Business Management 1 st Year Examination August 2016 Exam Paper, Solutions and Examiners Comments
Business Management August 2016 1st Year Paper
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NOTES TO USERS ABOUT THESE SOLUTIONS
The solutions in this document are published by Accounting Technicians Ireland. They are intended to
provide guidance to students and their teachers regarding possible answers to questions in our
examinations.
Although they are published by us, we do not necessarily endorse these solutions or agree with the views
expressed by their authors.
There are often many possible approaches to the solution of questions in professional examinations. It
should not be assumed that the approach adopted in these solutions is the ideal or the one preferred by us.
Alternative answers will be marked on their own merits.
This publication is intended to serve as an educational aid. For this reason, the published solutions will
often be significantly longer than would be expected of a candidate in an examination. This will be
particularly the case where discursive answers are involved.
This publication is copyright 2016 and may not be reproduced without permission of Accounting
Technicians Ireland.
© Accounting Technicians Ireland, 2016.
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Accounting Technicians Ireland
1st Year Examination: Autumn 2016
Paper: BUSINESS MANAGEMENT
(NEW SYLLABUS)
Thursday 11 August 2016
9.30 a.m. to 12.30 p.m.
INSTRUCTIONS TO CANDIDATES
Answer FOUR questions in total.
Answer at least ONE question from Section A.
Answer at least ONE question from Section B.
Answer at least ONE question from Section C.
Answer ONE additional question from ANY section (A, B or C).
Candidates should allocate their time carefully.
Answers should be illustrated with examples, where appropriate.
Question 1 begins on page 2 overleaf.
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SECTION A
Question 1
(a) Outline FOUR (4) core functional areas of a Business. 16 Marks
(b) List any THREE (3) intentional threats to computer security and explain how they may affect the security
of an Information System.
9 Marks
Total 25 Marks
Question 2
(a) Outline FOUR (4) stages of the product life cycle.
8 Marks
(b) Explain what is meant by the extended marketing mix for services and discuss its relevance from a
financial services provider’s perspective.
17 Marks
Total 25 Marks
SECTION B
Question 3
(a) Outline the elements of the PESTLE model.
6 Marks
(b) Using an explanatory paragraph, differentiate between the terms;
(i) Strategic Plan.
(ii) Tactical Plan.
(iii) Operational Plan.
9 Marks
(c) Discuss TWO (2) benefits and TWO (2) limitations associated with the planning process.
10 Marks
Total 25 Marks
Question 4
a) Draw a diagram of the Communications process.
5 Marks
b) Describe FOUR (4) barriers to communication managers may face.
10 Marks
c) Describe how managers may overcome these communication barriers.
10 Marks
Total 25 Marks
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SECTION C
Question 5
(a) Describe the term Social Responsibility.
5 Marks
(b) Discuss FOUR (4) arguments in favour and FOUR (4) arguments against greater recognition of social
responsibility by business firms.
20 Marks
Total 25 Marks
Question 6
(a) Write a detailed note on the role of Boards in a business today.
10 Marks
(b) ‘The world has become a global village’.
Describe the impact globalization is having on business.
10 Marks
(c) Outline the different forms of global business organisations that are emerging in the present economic
environment.
5 Marks
Total 25 Marks
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2nd Year Examination: August 2016
Business Managment
Suggested Solutions and
Examiner’s Comments
Students please note: These are suggested solutions only; alternative answers may also be deemed to be correct
and will be marked on their own merits.
Statistical Analysis – By Question
Question No. 1 2 3 4 5 6
Average Mark (%) 66.77% 56.75% 59.35% 60.74% 57.36% 50.37%
Nos. Attempting 159 107 133 95 135 113
Statistical Analysis - Overall
Pass Rate 75%
Average Mark 56.34
Range of Marks Nos. of Students
0-39 41
40-49 7
50-59 46
60-69 53
70 and over 55
Total No. Sitting Exam 202
Total Absent 64
Total Approved Absent 10
Total No. Applied for Exam 276
General Comments:
GENERAL COMMENTS ON THE PAPER AS A WHOLE
Another well received paper with a strong pass rate for an Autumn sitting.
Students should be reminded to give an answer in proportion to the marks awarded and not waste time in
Giving excessive answers.
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Examiner’s Comments on Question One
(a) Some learners misinterpreted this question with the 4 functions of management. Those who interpreted it correctly either provided a very limited listing or an extremely long explanation of each of the functions, Way beyond the scope/requirements of the questions posed/marks available. (b) Answered competently by most
SECTION A
Question 1
(a) Outline FOUR (4) core functions of a Business 16 Marks
(b) List any THREE (3) intentional threats to computer security and explain how they may affect the
security of an Information system.
9 Marks
Total 25 Marks
Students should outline 4 of these functions; (4*4 Marks)
• Finance
• Operations
• Human Resources
• Marketing
• Information Technology
Finance
The management of finance has emerged as increasingly important to any organisation today,
The finance function is concerned with not only ensuring the adequate supply of funds for organisational
activities but also reporting the results and putting in place procedures to evaluate and examine performance
over selected periods.
Cash-flow plays a vital role in any organisation. Managed well, a company remains healthy and strong.
Managed poorly, a company will experience problems. It is important therefore for any organisation to pay
considerable attention to financial management.
Financial Management is the management of finance in order for an organisation to achieve its objectives.
In terms of the financial function, the objectives are usually to generate cash and thus create wealth for the
organisation, as well as provide a return on shareholder investment.
Financial management deals with planning and control, as well as decision-making.
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Financial management is mistakenly confused with accounting. Financial management is a management activity
whereas accounting is a service activity. Financial management refers to how businesses raise, use and monitor
funds. It involves the processes of planning, organising and controlling the business’s financial position and
performance.
The key tasks that are undertaken by the finance function are:
1. Raising capital by means of equity, long-term debt and short-term debt project evaluation. The organisation
will evaluate the various sources of finance that are available to it.
2. Preparation of reports and internal management accounts. Examples of these would be cash-flow statements,
profit and loss accounts, balance sheets. The finance function will then interpret the reports to evaluate the
financial position of the company.
3. Preparation of realistic budgets for the organisation and development of an effective costing strategy.
4. Monitoring and controlling finances of the organisation. Once the financial plans are in place, the finance
department must ensure that they remain on course. Finance staff should provide information on profitability
and cash-flows to the other departments of the organisation.
The finance function can be divided into two decision types:
1. Strategic decisions linking the organisation and its environment. These tend to be long term.
2. Operating decisions governing internal resource allocation. These tend to be short-term and range
Operations
12 Key components of Operations Management
Operations Management ; An overview (Capon, 2004)
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1. Location strategies:
Locations strategies can take the form of; product-based location, market-based location or vertically-
differentiated location.
2. Product development process
(Capon, 2004)
The first step in the product development process is the Generation of ideas, this stage relies on a number
of sources of ideas for new products or services
The second step is Evaluation. This stage is needed to filter out ideas with deficiencies and weaknesses. It
includes a Technical evaluation: asking questions such as;
- can the product be made?
- any patent problems?
- will competitors or technology render feasible ideas obsolete?
You will then develop a prototype and conduct a commercial evaluation; Undertake a market and
financial evaluation (Will the product make a profit?). Use the information from technical, market and
financial evaluation to turn the prototype into a final product and finally launch the product on to the
marketplace.
3. Forecasting
There are two categories of forecasting; Quantitative and Qualitative;
• Quantitative forecasting requires access to historical data
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• Qualitative forecasting can be done by: personal insight, panel consensus, market survey, historical
analogy, and the Delphi method
4. Layout of facilities
Layout resources to ensure smooth and efficient work flow. There are 4 different types of layouts to choose
from; Process layout, Product layout, Hybrid layout and Fixed position layout.
5. Process and system performance
Performance can be measured by examining: capacity; utilisation and productivity; efficiency and
effectiveness & process flow charts
6. Inventory Management
Inventory/Stock control and management can be a manual or computerized Information system.
7. Materials requirements planning (MRP)
MRP is a dependent inventory system and relies on production plans to determine and manage stock
levels
8. Just in time (JIT)
JIT is a dependent demand system which matches stock available exactly with demand for stock. The
stock arrives just as it is needed
9. Quality
Quality is the ability of a product to meet and, preferably, exceed customer expectations. Total Quality
Management (TQM) involves the whole organisation working towards zero defects
10. Scheduling
Scheduling is used to make sure utilisation of labour and equipment is optimal. It helps to achieve low
costs and high utilisation. There are different types of schedules that exist: first come, first served; fixed
schedule system and appointment system.
11. Purchasing
Purchasing can be: centralised; decentralised or a combination of centralised and decentralised.
12. Maintenance
Planned maintenance aims to reduce the frequency and impact of failures. Unplanned maintenance deals
with breakdowns as they occur
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Human Resources
Boddy (2008) defines HRM simply as ‘the effective use of human resources in order to enhance organisational
performance.’ Dessler (2013) provides a more comprehensive definition, as follows:
‘The policies and practices involved in carrying out the “people” or human resource aspects of
a management position, including recruiting, screening, training, rewarding, and appraising’.
The quality of an organisation is determined by the quality of people it employs. Staffing and human resources
management decisions and methods are critical to ensuring that the organisation hires and keeps the right
personnel. In many organisations, specialists do human resources management (HRM) activities. In other cases,
HRM activities may be outsourced to companies like HR Tech. Many small business managers must do their
own hiring without the assistance of HRM specialists. Managers in larger organisations are frequently involved
in HRM activities (e.g., recruiting candidates, reviewing application forms, interviewing applicants, inducting
new employees, making decisions about employee training, providing career advice to employees, evaluating
employees’ performance, etc.).
This exhibit introduces the key components of the human resources management process;
It represents eight activities, or steps, that if properly executed, will staff an organisation with competent, high-
performing employees.
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The first three steps represent employment planning, the addition of staff through recruitment and the reduction
in staff through downsizing, and selection. Executed properly, these steps lead to the identification and selection
of competent employees. They are important to assist organisations in achieving their strategic directions.
Orientation and training and development assist people in adaptation to the organisation and ensure that their job
skills and knowledge are kept current.
Finally, the HRM process helps to identify performance goals, correct performance problems if necessary, and
help employees sustain a high level of performance (e.g., performance appraisal, compensation and benefits, and
safety and health).
Marketing
How organisations sell products is as important as how they produce them. But marketing today is more than
just selling the products or services. Instead it involves managing the entire customer relationship in an
environment increasingly dominated by technology and uncertainty.
Marketing has traditionally been viewed as simply advertising and/or selling—often referred to as “telling and
selling”. An organisation simply placed an advertisement and customers bought products. More recently,
marketing has achieved a new importance. With increasing competition, along with demanding customers,
organisations need new ways of reaching out to customers. Technology in the form of the internet, along with
more recently the development of social networking sites such as Facebook, has facilitated considerable change
in marketing. Finally, as markets reached saturation level, organisations need to develop new ways of
‘encouraging’ customers to buy products.
Marketing is now a multi-stage process. In the first instance, marketing is used to identify the customer, then it
must satisfy the needs (or perceived needs) of the customer, and finally, it must endeavour to keep the customer.
Hence Kotler (2011) defines marketing as identifying, anticipating and satisfying customer requirements
profitably. From a corporate perspective it is the process of achieving organisational goals through meeting and
exceeding customer needs better than the competition. Hence Rogan’s (2011) point that ‘marketing is based on
understanding the needs of customers and serving those needs, competitively, at a profit’. He further argues that
the new century has presented new opportunities and threats for organisations and those organisations that
maintain close links with customers and markets are in a better position to take advantage of these opportunities
and counteract the threats.
Organisations such as Apple Inc. or Google are examples of this trend; they produce products that customers
want, are responsive to their needs, and as a result are very profitable. In Ireland, new start-up companies like
DoneDeal have grasped the opportunities that internet shopping offers.
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Marketing involves the following key activities:
• Research
• Segmenting customers
• Targeting customers
• Communicating a position that is clearly perceived
• Developing the product
• Pricing the product
• Promoting products to customers
• Distribution/Place
Information Technology
It would be difficult to think of a business role that does not involve the use of computers. Technology assists in
the management of HR, in the finance function, with sales and marketing and just about any role in business can
be automated to a point. Computers abound in offices and shops, factories and homes to the point that they are
common place today. The government is committed to bringing high speed broadband to all primary schools in
Ireland, and most homes in Ireland are connected to the internet. In business terms, it is expected that computer
technology will become more pervasive and there is pressure on all organisations to automate more and more
processes.
With this is mind, it is critical to have a working knowledge of the uses of both Information Technology (IT)
and Information Systems (IS) in a business context. The internet is a growing influence as organisations today
need both an online and off line presence. Cloud computing and social networking are the latest in a line of
technological developments that affect businesses. The financial sector is a clear example of change; more and
more processes are automated as online banking flourishes, and companies are increasingly using social
networking sites, such as Facebook and Twitter, to reach out to customers.
Information technology provides a valuable source of competitive advantage and allows organisations to
integrate their core functions to create efficiencies and reduce costs. For example, many financial institutions
use highly complex IT systems to analyse and predict stock market trends and outcomes; similarly the
educational sector has moved to embrace online and blended learning.
(b) List any THREE (3) intentional threats to computer security and explain how they may affect the
security of an Information system. 9 Marks
Students should provide an overview of 3 of the following intentional threats, explaining the impact they have
on the security of an IS; (3*3 Marks)
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Virus
Worm
Trojan
Adware
Phishing
Denial of service (DOS)
Hacker
Examiner’s Comments on Question Two
(a) Some learners left this blank, with no attempt made whatsoever; others gave details of other marketing theory unrelated to PLC. Those who understood what the PLC was, scored well. (b) Adequately answered by candidates; learners could have focused more on the application to financial services provider perspective.
Question 2
(a) Outline FOUR (4) stages of the product life cycle. 8 Marks
(b) Explain what is meant by the extended marketing mix for services and discuss its relevance from a
financial services provider’s perspective.
17 Marks
Total 25 Marks
(a) 4 * 2 Marks
The following table illustrates then the marketing issues that arise at each stage.
Phase Characteristics
Introduction Stage
(The product is newly introduced to the market. The main
objective here is to generate awareness.)
• Low sales
• High costs
• Purchased by innovators
• Limited competition
Growth Stage
(The product is becoming more popular. More people buy
at this stage - they are known as early adopters.)
• Rising sales
• Costs declining
• Growing competitors
• Increasing market share
Maturity Stage
(The product is approaching its peak in terms of sales and
profits. Customers here are termed ‘middle majority’.)
• Intense competition
• Maximisation of profits
• Maintain market share
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• Cost per customer is low
Decline Stage
(The product is past its popularity. Customers buying at
this stage are referred to as ‘laggards’.)
• Sales decline
• Profits decline
• Competition is reduced
• Replacement is an option
(b) Explain what is meant by the extended marketing mix for services and discuss its relevance from a
financial services provider’s perspective.
Services marketing, which is the promotion or advertising of non-physical goods, that is services. It is defined
as: “….any act or performance that one party can offer to another that is essentially intangible and does not
result in the ownership of anything.”
The 7Ps
Traditional marketing dealt with the 4Ps—product, price, place, and promotion, which works well with tangible
products. With the rise of the services, however, the 4Ps have been expanded into the 7Ps—to include people,
process and physical evidence. The following table explains these concepts.
People
(An example of this is the intense competition in the
education sector. Colleges pay much attention to
recruiting and training individuals so that the
service provided meets consumer expectations.)
The nature of most services demand interaction
with people - between the consumer and individuals
representing the service provider. This is an
important element, as service quality occurs at this
point of interaction.
Process
(Examples here include online banking. The process
is largely automated and computerised. Bank of
Ireland’s Banking365 is one such initiative.)
These are the procedures by which a service is
acquired. The direct involvement of consumers in
the production of services places greater emphasis
on the process of the transaction for services.
Process varies across many services.
Physical Evidence
(For example: The physical ambiance of a bank
must be designed to reflect target customer
expectations, the branding position and ensure the
smooth delivery of the service.)
This includes the environment in which a service is
offered and consumed. It is central to the
consumer’s understanding of the service and to his /
her enjoyment of the service. Many services are
experiential in their nature.
CHARACTERISTICS OF SERVICES MARKETING
Services have various characteristics that separate this sector from manufacturing. This can create many
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challenges when it comes to marketing the service and firms have to rely on different techniques to
communicate service values: some of these characteristics are explained next.
Intangibility
Services are intangible. Unlike physical products, they cannot be seen, tasted, felt, heard or touched before they
are bought. For example, attending a lecture is an intangible service.
What can be done? Providers can use highly-skilled people, equipment, communication material, symbols and
prices to alleviate uncertainty.
Inseparability
Services are typically produced and consumed simultaneously. Services cannot be separated from their
providers. Customers participate in and affect the transaction so interaction is critical. For example, in the
classroom, both the lecturer and the student influence the outcome of the service.
What can be done? – Word-of-mouth is essential and so service providers need to ensure employees are aware
that they essentially affect service outcomes. Training is important.
‘Perishability’
Services generally cannot be stored. The ‘perishability’ of services is not a problem when the demand is steady
but when demand fluctuates, service firms may have challenges synchronising supply and demand.
Theoretically, lectures can be stored – they can be recorded, for example, and posted as Podcasts – however, the
experience of sitting in a classroom and attending a lecture cannot be stored.
What can be done? - The service experience should be maximised during the delivery of the service. Because
they are perishable, service quality has one chance to make an impression.
Heterogeneity / Variability
Because they depend on who provides them and when and where they are provided, services are highly variable.
Each service will differ in the eyes of the customer. Using our lecture example, each lecture will vary depending
on the person delivering it. Also, classrooms and facilities will differ; moods and attitudes will differ depending
on the make-up of a class. So while one person might consider a lecture to be entertaining and educational,
another student might have a very different view.
What can be done? - Service delivery and quality are the key variables here. Providers need to control and
develop the human factor inherent in service delivery.
The example used above was education. Restaurants, hotels and pubs are part of the service sector and equally
have the same difficulty in providing a quality service. For example, a restaurant provides an intangible service;
while a meal might seem at face value a product, it is subject to the whims of the consumer; meals are typically
produced and consumed simultaneously; food is perishable and cannot be stored for long periods (especially say
fish) and quality can vary in a restaurant. All this means is that management in a restaurant can be more difficult
than say in a factory. In the latter, under ideal conditions, organisations can manufacture products time and time
again to the same quality levels. This is not the case in restaurants, pubs and hotels.
High versus Low Involvement Purchases
High Involvement Purchases:
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These are purchases where the risk for the consumer is high. Examples include purchasing a house or car. In
high involvement cases, the consumer is actively searching for information related to the product or service. So,
for example, a person wishing to purchase a new car will most likely actively search the Internet and auto trade
magazines for information. The advantage for marketers here is that it may be much easier to get the consumers
attention if they are highly involved with the product/service category.
Low Involvement Purchases:
Low involvement purchases are those where the risk is relatively low for consumers. Examples include fast
moving consumer goods (FMCGs) such as milk, bread and confectionery. In these cases, the consumer is less
likely to be actively scanning the retail environment for information on these products or services. This presents
a problem for marketers wishing to draw attention to their wares. When consumers are in the low involvement
category, techniques such as celebrity endorsement, recommendations from friends and humorous advertising
are known to be effective tools to create awareness under low involvement conditions.
These concepts should be applied in the context of a financial services company.
Examiner’s Comments on Question Three
(a) Answered competently by majority of learners (b) Answered adequately by most (c) Answered adequately by most with some repetition of answers.
SECTION B
Question 3
(d) Outline the elements of the PESTLE model (6*1 Marks)
The Macro-Environment
Political Companies must monitor political changes at both domestic and international
levels. Issues of importance include political orientation (capitalist,
communist) and government attitudes to foreign investors, taxation and
international policy.
Economic
Economic factors dictate prices, production costs, demand and profits. The
current economic recession is global and thus impacts markets around the
world.
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Socio-Cultural
Companies must consider changing tastes, purchasing behaviour and
changing priorities which are dynamic and hard to evaluate. Religion,
attitudes, beliefs, education and social systems all fall under this category.
Technological
Technology is a major macro-environmental variable which influences many
products and services that we are familiar with. It can also be used to gather,
analyse and use market research information to create specific selling
strategies and aid the promotion effort.
Legal
Organisations must be aware of the legal parameters in the markets in which
they operate. They are vast and often complex. Among the most important
legal considerations are taxation, employment laws, safety regulations and
contract law.
Environmental Many companies have adopted approaches to minimize the impact of their
operations on ecological systems and are developing strategies and initiatives
to help combat climate change. International and domestic environmental
laws must be adhered to.
(e) Using an explanatory paragraph, differentiate between the terms;
i. Strategic Plan
ii. Tactical Plan
iii. Operational Plan (3*3 Marks) 9 Marks
Plans can be classified under three separate headings: Strategic, tactical and operational plans.
Strategic plans focus on the broad future of the organisation and involve analysing and aligning the external
environmental demands with internal resource capability. Strategic plans include the formulation of objectives
and describe the targeted outcomes required to achieve the organisation’s mission. Strategic planning is the
primary responsibility of senior management.
Tactical plans decode strategic plans into goals for specific parts of the organisation and have shorter time
frames than strategic plans, frequently encompassing from one to three years. They are narrower in range than
strategic plans and generally apply to a single business within a firm. Middle level management are usually
responsible for developing tactical plans.
Operational plans are short-range plans that translate tactical plans into specific goals and actions for small
units of the company. Their time frame is usually up to one year in advance. Operational plans identify key
factors that could affect the desired results and specify different actions to take if factors change within the
environment. Typically supervisors engage in operational planning.
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(f) Discuss TWO (2) benefits and TWO (2) limitations associated with the planning process.
(4*2.5 Marks) 10 Marks
Benefits Limitations
Provides tools and techniques to deal with
uncertainty and change
Can create rigidity and inflexibility as there may be a
tendency to be locked into specific goals and
timetables
Provides a timetable for accomplishment Inflexible planning will make it much harder to deal
with turmoil internally and externally
Provides direction within an organisation Planning functions often assume that the environment
won’t change over the course of the plan
Provides a key evaluation tool for success and
progress of the firm and its agendas
Formal plans cannot replace intuition and creativity
Affords employees guidelines for reaching
objectives
Successful plans may produce a false sense of
security
Helps employees co-ordinate activities and may
assist in developing teamwork initiatives
There may be internal resistance to formal planning
due to factors such as conflict, distribution of power,
relationships and uncertainty
Helps firms develop a vision of the future Planning can be expensive both in terms of time and
money
Examiner’s Comments on Question Four
(a) Illustrated well by most, with some absence of the 'noise' element, (b) Barriers were well identified by most (c) This section was not as well answered as part b with most learners providing repetitive answers.
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Question 4
(a) Illustrate the Communications process
5 Marks
(b) Describe FOUR (4) barriers to communication managers may face.
(4*2.5 Marks) 10 Marks
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(c) Describe how managers can overcome these communication barriers.
(5*2 Marks) 10 Marks
Total 25 Marks
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Examiner’s Comments on Question Five
(a) Answered adequate by most; however some learners answers lacking in theoretical foundation. (b) Answered adequately by most. Those learners who provided a lack of theoretical foundation in part a followed on weekly in this component
SECTION C
Question 5
(a) Describe the term Social Responsibility 5 Marks
Social responsibility is a business’s intention, beyond its legal and economic obligations, to do the right things
and act in ways that are good for society. Social responsibility adds an ethical imperative to do those things that
make society better and to not do those that could make it worse.
Managers regularly face decisions that have dimensions of social responsibility. Examples include employee
relations, philanthropy, pricing, resource conservation, product quality and safety, and doing business in
countries that violate human rights.
Social obligation occurs when a firm engages in social actions because of its obligation to meet certain
economic and legal responsibilities. Social responsiveness is seen when a firm engages in social actions in
response
to some popular social need. Social responsibility is a business’s intention, beyond its legal and economic
obligations, to do the right things and act in ways that are good for society.
(b) Discuss FOUR (4) arguments for AND FOUR (4) arguments against greater recognition of social
responsibility by business firms.
20 Marks
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There are two opposing views of social responsibility. The classical view is the view that management’s only
social responsibility is to maximise profits. Economist and Nobel laureate Milton Friedman is the most
outspoken advocate of this view. Friedman argues that managers’ primary responsibility is to operate the
business in the best interests of the stockholders—the true owners of the organisation. The socioeconomic view
is the view that management’s social responsibility goes beyond the making of profits to include protecting and
improving society’s welfare. This view purports that corporations are not independent entities responsible only
to stockholders.
Arguments For and Against Social Responsibility
FOR (4 *2.5 Marks)
Public expectations
Public opinion now supports businesses pursuing economic
and social goals.
Long-run profits
Socially responsible companies tend to have more secure
long-run profits.
Ethical obligation
Businesses should be socially responsible because
responsible actions are the right thing to do.
Public images
Businesses can create a favourable public image by pursuing
social goals.
Better environment
Business involvement can help solve difficult social problems.
Discouragement of further governmental regulation
By becoming socially responsible, businesses can expect less
government regulation.
Balance of responsibility and power
Businesses have a lot of power, and an equally large amount
of responsibility is needed to balance against that power.
Stockholder interests
Social responsibility will improve a business’s stock price in
the long run.
Possession of resources
Businesses have the resources to support public and
charitable projects that need assistance
Superiority of prevention over cures Businesses should address social problems before they
become serious and costly to correct.
AGAINST (4 *2.5 Marks)
Violation of profit maximisation
Business is being socially
responsible only when it pursues
its economic interests.
Dilution of purpose
Pursuing social goals dilutes
business’s primary purpose –
economic productivity.
Costs
Many socially responsible actions
do not cover their costs and
someone must pay those costs.
Too much power
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Businesses have a lot of power
already and if they pursue social
goals they will have even more.
Lack of skills
Business leaders lack the
necessary skills to address social
issues.
Lack of accountability
There are no direct lines of
accountability for social actions
Total 25 Marks
Examiner’s Comments on Question Six
(a) Similar to question 5, answered adequately by most; however some learners answers were lacking in theoretical foundation. (b) Answered competently by most. Allowance made for a variety of interpretations in this part. (c) Most learners provided company examples/names rather than a category of company.
Question 6
a) Write an explanatory note on the role of Boards in a business today.
10 Marks
4 Marks
A single tier board (typical of the shareholder model in Ireland, UK and USA). A majority of directors may
be non-executives. Non-executives represent the interests of shareholders. BUT choice of nonexecutives
may be influenced by executives.
A two-tier structure (typical of the stakeholder model in Germany, France and the Netherlands):
– A supervisory board represents a wider range of stakeholders
– A management board plans strategy and has operational control
– Major strategic decisions have to be approved by both boards
Two key issues for boards: 2 Marks
• Delegation: strategy can be delegated to management but it is easier to ensure other stakeholders are
protected with a supervisory board.
• Engagement: The board can engage in the strategic management process but board members may have
insufficient expertise.
Accepted good practice for boards includes: 4 Marks
• Operating ‘independently’ of management – the role of non-executives is crucial; avoid conflicts
of interest or the perception of conflicts, e.g. having a personal interest in a company which does
business with the company of which he/she is a non-executive director
• Being competent to scrutinise the activities of managers
• Having time to do their job properly.
• Behaving appropriately given society’s expectations for trust, role fluidity, collective responsibility and
performance.
Business Management August 2016 1st Year Paper
Page 25 of 25 Bus Mgmt A2016 (BM)
(b) ‘The world has become a global village’..
Describe the impact globalization is having on business.
(4*2.5 Marks) 10 Marks
An organisation going global typically proceeds through stages as shown below. The first step toward going
international may start with global sourcing (also called global outsourcing), which is purchasing materials or
labour from around the world wherever it is the cheapest.
The next step may involve exporting - making products domestically and selling them abroad. An organisation
might do importing, or acquiring products made abroad and selling them domestically. Both usually entail
minimal investment
and risk.
Licensing or franchising, involve one organisation giving another organisation the right to use its brand name,
technology, or product specifications in return for a lump sum payment or a fee. This approach is used widely
by pharmaceutical companies and fast food chains.
Direct investments may include:
A global strategic alliance - a partnership between an organisation and a foreign company partner or partners.
Joint ventures are a specific type of strategic alliance in which the partners form a separate, independent
organisation for some business purpose. These partnerships provide a fast and less expensive way for companies
to compete globally than they would do on their own. A foreign subsidiary is a separate and independent
facility or office. The greatest commitment (and risk), occurs when the organisation sets up a foreign subsidiary.
(c) Outline the different forms of global business organisations that are emerging in the present
economic environment.
(3*1.66 Marks) 5 Marks
Different types of Global Organisations?
Multinational companies or MNCs are any type of international company that maintains operations in multiple
countries. Companies such as Microsoft, Ford and Honda are examples.
Types of MNC’s:
A multi-domestic corporation - decentralises management and other decisions to the local country where it is
doing business.
Transnational or borderless organisation - companies that use an arrangement that eliminates artificial
geographical barriers. IBM reorganised into industry groups.
Global Corporation - centralises its management and other decisions in the home country.
Total 25 Marks