Business Management 1 Year Examination - Accounting … · Business Management 1st Year Examination...

Business Management

1st Year Examination

August 2016

Exam Paper, Solutions and Examiners Comments

Business Management August 2016 1st Year Paper

of 25

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.


of 25 Bus Mgmt A2016 (BM)

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.



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



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



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.



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.



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)



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



• 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



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.



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.



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)



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



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



• 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



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



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:



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.



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.



(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.



Question 4

(a) Illustrate the Communications process

5 Marks

(b) Describe FOUR (4) barriers to communication managers may face.




(c) Describe how managers can overcome these communication barriers.

(5*2 Marks) 10 Marks

Total 25 Marks



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



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



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.



(b) ‘The world has become a global village’..

Describe the impact globalization is having on business.


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.


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

Business Management 1 Year Examination - Accounting … · Business Management 1st Year Examination...

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