastage. Improvements in
product consistency should reduce the cost of quality resulting from defective output.
Improved accuracy in production schedules
In TPM, maintenance is scheduled into the production process. This means downtime is planned for
rather than occurring randomly when a machine breaks down. Therefore production should more closely
follow what is planned.
On-time delivery
With output becoming in-line with the production schedule, the organisation is able to deliver its products
to the customer when they are expected.
(b)
Benefits of information systems and information technology

Information systems (IS) provide management information and assist with business operations.
Information technology (IT) is the underlying hardware equipment that the system is built on.
The following are benefits to an organisation of information systems and information technology:
IS enables an organisation to record information about every business transaction or event. IT facilitates
processing a large volume of data, helping the organisation to build up a better picture of costs and
revenues to improve their understanding of the business.
Decision-making
IS/IT enables relevant information concerning the organisation to be collected and stored. Information may
come from internal and external sources and can be used by senior management to make better, more
informed, decisions.
Planning
Effective planning by management requires knowledge of resources, time-scales and possible scenarios.
IS/IT supports planning by making this information available to management when required and in a form
that they can use.
Technology allows data from various sources to be collected and converted into useful reports. These
reports allow, for example, actual results to be compared against budgets and forecasts. Such reports can
be used to allocate bonuses or to report progress to stakeholders.
Control
Using performance measurement reports, a businesss senior management can analyse the organisations
current position and take corrective action if necessary.
(c)
Employee productivity
Productivity is a measure of how efficient an employee is at performing tasks in other words how much
work they can do in a particular period of time. Anything that increases the rate that an individual is able
to perform a task (without a loss of quality) is something that makes them more productive.
Factors that affect an individuals unique productivity may include:
Skill
A skill is a persons natural or learnt practical ability to perform a task. For example, a dressmaker should
have developed the skills needed to create an item of clothing such as sewing and cutting material. The
more skilful a person is at a task, the faster they can perform it with the minimum of wastage.
Knowledge
Knowledge covers a range of areas such as theory covering the technical requirements to do a job. For
example an accountant has knowledge of accounting standards or techniques such as investment
appraisal. The more knowledgeable an individual is, the quicker they can perform a task, because they do
not have to think too much about it or research the topic before performing the task.
Capability
Capability refers to the physical or mental ability to perform a task. It may stem from a persons skills or
knowledge, but very often a person will either be or not be capable of performing a task. For example,
working in a warehouse may require a person to move heavy objects. A person may not have the
capability to perform the role (due to lack of strength), or may be capable, but be slower at performing the
task than a stronger, fitter person. In this case, the stronger, fitter person will be more productive.
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296
Motivation
Motivation is an employees desire to perform their role. Individuals who are highly motivated are
generally more productive because their work rate is higher. At the individual level, motivation may come
from the enjoyment of performing the task or from their need for payment.
Personal environment
An individuals personal environment will affect their productivity. Those with a stable and happy homelife will be happier in themselves and be able to devote their energy to their task in hand, rather than
being distracted by worrying about concerns they have at home.
(d)
Quality circles and quality control inspection.

The nature of quality circles and quality control inspection are discussed below.
Quality circles
A quality circle is a team of workers from within the organisation which meets at intervals to discuss
issues relating to the quality of the product or service produced. All relevant aspects of quality are
discussed, from materials from suppliers through to production processes and outputs.
Quality control inspection
Quality control inspection involves inspecting products at various stages of the production process to
check that the quality of the product meets the standard expected. It could occur, for example, when raw
materials are received, at some point during the production process, and once the final product has been
completed.
Quality circles versus quality control inspection
The key differences between quality circles and quality control inspection include:
Approach to quality
The use of quality control inspections is associated with the traditional approach to quality that of
detecting poor quality after it occurred. Quality circles reflect the modern approach of preventing poor
quality occurring in the first place.
Approach to waste
By building quality into the production process, quality circles seek to minimise wasted materials, labour
and other inputs in the production process. Quality control inspections do not prevent wasted resources
because they allow poor quality to occur and then detect it afterwards.
Relationship with suppliers
The modern approach to quality, of which quality circles are part, involves an organisation building strong
relationships with its suppliers so that some reliance can be placed on the quality of the raw materials or
parts that enter the production process. Under the traditional inspection approach to quality, such close
relationships were not required because the organisation would attempt to detect poor quality inputs at
the goods received stage.
(e)
Ideas and principles of FW Taylor

The main ideas and principles of FW Taylor include:
Scientific management
Taylor discovered a link between employee ability and the objectives of a firm and developed the idea of
scientific management. This idea states that management should be based on well-recognised, clearly
defined and fixed principles, instead of depending on more or less hazy ideas. It includes the following
four principles.
The development of a true science of work
'All knowledge which had hitherto been kept in the heads of workmen should be gathered and recorded
by management. Every single subject, large and small, becomes the question for scientific investigation,
for reduction to law.'
The scientific selection and progressive development of workers

Workers should be carefully trained and given jobs to which they are best suited.
The bringing together of the science and scientifically selected and trained workers
The application of techniques to decide what should be done and how, using workers who are both
properly trained and willing to maximise output, should result in maximum productivity.
The constant and intimate co-operation between management and workers
'The relations between employers and men form without question the most important part of this art.'
There is much that is relevant today in this approach and the pursuit of productivity is still a major
preoccupation for management at all levels.
(f)
Systems review
Systems review is a stage in the systems development lifecycle that occurs after a system is first
implemented, and periodically afterwards. The purpose is to determine whether the system is operating as
it should. Common areas that are included in a systems review include:
Cost-benefit review
In this review the actual costs and benefits of the system are known and can be compared to what was
expected when the system was designed. Aspects such as direct and indirect benefits, development costs,
implementation costs and running costs are considered.
Performance review
Performance reviews are carried out on a range of system functions and characteristics such as:
Processing
The growth in file sizes and the volume of transactions processed should be reviewed. Trends may be
spotted that may indicate the system may be not be able to cope with demands placed on it in the future.
Security
An assessment should be made as to whether security procedures are effective and efficient. This may be
achieved by reviewing the security log that should identify the number of attempted security breaches or
virus attacks.
Error rates
Error rates for input data should be looked at. High error rates may indicate inefficient preparation of input
documents or inappropriate methods of data capture being used.
Output
Information produced by the system should be considered. For example, whether the information is
actually being put to a proper purpose, is available on a timely basis and distributed to the appropriate
personnel.
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SECTION C
Question 3
Text reference. Chapters 1, 2 and 11
Top tips. Look out for the hint in part (c) concerning the five features of CIMAs Code of Ethics. Could this be
referring to the five fundamental principles?
Part (b) is tricky even if you do know Hofstedes theory. If you dont know the theory then use your time more
productively on another question.
Easy marks. Coming up with the benefits of good corporate governance in part (a).
Marking scheme
Marks
(a)
(b)
(c)
10
10
5
25
marks.
(a)
Corporate governance is the system by which companies and other entities are directed and controlled.
Good corporate governance is becoming increasingly important, especially for OK4u and IPP given their
circumstances.
Benefits of good corporate governance to OK4u
OK4u is concerned with distancing itself from the problems of IPP by adopting good corporate
governance. Some benefits of good corporate governance to OK4u include:
Risk reduction
Good corporate governance will go some way in reducing the risk of large losses such as with IPP. This is
achieved by improving internal and external controls and aligning directors interests with those of the
companys stakeholders.
Improved performance
Organisations with good corporate governance make directors responsibilities clear and reward them in
line with their performance. Adopting good corporate governance should therefore improve OK4us future
financial performance.
External perceptions
Perhaps of most importance to OK4u, external perceptions of a business are improved if it is seen to be
upholding good corporate governance. This may help the business differentiate itself from the competition
and gain customers.
Future listing
By adopting good corporate governance policies before it is required to OK4u can strengthen its reputation
with potential investors and the stock market. This may help the organisation raise more finance if it
decides to become listed in the future.
Benefits of good corporate governance to IPP
For IPP, the main objective of adopting good corporate governance is to learn from past mistakes and
prevent them from happening again. Some benefits of good corporate governance to IPP include:
Prevent power being held by one individual
Good corporate governance involves separating the roles of Chairman and Chief Executive so that power is
not held by one individual. For IPP to move on it must reduce the risk of one individual wielding too much
power (as AK did) and adopting good governance is one way of achieving that.
Improve board involvement
Good corporate governance would improve the involvement of IPPs board in business decisions. For
example, board meetings should be held regularly and committees set up to look into the organisations
operations. This will be necessary to fill the power gap as well as to bring stability to the organisation.
Improve internal control
The problems caused by AKs behaviour were in part due to poor internal control procedures that allowed
him to effectively take control of the businesss finances. Strong internal controls, such as an internal
audit department would prevent fraudulent behaviour occurring in the future.
Prevent emphasis on short-term profits
IPP reported exceptional profits each quarter and this led to the spike in share price. The emphasis IPP
placed on quarterly reporting may have contributed to AK manipulating the accounts to achieve the
desired results. Good corporate governance places more emphasis on the long-term financial picture that
should prevent such problems re-occurring.
Prevent misleading accounts and information
Good corporate governance would put into place internal and external controls that should increase the
quality of a companys financial reporting and go some way to preventing reports from misleading the
market about the organisations financial position.
(b)
Hofstede
Hofstede analysed the cultural differences of employees of IBM in the 1960s and 1970s and identified
five dimensions that contributed to them.
Power-distance
This refers to how far society and organisations tolerate an unequal distribution of power. In high powerdistance cultures (eg India) and organisations, power tends to be concentrated at the top and managers
exert their status and power over subordinates. The consequences of high power distance are an
autocratic organisation, many layers of management and different work statuses of managers and subordinates.
It is clear that IPP operated with a high power-distance culture. Tolerance for this has resulted in those
working under AK accepting that power should be concentrated with him at the top of the organisation
and that AK should exert his status and power over them and this allowed AK to get away with his
actions.
Uncertainty avoidance
This measures the extent to which people are able to tolerate ambiguity and uncertainty. For example,
whether individuals wait until they are completely sure of all details before acting. The consequence of
high uncertainty avoidance is that rules and regulations will prevail, along with formal structures and
standardisation.
It seems likely that IPP had low uncertainty avoidance as evidenced by the lack of rules and procedures,
such as AKs ability to use IPP funds without requiring a counter signature on withdrawals and transfers.
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300
Tolerance for this culture allows a lack of structure, which has led to a lack of controls over AKs
behaviour.
Individualism versus collectivism
This measures the extent to which people see themselves in individual terms as opposed to being
members of a group be it family, company, caste, class or even simply a sporting club. Consequences of
high individualism are autonomy, personal achievement and self-reliance.
AK appears to have operated fairly independently, without input from other directors or employees,
implying a high individualism culture, which may have allowed AKs power to grow due to limited checks
on his actions.
Masculinity versus femininity
This is about the degree to which a culture encourages one set of qualities (the 'masculine' ones such as
competitiveness and assertiveness) as opposed to another set (the so-called 'feminine' ones such as
concern for others, attention to quality of life or to the environment). Consequences of high masculinity
include achievement of challenge, high status being sought and high earnings required.
It could be that IPP had a rather masculine culture, leading AK to feel competitive and combative with
other employees, hence his choice to behave in a self-serving manner. Or conversely, if IPP had a more
feminine culture, AK may have had less challenge from other employees and was thus able to carry out
his operations discreetly.
Long-term orientation (Confucian dynamism)
This refers to whether people associate themselves with a long-term (forward looking) orientation (values
such as thrift and perseverance often associated with China) or a short-term (historical) orientation
(values such as tradition, meeting social obligations and saving face often associated with Germany).
The consequences of high long-term orientation are that education and training will be respected and
employees will have a strong ethic of work.
AK appears not to have had a focus on the long term success of the business, and if this short-term
orientation pervaded the culture of the organisation, other employees were less likely to challenge his
approach allowing him to operate without objection.
(c)
CIMAs Code of Ethics for Professional Ethics

CIMAs Code of Ethics is based on five fundamental principles that OK4us Director of Compliance and
Ethics could learn from when establishing a minimum behaviour standard for the company.
Integrity
This is more than not telling lies it means not being party to anything which is deceptive or misleading.
Employees should be straightforward, honest and truthful in all professional and business relationships.
Objectivity
This is founded on the idea of fairness and avoiding all forms of bias, prejudice and partiality. Employees
should not only be objective when making professional and business decisions, but they should be seen to
be objective too. This means not accepting inappropriate gifts or hospitality.
Professional competence and due care
Individuals must ensure they remain up-to-date with current developments and are technically competent
to perform their role. Managers with staff working under them must ensure that their sub-ordinates also
have the appropriate training and supervision.
Confidentiality
Anyone that an employee comes into contact with is entitled to expect that confidential information about
them or their work will not be revealed without specific permission or unless there is a legal or
professional right or duty to do so.
Professional behaviour
Employees should behave in such a way as to protect the reputation of the business and any professional
bodies that they belong to. They should also comply with all relevant laws and regulations.
Question 4
Top tips. In both parts (a) and (b) you can come up with general impacts and benefits that would affect most
companies providing they are relevant to RU2. Dont forget to apply your points to RU2 where possible.
Easy marks. Identifying the costs in part (c). Almost any activity will have a cost so this should not be difficult.
Marking scheme
Marks
(a)
(b)
(c)
10
10
5
25
marks.
(a)
Effect on RU2 of becoming customer-led

The more experienced staff of RU2 (such as YY) appear to reflect the organisation being, in the past, a
production or sales-oriented business. YY clearly believes that his role is to produce goods and it is for the
marketing manager to sell them. However, a move to becoming customer-led will have a number of
impacts on RU2, including:
Customer research
Rather than producing products that the company believes are needed by the market and then selling
them, RU2 will have to undertake research into the actual needs of the customer. This may be through
surveys or meeting customers at exhibitions to discuss their requirements. The objective is to determine
what the customer actually desires, with the objective of producing products that meet these needs.
Investment
RU2 will have to invest significant resources in market research and the machinery and systems needed
to manufacture the new products. It has already demonstrated a willingness to invest with the approval of
the purchase of the CRM system so this should not be an issue.
Marketing and training
RU2 will need to market the new products effectively. Ultimately it needs to get the message across that
its goal is customer satisfaction and therefore a new marketing strategy (and plan) will be required.
Employees may require training on customer satisfaction techniques and education about the change to
the companys direction.
Feedback
RU2 will have to become open to receiving customer feedback about its products (the CRM system
should help with this). However, the organisation must listen to the feedback and make the necessary
changes to its products. Attempts should be made to retain unhappy customers by offering refunds or
replacement products to help satisfy them.
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Culture
Perhaps the biggest change to RU2 will be in its culture. Employees such as YY will have to become more
flexible and pragmatic in their attitude. Ultimately all staff should have customer satisfaction as their
objective and they should do all they can to achieve it.
(b)
Benefits of developing a marketing plan

RU2 has not had a marketing plan in the past and the new Marketing Manager is beginning to develop
one. The benefits to RU2 of developing a marketing plan include:
Alignment with corporate strategy
A marketing plan is driven by, and therefore must be consistent with, an organisations overall corporate
strategy. The first benefit of this is that RU2 must develop a corporate strategy as well as a marketing
plan. This will force the business to define its objectives and think about its operations in a way that it
may not have done before. This will help focus each department on what is expected of it with the
manager being accountable for departmental results and should all help improve RU2s financial
performance.
Consider the environment outside of RU2
A key part of a marketing plan is a situation analysis. This involves the organisation looking at external
opportunities and threats to the business something that RU2 may not have done before. For the first
time, the organisation will be outward looking and this is a good thing. It may identify new potential
sources of revenue and spot dangers to its long-term survival that it might not have otherwise done.
Allocate the marketing budget effectively
The selection of target markets and application of the marketing mix will be determined by the marketing
plan and this will have two benefits to RU2. Firstly, the marketing spend will be carefully controlled and
used for a specific purpose (therefore reducing wasted expenditure) and secondly, what is spent will be
used to execute a carefully thought out strategy. This should mean that a better return is created from the
marketing money invested.
Helps plan production and operations
The marketing plan will drive the output required from RU2s production departments. For the first time,
these departments will have a planned level of output that they are required to meet. This enables the
production manager (YY) to plan and budget for his department more effectively. If he believes he will be
under staffed, or requires new equipment, then his requests for investment will have more weight. The
plan should ensure that RU2 has sufficient resources in place to meet its expected level of demand. This
means no revenue is lost if the company has under-capacity, or resources wasted through over-capacity.
Long-term view
A marketing plan takes a tactical view (for the coming financial year) and a strategic view (up to five
years time). This long-term view enables RU2 to start planning new products rather than purely focussing
on selling the products that it currently makes. This supports its new customer-led approach as the
company with have time to develop a product range that meets the needs of its customers and should
help secure the companys future as it can respond to changing customer tastes and trends.
(c)
Possible costs of the CRM system

Some possible costs associated with RU2s new CRM system include:
Development costs
These are costs incurred during the development phase of the system. For example, the costs of buying
the software or having it written by programmers if it is bespoke.
Installation costs
Installation costs are incurred when the system is assembled. For example the costs of new hardware and
labour costs of the developers or specialists to install the software on the hardware.
Training costs
Staff will need to be trained to use the new CRM system. This may be done in-house or at an external
location. The cost of lost staff time will be included as well as the price of the training payable by RU2.
File conversion costs

Although the system is new, there is likely to be some information about customers that RU2 currently
holds that will need to be put onto it. There will be costs incurred it getting the customer data from the
form it is currently in and into a form that the new system requires. This may not be a conversion from
one file format to another as it may involve inputting data from hard copy into the system manually. This
time and effort will have a cost.
Running costs
There is a wide range of running costs associated with the new system. For example, purchasing system
updates, security software to protect the data as well costs such as electricity and labour needed for the
system to function.
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This Practice & Revision Kit is one of a suite of products, for use independently

or as part of a package, supporting Operational Paper E1 Enterprise Operations.

operational paper e1 enterprise operations

practice & revision kit

ABOUT BPP LEARNING MEDIA

Advice on how to obtain easy marks

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CME1RK14 (POL & HO).indd 1-3

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Finding questions and using the Practice and Revision Kit

Planning your question practice

Questions and answers

exam 2 (September 2013 resit exam)

exam 3 (November 2013 exam)

1 Objective test questions: Global business environment

2 Various global business environment topics

5 G banking group (5/10)

8 Objective test questions: Information systems 1

9 Objective test questions: Information systems 2

10 S&C software project (OMIS 5/06 amended)

11 S1K (Specimen paper)

15 Objective test questions: Operations management 1

16 Objective test questions: Operations management 2

17 Capacity, supply and demand

18 YO and MX (OMIS 5/07 amended)

Part A: The Global Business Environment

Part B: Information Systems

Part C: Operations Management

22 Objective test questions: Marketing 1

23 Objective test questions: Marketing 2

24 V (OMIS 5/05 - amended)

29 TT Drinks Company (11/11)

32 Objective test questions: Managing human capital 1

33 Objective test questions: Managing human capital 2

34 ARi9 (OMIS 11/08 amended)

Part E: Managing Human Capital

42 Multiple choice questions: General 1

43 Multiple choice questions: General 2

44 Multiple choice questions: General 3

45 Multiple choice questions: General 4

46 Multiple choice questions: General 5 (Specimen paper)

47 Multiple choice questions: General 6 (5/10)

48 Multiple choice questions: General 7 (11/10)

49 Multiple choice questions: General 8 (5/11)

50 Multiple choice questions: General 9 (9/11)

51 Multiple choice questions: General 10 (11/11)