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Enterprise Operation

No.

QUESTION

PAGE

May -2010

November- 2010

19

May-2011

35

November-2011

52

September-2011

71

March-2012

83

May-2012

100

November-2012

116

September-2012

133

10

March-2013

147

11

May-2013

161

12

November-2013

176

13

September-2013

191

14

March-2014

207

15

May-2014

222

16

November-2014

237

17

September-2014

252

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Prepared by: Tamal Towhid, June 2015 Batch, ICMAB

E1 Enterprise Operations
May- 2010
SECTION A 20 MARKS
[the indicative time for answering this section is 36
minutes] ANSWER ALL TEN SUB-QUESTIONS

Instructions for answering Section A


The answers to the ten sub-questions in Section A should ALL be written in your answer
book.
Your answers should be clearly numbered with the sub-question number and ruled off so
the markers know which sub-question you are answering. For multiple choice
questions you need only write the sub-question number and the answer option you
have chosen. You do not need to start a new page for each sub-question.
Each of the sub-questions numbered from 1.1 to 1.10 inclusive, given below, has only
ONE correct answer. Each is worth two marks.

Question One
1.1
Electronic Executive Information Systems (EIS) and Expert Systems (ES) are
examples of
A

customer relationship management software.

database management systems.

computer networking.

decision based software.

1.2 Technology which encourages user contributions and interactivity is known as


A Web 2.0.
B

business 2 consumer (B2C).

e-commerce.

teleworking.

1.3

Dispersed and virtual teams are normally a result of

an economic downturn.

developments in technology and information systems.

poor staff morale and motivation within the workforce.


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ineffective human resourcing practices.

1.4

Integrated solutions in product design and control of machinery are based on

a shared customer focused outlook.

a JIT philosophy.

CAD and CAM technologies.

decision support systems.

1.5

A main outcome of electronic data interchange (EDI) is

user independence.

to save paperwork by using structured electronically transmitted data.

home working.

improved internal communication.

1.6
A manufacturer concerned mainly with production efficiencies and reducing unit
costs is known as
A

product oriented.

production oriented.

operationally strategic.

a learning organisation.

1.7
be

The influence an organisation will normally have over its macro environment will

limited or non existent.

high.

extremely high.

continual.

1.8
Non-political, not-for-profit, cause-orientated organisations drawn from more
than one country are known as
A

strategic business units.

non-governmental organisations (NGOs).

conglomerates.

globalised networks.

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Prepared by: Tamal Towhid, June 2015 Batch, ICMAB

1.9

Merit goods are commodities that

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.

1.10 The cognitive paradigm theory explains consumer behaviour through


A

product branding.

rational problem solving and decision making.

past experience and levels of satisfaction.

inertia or a lack of time.

Answer to Question One


1.1 D
1.2

1.3

1.4

1.5

1.6

1.7

1.8

1.9

1.10

SECTION B 30 MARKS
[the indicative time for answering this section is 54 minutes]
ANSWER ALL SIX SUB-QUESTIONS IN THIS SECTION - 5 MARKS EACH.
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Prepared by: Tamal Towhid, June 2015 Batch, ICMAB

Question Two
a) An organization has decided to outsource its IS function. Explain the main issues
it needs to address.
(5 marks)

Having decided to outsource its IS function, there are a number of issues the
organisation needs to address, including:
Communication with the current workforce
There is a need to explain the rationale and timescale for outsourcing. There may be a
need for redeployment of staff whose roles are displaced by the contractor and a
readjustment of other roles. This may involve negotiation with unions or staff groups.
Invite tenders for the work
The organisation should invite tenders from reputable contractors and based on tender
documentation. Briefing interested contractors will help ensure compliance with
organizational ethical policies, procedures and practices. Clarification of the organisations
arrangements should be included in formal planning, bidding and legal documents.
Choice of contractual partner
It is crucial to make the right choice of partner. Thorough evaluation and selection processes and
criteria should be established and then followed. This will include background review of potential
contractors (their performance, references, litigation history etc.).
Establish working relationships/organisation
There is a need to establish and maintain a strong client- contractor relationship in order that
organisational needs are fully satisfied. The organisation should communicate and agree
mutual roles and expectations. There should be easy contact through a series of
relationships at various levels (e.g. key account manager, user level, executive level, etc.).
An in-house expert is usually retained as the client contract manager.
Briefing for chosen contractor
The chosen contractor must understand the business process and the organisational
culture so that a full induction is needed including introductions to users and other staff.
Process of handover
Phasing of handover should be decided, future of current IS staff decided, training of
new staff.
Establish and monitor cost
A budget needs to be established and then carefully controlled. The budget may initially
be lower than existing in-house IS costs but variations to the initial contract as
circumstances change will involve additional costs and these need to be accounted for.
Managing contract compliance and adherence to predetermined standards
Tight contract specifications and systems for quality and performance monitoring will be
required. To achieve this, performance criteria and review mechanisms will need to be
established and agreed upon. It may be that a dedicated employee post will be required
to ensure contract compliance (dependent upon the size of the organisation).
Ensure satisfaction of user requirements
Systems will need to be established to evaluate and monitor customer (user) satisfaction
and results need to be discussed with the contractor. Agreement on necessary remedial
action or adjustments to working practice will need to be negotiated.
b) Describe the ways in which IS and IT might help an organisations human
resource function perform its role effectively.
(5 marks)

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There are many dimensions to an organisations human resourcing function and IS and
IT can be of great assistance in improving efficiency. Some examples are given below.

Assisting HR planning. In order to construct robust HR strategies and plans, detailed


planning processes require gathering of much information, and then carrying out
operations such as costings, projections and the development of alternative options.
Clearly applications offering spreadsheets, databases, web based enquiry and modelling
applications would be highly valuable (IS).
Reward. Simplifying payroll operations. Organisations of any size rely on cashless pay
(normally BACS transfer) in order to remunerate workers efficiently. Dedicated,
sophisticated, software packages process can calculate and capture payroll
information. This will help in paying employees accurately, providing data for
management and fulfilling income tax requirements of governments (IS).

Recruitment and employer branding. When recruiting, IT can help by transferring


electronic advertising copy to publishers quickly and accurately. A further
consideration is to use the internet directly which could prove an effective and
relatively low cost recruitment method (IT). An organisational website would be
needed with links to recruitment possibilities and online application forms. An attractive
website could also perform an important role in differentiating one organisation from
another, so strengthening employer branding to appeal to potential recruits (IS).
Assist in selection processes. Individuals undergoing selection for a job will perform
certain processes, some of which have potential for automation (such as in-tray
exercises, work simulation and completion of profiling questionnaires) (IS).
Legal compliance. Communicate HR and organisational policies to the workforce. An
organisational intranet and use of emails can help an organisations human resourcing
function improve communication with the workforce (IS). If the organisation is
geographically dispersed it might also consider the potential for videoconferencing and
teleconferencing (IS).
Workforce management. In addition to being an organisations most valuable
resource, employees often represent the largest component of total expenditure. As
such there is a need to manage the workforce effectively, including staff numbers,
overtime levels, levels of illness and absence, etc. Dedicated HR management
information systems (MIS) would be helpful in this respect (IS).
Dissemination of good practice and learning from mistakes. Much organisational
knowledge is held by individuals, soft by nature and not captured formally. For
organisations wishing to disseminate good practice and learn from mistakes,
particularly those aspiring to be learning organisations, Knowledge Management
Systems (KMS) help in capturing and sharing such learning (IS).
Conflict resolution/disciplinary process. Complaints procedure online for staff to
view (IS). Intranet for sharing of expectations and policies (IT).
A repository for organisational policies. Formal HR Policies and procedures (and
consequent forms) may exist in hard copy but could effectively be held on the intranet of
a Local Area Network. This material might be extended to include electronic capture of
personnel details such as results of job analysis, job descriptions and person
specifications. This would be a helpful reference point for existing employees and useful
induction materials for new recruits (IT).
Staff development. A platform for the delivery of training content and material. Technology
would allow some degree of distance learning and open learning to take place through, for
instance, online access, use of material held on DVDs, etc. (IT

c) Explain how a manufacturers promotional activity might vary depending upon


the sort of distribution channel that operates.

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Prepared by: Tamal Towhid, June 2015 Batch, ICMAB

Distribution involves getting the right products to the right people at the right time, and
can take a number of forms:

Zero level. The distribution channel is short and the manufacturer/producer sells
directly to the final customer. (For example, web sales or through own retail outlet).

One level. A manufacturer/producer deals with retailers who in turn act as


intermediaries by dealing with the final customers. (For example, phone
manufacturer which sells to phone wholesalers which sell to the public).

Two level. Where the supply chain is further extended, wholesalers become
involved and there are several intermediaries between the manufacturer/producer
and the ultimate customer. (For example, the extended chain involved in sales of
items of clothing).

A manufacturers promotional activity will vary dependent upon the sort of distribution
channel that operates.
Marketing policies
There are three marketing possibilities:

Direct marketing
Push marketing
Pull marketing

Zero level distribution channel. Direct marketing from the manufacturer to the ultimate customer
is possible. One example might be a farmer placing a Produce for sale board on the roadside
outside the farm and selling from a farm shop on-site, a further example may be

online trading, with promotion of the website address on other sites (e.g. by pay-per-click
on Google).
One and two level distribution channels involve two types of marketing:

Push marketing: the task of selling goods to final customers rests with wholesalers
and retailer intermediaries in particular. The emphasis of the manufacturers
promotional activity is to persuade intermediaries to promote its products to the end
customer at the expense of competitor products. Activity might include personal
selling, trade promotions and wholesale discounts, meaning that ultimate
consumers are rarely aware of this activity. Manufacturers are said to push
products towards the consumer.
Pull marketing: the emphasis of the manufacturers promotional activity is to
influence final consumer attitudes so that a product demand is created. If the
strategy is successful, intermediaries will feel obliged to satisfy this demand, and will
be encouraged to take the manufacturers products. Promotional activity typically
involves heavy expenditure on advertising and consumer promotion in the hope of
stimulating higher demand for the product (one example might be the distribution of
coupons for money off the purchase). In the children's toy industry there are often
intense advertising campaigns and the development of highly visible brands (often
through childrens television) encouraging parents to actively seek specific products.
The manufacturers marketing aim is that the customer pulls its products towards
themselves.

d) Construct a basic marketing mix for an online company selling branded


sportswear.
(5 marks)

The marketing mix


The four dimensions of the marketing mix represent decisions an organisation should

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Prepared by: Tamal Towhid, June 2015 Batch, ICMAB

make over the marketing factors that need to be mixed to achieve maximum impact and
influence on its target market. In the case of the online company the mix is shown below.
Product
Pictures and product descriptions are likely to be displayed on the website but the products
themselves will be synonymous with the strong brand name and image attached to them.
Brands communicate expectations of quality, durability, and design to potential purchasers.
(Sportswear brands such as Nike, Adidas and Puma represent some of the most powerful
brands of any business). The company will be expected to offer an appropriate and up to
date product range through its site. Packaging will not represent a significant feature of the
product mix. Similarly issues of after-sales service, optional extras, guarantees, warranties
(beyond those required legally) will not feature in the product mix.
Place
Rather than a physical sales location, place is cyberspace, with the place mix relying on the
design and operation of an effective website. Web based trading means that distribution
coverage is potentially global. Online companies generally do not involve themselves in
issues of transportation directly, instead relying on postal services and package handlers for
delivery. The online company will clearly need sufficient stock levels and warehouse facilities
(the location of which needs to be logistically convenient). Alternatively, the company may
rely instead on a JIT approach with minimum stock so long as they have a good working
relationship with manufacturers. (Some of the savings achieved over high street shops in
terms of operating overheads will be passed on to customers in the form of lower prices).
Promotion
All promotion is likely to take place online. Significant features of the promotional mix include
a need to invest in an attractive and user-friendly website and high visibility of the site
through web search engines. Online advertising might be undertaken through (for instance)
pop-ups and online links from general sports and leisure sites. Product pictures are likely to
be displayed on the web site. Sales promotion might be achieved through competitive pricing
relative to other online outlets. Traditional personal selling and publicity will not feature in the
mix.
Price
All branded products command higher prices than unbranded products whether sold
traditionally or online. In this case prices will reflect branding but will be lower than for high
street shops selling the same products (thanks to lower overheads). As part of the price mix
the firm may offer online discounts for customer repeat purchases or bulk purchases. In
common with other online operations, payment will be made by debit or credit card at the
time when products are ordered meaning that payment terms and considerations of credit will
not apply.
e) Describe the range of internal possibilities that exist for an organisation wishing
to fill a job vacancy.
(5 marks)
A number of internal possibilities exist for recruitment, shortlisting and selection without
the need to involve a third party, including:

Advertising the vacancy internally using (physical) notice boards, or through other
organisational communication methods such as email, the intranet, or organisational
newsletters, etc. Based on expressions of interest, this may lead to internal
promotion of someone or an existing employee moving sideways into the vacant role.

Advertising the vacancy externally using the organisational website or by placing


posters outside the organisations buildings. This may lead to someone outside
the organisation filling the vacancy.

(Where industry regulations and local conventions do not prohibit it) appointing to the
job without advertising. This may involve promotion of another employee to the role
(either permanently or on a temporary basis). Alternatively, it may mean transferring
a member of the workforce from another part of the organisation, generally because

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of a corporate career development policy, redeployment and rebalancing of the


organisation or based on recommendations of organisational managers.

Contacting potential candidates by reference to a locally maintained register of those


who have in the past submitted a CV, or who have worked for the organisation
before and have taken a career break or maternity leave, etc.

Contacting previously unsuccessful candidates who have applied for similar posts
in the past (assuming that they would be suitable for the position that is vacant).

Encouraging workforce recommendations of friends and family who may


be interested in considering the vacancy.

Generally use of internal sources will be less costly, but the danger is that an
inappropriate selection may result.

f)

Discuss what an organisation could do to motivate its workforce without offering


financial incentives.
(5 marks)
There are many, often competing, theories of motivation. These might be understood in
terms of Mullins (2007) classifications of:

economic rewards (e.g. pay, security, perks of the job, etc.),

intrinsic satisfaction, (from the nature of work, job interest, self development, etc.) and

social relationships (e.g. friendships, being part of a team, etc.).

Certain aspects of these not involving financial incentives are discussed here.
Encourage social relationships
Organisations can develop teams and good worker/manager relationships. The potential impact of
work groups on individual motivation and productivity was best illustrated by the Hawthorne
Studies. Social relationships between workers within a team and between workers and their
managers can prove a more powerful source of motivation than financial incentives.
Structure the organisation positively
Structuring the organisation to emphasise self-directed work teams which stress employee
involvement can build on this social relationships thinking to motivate the workforce.
Develop a positive culture/celebrate success
The organisation could develop a stimulating organisational culture whereby employees feel
valued and are motivated to contribute positively. Such cultures take time to develop and
need to be carefully maintained through supportive management approaches and by use
of appropriate actions. By way of example, outstanding employee performance might be
rewarded through a number of mechanisms including additional leave entitlements, flexible
working conditions and public recognition of achievements.
Communicate positive messages
The organisation could develop and enhance non-financial elements of a total reward
package to communicate a positive message to employees. In any case, the organisation
needs to pay attention to, hygiene factors, so issues of working conditions, rest breaks
and availability of food and refreshments can impact directly on morale and motivation.
Regular communication to the workforce and collaborative activity can make employees
feel good about both themselves and the organisation they work for.
Effective job design
Effective job design can be used to build more interest, variety, challenge and collaborative
working into jobs which might motivate employees. (This is consistent with the job
characteristics model which links job characteristics, the individuals experience of those
characteristics, and the outcomes in terms of motivation, satisfaction and performance).
Thus special attention needs to be given to skill variety, task identity, task significance,
autonomy and individual feedback.

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Prepared by: Tamal Towhid, June 2015 Batch, ICMAB

Introduce job variety


The organisation could introduce job variety to motivate and develop individuals, overcome
inertia, and help in understanding the roles performed by others. Job variety might be
achieved through expanding a role by adding stimulating tasks (job enlargement) or tasks
that might normally be carried out by someone on a superior grade (job enrichment) or
swopping jobs for a period (job rotation).
Clear Goals
Consistent across the organisation, aligned between departments and with
ongoing communication of performance.
Provide resources
Updating of equipment to enable efficient performance.
Competent management
Responsive to requests for support, sensitive and fair in issuing instructions, consistent
in decisions made.
Offer training and skill development
By offering individuals an opportunity for additional training and skill development they
should value the opportunity to develop their potential and consequently will be both
engaged and motivated

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Prepared by: Tamal Towhid, June 2015 Batch, ICMAB

SECTION C 50 MARKS
[Indicative time for answering this section is 90 minutes]
ANSWER BOTH QUESTIONS IN THIS SECTION 25 MARKS EACH

Question Three
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 backoffice 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.
Total for question three = 25 marks

a) Describe the key factors involved in the emergence of the BRIC economies.
(10 marks)

Requirement (a)
Growth of BRIC Economies
Currently the most important growing economies in the world are Brazil, Russia, India and China and
they have come to be known as the BRIC group. The growth of each of these economies contains
unique aspects of the history of each country but there are some general factors that have influenced the
growth of all four. These include the following:
General factors driving growth
Globalisation
This concept refers to the growing interdependence of countries worldwide and the freedom it gives to
firms and individuals to initiate economic transactions with those in other countries. Factors that have
contributed to the globalisation process include;

developments in electronic communication such as the internet,


improvement in transportation such as containerisation and the development of jumbo jets,
convergence of tastes through the development of foreign travel and the world wide media,
the reduction of trade barriers assisted by organisations like the World Trade
Organisation (WTO) enabling the opening up of trade between countries and
the growing readiness of multinational enterprises (MNEs) to take advantage of instant
communication and more rapid and cheaper transportation to conduct their operations on a
global basis.

In providing opportunities for business organisations to trade and to invest in other countries, globalisation

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has also enabled more countries to take advantage of economies of scale and to reap the benefits of
comparative advantage that trade between nations brings to the trading partners.
These economic advantages of globalisation have enabled all countries including those in the BRIC
group and other smaller countries to find markets for their products in other countries and to take
advantage of the easier access to capital, new technology, business expertise and skilled labour that the
world has to offer.
Internal developments in emerging economies
But while the development of globalisation has provided the conditions to assist in their growth, the
emerging economies themselves have developed internally to take advantage of globalisation. In many
emerging economies the government of the country has played a key role by adopting policies to assist
the development of its own business infrastructure. In particular there has been a general move towards
the adoption of a free market economy. This has entailed the removal of bureaucratic rules and the
offering of greater incentives to individuals and businesses to benefit from their entrepreneurial efforts.
This has been accompanied by relative political stability that has attracted inward investment from
abroad.
Previous poverty: Until this century they were very poor economies. This makes growth easier to achieve.
Hong Kong, Singapore and South Korea also currently have very high growth but started from a higher
prosperity than the BRIC countries.
In many such countries the adoption of new agricultural techniques has improved productivity
considerably and this in turn has provided a pool of labour available to work in the new manufacturing
plants that the governments of these countries have encouraged. The availability of labour coupled with
low wage rates relative to established economies has made BRIC economies very attractive to
multinational businesses wishing to reduce production costs.

Improvements in education have also been fostered and such improvements have made such countries
attractive places for investment by the worlds multinationals.
Natural Resources: The developing world economy is increasingly hungry for the resources that the
BRIC countries can provide cheaply. Brazil and Russia have extensive raw materials; Brazil in agriculture
and iron ore, Russia in oil. India and China have extensive cheap labour and manufacturing skill.
Such investment in turn has provided work and income for the abundant labour force in the emerging
economies and this income has contributed to the development of an urban middle class with discretionary
income to purchase an ever widening range of consumer goods.

These developments produce what might be called a virtuous circle in which more employment
produced more income which is spent on the consumption of more goods and through the multiplier
effect increases the countrys overall GDP.

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)

Requirement (b)
Offshoring involves relocation by an organisation of a business process from one country to another.
This is usually accompanied by migration of jobs from rich to poorer countries. The advantages and
problems that follow relate to emerging countries in general , not India specifically.
Advantages
There are a number of advantages to the Group.
It enables the Group to lower its cost of operations by having its back office operations performed
in an emerging country at a fraction of the cost it takes to undertake them in country D.

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A large pool of underemployed well educated talent exists in such countries and wages are
consequently lower than they are in a European economy like that of country D.

It is also the case that the government of some emerging economies have invested heavily in
IT and the communications infrastructure so that internet and telephone links with countries
around the world are excellent.

By centralising its back office operations in one location, the Group will also be able to cut
costs because it will be easier to standardise and control its operations in a single location and
division of the organisation.

It allows the G Banking group to concentrate on the more complex side of its banking operations and by
so doing to become more expert and efficient in these activities through specialisation and division of
labour. This kind of specialisation is increasingly necessary in a global economy where competition is
increasing and where threats come not only from domestic banks but from banks in other parts of the
world. Specific advantages include:

Speed: Greater staff resource available in the offshore country enables faster responses
to customers.

Sales to offshore country: Encourages sales to the country where production is partially
done.

Problems
Offshoring is being carried out in another country in which different political, economic, social, cultural,
technological and environmental conditions prevail. Experience suggests that these differences can
make for difficulties (although this may not necessarily be so for India). Difficulties can include:

Cultural differences between say country D managers and local employees can make for
misunderstandings and conflict.

The political polices of some emerging economies can involve costs on the business not found
in the home country as for example the requirement to provide housing accommodation and
other benefits for employees.

Economic: Exchange rates can be unstable and local tax requirements may also be difficult to
forecast.

There may also be language differences and time differences to be overcome. Some or all of the
differences noted may result in real or perceived differences in service levels with the result that
the overall image of the bank suffers in its own country.

Technical: Technical ability of staff and the local supply chain of essential supporting materials
may be inadequate in some areas.

Legal: Risk of loss of confidentiality. Respect for intellectual property rights may not be clear in
some countries.

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)

Requirement (c)
Role of HR division
Help is promised to employees affected in country D. The following help can be offered by the HR division
of the Group:

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Communication: Policy can be discussed with relevant staff unions and communicated to all
staff. Issues of timing and compensation packages might be explained and negotiated.

Advice and training: Those losing their posts can be offered assistance with re-training. Careers
advice can be given to those wishing to consider a new career path and targeted training
provision could be offered.

Compensation: Those losing their posts can be provided with severance payments based on
years of service.

Assistance with getting new jobs. Staff affected can also be allowed time off to attend interviews
for new posts during the period leading up to the completion of their employment with the Group.
Training in CV production and support in completing application forms might be arranged.

Counselling. Counselling by experts and mentor support could be offered for those struggling
to cope with change or unable to adjust to the idea of not working for the Group.

Question Four
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:

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)

Requirement (a)
Adoption of up -to-date supply chain management approaches to improve performance of W
Company
Innovations in Operations Management
In recent years operations management has come to be seen by many as strategically important to the
overall success of the business and a number of innovations have occurred including the shift from
price-based operations to relational procurement and to a greater concern with supply chain
management as part of a strategic process.
Strategic importance of supply chain management
While purchasing deals with the day to day buying of materials and equipment, supply has come to be
used to refer to more strategic considerations like the planning and implementation of a strategy and
the management of the whole supply chain process.

The essence of supply chain management is a cross-functional approach which involves


managing the movement of raw materials into an organisation, some aspects of the internal

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processing of materials into finished goods, and the movement of finished goods out of the
organisation and toward the end-consumer.

The increasing emphasis on core competences as a basis of competitive advantage has resulted
in organisations outsourcing some of their non-core activities to other organisations which are
able to perform activities like the sourcing of raw materials and the distribution of finished goods
more effectively than the organisation itself. W would be advised to review its activities with a
view to outsourcing those that could be done at less cost by an outside supplier.

One outcome of this development is to increase the number of organisations involved in


satisfying customer demand, another is to make for greater difficulty in the control of logistics
operations. So an important aspect of supply chain management is to develop trust and
collaboration among supply chain partners thus improving the visibility of inventory and speeding
up the movement of materials and products through the supply chain.

Another way in which the efficiency of operations could be improved in W is by attention to the
following aspects of its supply chain management:

Instead of maintaining the traditional form of organisational structure in which the organisation is split
into specialist divisions or functions like production, sales and marketing that often results in poor
communication and a resulting inventory build up,

W could adopt a horizontal structure that focuses on improving the supply chain for the benefit
of the end customer.

W could also improve its efficiency by paying more attention to the management of its
relationships with its up stream and down stream partners. In particular it could reduce the
number of suppliers and develop closer more collaborative relationships with them. As part of
this, W could make use of cross-functional specialists to work with supplier organisations to
improve quality and design of products.

Further efficiencies can be attained by use of integrated information systems that would replace
paper orders to suppliers with faster more accurate electronic means in the form of electronic
data interchange(EDI).

The use of Porters value chain analysis to identify the strengths and weaknesses in Ws supply
chain might prove helpful.

JH might also find Porters value chain a useful tool for assessing the strengths and
weaknesses of various aspects of Ws supply chain.

Operations management is concerned with virtually all the primary activities that Porter depicts as
horizontally linked in the value creation process: inbound logistics, operations, outbound logistics
and services. In respect of the support activities, operations management is directly linked to
procurement and elements of technology and infrastructure. By comparing the efficiency and
effectiveness of these links with key rivals, the management of W will be able to identify where
its weaknesses and strengths are and modify its supply chain strategy appropriately.

Porters concept of the link between the organisations own value chain and the value chains of its
suppliers and customers in a wider value system have also proved fruitful to supply chain specialists.
Competitive advantage through linkages between the organisation and its value system components can
be achieved by the analysis and subsequent improvement of relations with its suppliers and with its
customers. This may even extend to collaboration with other organisations via the adoption of total
quality management principles, common merchandising and even the formation of joint ventures or
strategic alliances.
In addition, JH might also find Cousins strategic supply chain wheel a useful framework as it attempts to
summarise the key components of any corporate supply strategy. Cousins argues that an integrated
approach to supply strategy involves the balancing of the five spokes of the strategy wheel. The five
spokes include several of the items noted above including, attention to organisation structure, improved

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relationships with suppliers and other partners, but adds the need to make use of cost/benefit analysis,
careful consideration of the skills and competences of key personnel and the choice of appropriate
performance measures to ensure alignment with the overall business strategy.

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)

Requirement (b)
Process design
W has made little use of the latest developments in operations management such as process design with
the result that costs are higher than those of competitors. This being the case, it may well be that Ws
processes need improvement or a radical overhaul to operate in a different but more effective and
efficient way.
Before any changes to processes are undertaken however, it is necessary to conduct an analysis of
existing processes. In order to do this thoroughly, an assessment of the organisations mission, goals
and customer needs should be conducted. Only after such an analysis has been followed through
should a more detailed analysis of processes begin. A business process can be examined, measured
and improved or it can be completely redesigned or eliminated altogether.
Business process design is the method by which an individual specialist such as JH seeks to understand
the business activities that enable an organisation to function. This in turn will ensure that these activities
or processes are designed so as to be as effective and efficient as possible. Apparently JH has used the
method to good advantage in the past.
Process design can involve the development of wholly new processes to facilitate the production of a
good or service, or in the case of W Company, it can refer to the improvement of existing processes.
The use of Process maps/charts
The re-design of business processes requires a detailed analysis of existing processes and a number of
aids or techniques have been developed to assist carrying out such an examination. One such aid is that
of the process maps or charts.
Process maps provide a visual representation of the processes via which a product or transaction is
processed; in this case how the white goods are manufactured by W Company. The map will include
workflow either within a process or within the organisation and the flows of information or products along
supply chains and across networks.
One of the advantages of process maps is that they help capture the operations process by illustrating
the activities that transform inputs into outputs. For W this will involve transforming materials and parts
into finished products.
The advantages of charting include the following:
It allows employees to understand what their job is and how it fits into the whole process.
It provides management with an overview thus identifying responsibilities and key stages in the
supply chain.
It helps indicate inefficiencies in existing processes thus identifying where waste exists and
pointing to potential improvements in the system.
It can assist in planning for change.

Given these advantages, it is evident that improvements in supply chain management activities within
W Company could make use of these techniques to good effect.

Business Process Re-engineering (BPR)


When the analysis of processes has been completed a number of tools/methods and approaches are
available for the improvement of processes. These include the use of TQM, Kaizen (continuous
improvement), structural reorganisation and the most radical method of process design: Business
Process Re-engineering (BPR). This approach, developed by Hammer and Champy, involves the

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fundamental re-thinking and redesign of existing business processes to achieve improvements in


performance as measured in terms of cost, quality, service and speed.
BPR challenges managers and staff to totally rethink the way they do things in order to improve
organisational effectiveness. The creators of the Re-engineering approach identify four major themes
of BPR as follows:

Process re-orientation which involves a focus on jobs, tasks, constraints and resources
with the intention of carrying out jobs and tasks more efficiently, overcoming constraints
and making better use of resources;
Creative use of IT wherever this can enhance business processes;
Rule breaking, which in this context means a readiness to do things in new and more effective
ways;
Ambition which involves setting targets for improvements in performance not previously
contemplated.

This approach could be used to help facilitate the process improvements in procurement and supply
chain management that JH will need make in Company W if it is ever to compete successfully again with
its rivals.
The use of BPR is a radical solution and requires careful consideration as this involves a
fundamental review and possibly a costly reorganisation of the way in which W Company conducts
its operations

Explain briefly how a code of ethics could help W Company to limit future incidents of
unethical behaviour.
(5 marks)

Requirement (c)
The misappropriation of funds and unethical conduct damages the functioning of any organisation. If
monies or other resources are not used as intended then the efficiency and effectiveness of the whole
organisation is compromised.
Most professional bodies have developed a Code of Ethics to help regulate the conduct of their
members and to try to prevent unprofessional conduct and unethical behaviour. One example of such
a code is The Code of Ethics drawn up by CIMA in 2005.
If W Company were to adopt such a code, future incidents could be limited for the following reasons:

Disciplinary action: a Code of Ethics is particularly useful as it sets out standards which act as
guides to behaviour and the punishments that would follow from infringement of these standards.
(Action against the perpetrators of past ethical misconduct is required to punish miscreants and to
set an example to others).

Expectations: a code can be used as a management tool for making clear the obligations and
responsibilities of managers and staff and the ethical ambitions of the organisation. It can also offer
guidance to employees on how to handle ambiguous situations which pose a dilemma between
alternative courses of action.

Role model: in drawing up a code of ethics the W Company will need to tailor its code to the
particular concerns of employees in the context of the organisation and the environment in which the
business operates. To be effective it will be necessary for the senior management in W Company to
demonstrate commitment in its implementation, monitoring and maintenance.
Involvement: such a code is usually developed through including employees and management.
Such discussion creates consensus on what is acceptable behaviour and causes group pressure
to comply.

Training: training is usually provided to communicate and implement such a code. This training, if

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conducted well, will reinforce the necessary behaviour. Training will include stories and examples
that will ensure the subject is real for everyone.

Publication: external publication of such a code enhances the reputation of the organisation and should
increase pride in employees, which will reinforce compliance.

Two way responsibilities: a code identifies organisational responsibilities as well as those of


employees. Clarity on this reminds management and staff of the fairness of obligations that are
expected on both sides which should increase compliance.

Reporting: the code will include a procedure for reporting suspected breaches of the code. An
open door policy plus acceptance of anonymous reports will avoid the appearance of creating a
network of informants. Follow up of all reported violations with potential confrontation and
leadership skill will reinforce the seriousness with which the code is taken.

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E1 Enterprise Operations
November- 2010
Question One
1.1
A
B
C
D

Which one of the following is NOT a benefit of corporate governance?


Improved access to capital markets.
Stimulation of performance.
Enhanced marketability of goods and services.
Prevention of fraudulent claims by contractors.

1.2
A
B
C
D

Corporate political activity is normally undertaken in order to


secure policy preferences.
make the world a better place.
further an environmental agenda.
understand the external drivers on an organisation.

1.3
Political risk analysis is conducted by a company considering international operations and
normally focuses on the
A
world economy generally.
B
relations between the USA, Japan and Europe.
C
political and cultural differences between the home and target country.
D
industrialisation of the target country.

1.4
A
B
C
D

Efficient regulation of companies is said to exist if


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.

1.5
A
B
C
D

The basis of the stakeholder view is that


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.

1.6
A
B
C
D

Which ONE of the following is not an approach to systems implementation?


Parallel running.
Phased changeover.
Matrix operation.
Pilot testing.

1.7
A
B
C
D

Which ONE of the following is not normally associated with outsourced IS solutions?
Ensuring contract compliance.
Assembly and maintenance of a suitably skilled workforce.
Preparing formal tendering documents.
Invoicing, processing and payment.

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1.8
is
A
B
C
D

A necessary product/service requirement to meet the Japanese interpretation of quality

1.9
A
B
C
D

Process design can best be improved by


an organisational restructure to reflect functions not processes.
improved checks on suppliers.
adopting a strategy of continuous improvement.
improved quality control.

to comply with all safety standards.


to cost no more than necessary.
to meet a design brief.
to meet customer expectations.

1.10 Collaborating with its suppliers may bring a company added value because it can
A
strike a harder bargain with its suppliers.
B
work with a supplier to improve quality and reduce costs.
C
avoid transaction costs.
D
introduce price competition amongst suppliers.

Answer to Question One


1.1 D
1.2 A
1.3 C
1.4 A
1.5 C
1.6 C
1.7 B
1.8 D
1.9 C
1.10
B

SECTION B 30 MARKS
Question Two

a) Briefly explain FIVE reasons for the growth in outsourcing by organisations. (5 marks)
Requirement (a)
Outsourcing involves the contracting out of a business function to an external third party provider.
This usually involves two organisations entering a contractual agreement to exchange services
and payments.
When a business outsources to suppliers outside a country the process is known as offshoring or
offshore outsourcing
The increasing tendency for organisations to outsource one or more of their functions is because of
the benefits that organisations can derive from this arrangement. The benefits most often quoted
include the following:

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Contemporary strategic thinking emphasises a need for organisations to focus on their core
activities as these are the things they best understand (sticking to their knitting). Other areas of
operation might more effectively be provided by a third party on their behalf. Outsourcing enables
an organisation to focus on its core business and by so doing become more specialised and
proficient in that business without the distractions of carrying out other functions such as IT
support in which it may have limited expertise.

Organisations are often able to manufacture or conduct one or more processes at a lower cost
than if they were to carry out the activities in-house. The attraction of outsourcing is that the
cost of labour in some emerging economies is often significantly lower than in the mature
industrial economies from which much outsourcing activity is initiated.

The cost of services charged by an external provider may often be lower because of particular
expertise and economies of scale that the provider enjoys.

Outsourcing can result in improvements in the quality of the organisations product or service
because the external supplier can often bring to bear specialist expertise, knowledge,
equipment and best practice not possessed by the outsourcing company.

By outsourcing, organisations can use the experience as a catalyst to challenge the


organisational culture and bring about change where lethargy or entrenched views have held
the organisation back in the past.

b) Describe FIVE ways in which emerging economies have benefited as a result of foreign
direct investment in their countries by multinational enterprises.

Requirement (b)
Multinational enterprises (MNEs) have played a major role in the development of so called transition or
emerging economies through foreign direct investment (FDI) in those economies. MNEs, often with their
home base in Europe, the USA or Japan have invested in the large emerging economies like Brazil,
Russia, India and China as well as in so called second tier economies like Indonesia, Vietnam, Columbia
and the Ukraine.
This FDI has consisted of two main types:

acquisitions in which the MNE acquires shares of a local company and control of its assets and
markets are transferred to the new parent, and
investment in green field sites where a company builds new factories, offices and other
facilities and provides all equipment and some of the senior staff but recruits other staff within
the host country.

Emerging economies have, as a result, benefited from:

an impetus to their economic growth through new building work,


a contribution of expertise and finance in developing infrastructure and
communication,
learning from new technology and expertise,
additional employment opportunities,
salaries and wages earned in the host country are largely spent to boost the economy of the
host country. (Profits are generally repatriated to the country of the investing company).

c) Certain organisations have been transformed by information and communication technology (ICT).
Briefly explain FIVE significant ICT changes using retail organisations as an example.

Requirement (c)
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(Note: in excess of five developments are given below). The impact of information and communication
technology (ICT) on retailing is probably more obvious to the general public than its impact elsewhere.

24 hour retailing. The internet has enabled an infrastructure for 24 hour retailing and a widening
of the customer base, potentially globally.

Reduced costs. The internet has enabled retailing to be conducted at a fraction of the cost of
buying and selling goods in the traditional shop or supermarket due to overhead savings
which can be passed on to consumers in lower prices.
Reduced staffing. Intermediaries like shop assistants and travel agents in traditional retail
organisations can be replaced by significantly fewer staff using telephones and computers in call
centres where goods and services can be ordered, payment taken and the goods dispatched via
dedicated suppliers to the end customer. Non-physical goods like music, photographs, plans,
articles and software can be distributed electronically without need for physical transportation.
Different means of advertising of products. The use of e-commerce is also cost effective
for advertising in that a website is available twenty four seven for anyone with an interest in
the goods and services which a particular organisation has on offer.
Growth in on-line retailers. The internet offers the opportunity for low set up costs and global
sourcing which has led to a proliferation of retailers (post the dot.com boom of 15 years ago).
Many retailers now sell both in store and online.
Smarter stock management. ICT also enables inventory to be maintained at cost efficient
levels because the faster an order can be taken and then delivered the less waiting time there
is in storage. Bar code readers and scanners on sales terminals have produced a potential for
real time stock management
More sophisticated product marketing. The opportunities for marketing are enhanced. The
requirement to furnish personal contact details provides the marketing arm of an organisation
with information about customers and customer contacts that can be used to determine individual
customer preferences and target them with information about new products and new offers.
Hybrid provision opportunities. Existing retail organisations have found it profitable to
integrate an on-line business with their traditional type of business to the mutual benefit of both.
Greater opportunities for individuals to buy and sell. The possibility of individuals trading
anything they have to sell and want to buy has also been clearly demonstrated as thousands
now trade regularly via ebay,etc.

d) Describe FIVE forms of waste within manufacturing organisations that lean process
improvement aims to eliminate.

Requirement (d)
(Note: in excess of five forms of waste are given below).
A Lean philosophy is in essence about the elimination of waste of all kinds.
Taylorism and Fordism
Lean may be a recent term but it has its roots in a long history. Early exponents of ways of eliminating
waste in manufacturing included those who proposed scientific management techniques, most notably
F W Taylor. Taylor used a number of techniques including work study techniques and time and motion
study to eliminate unnecessary movements of men, materials or components in the production
process.
The introduction by Henry Ford of innovations like the assembly line, standardisation of parts and
integration of the supply chain processes for automobile production, from the extraction of iron and coal
for steel production through to the sale of the finished product was all a contribution to improved
efficiency.
Lean management
Japanese manufacturers refined the idea of lean management by eliminating waste in storage and over

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stocking by use of Just-in Time (JIT) purchasing and stock management.


The Toyota Company is credited with having developed a Lean manufacturing philosophy. Over time,
various principles have been added to those developed by Toyota but include pull processing, right-firsttime quality, waste minimisation, continuous improvement, flexibility, and developing and maintaining a
long term relationship with suppliers. Toyota also identified seven wastes to be eliminated as follows:

Transportation (moving products that are not actually required to perform the
processing).
Inventory (all components, work in progress and finished product not being
processed).
Motion (people or equipment moving or walking more than is required to perform the
processing).
Waiting (waiting for the next production step).
Over-production (production ahead of demand).
Over-processing (resulting from poor tool or product design creating activity).
Defects (the effort involved in inspecting for and fixing defects).
Later an eighth waste was defined by Womack et al. (2003) described as manufacturing goods or
services that do not meet customer demand or specifications

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).

Requirement (e)
Service organisations include hospitals, universities, office processes, retail organisations, consultancies
and many others. It should be noted that some manufacturing organisations also often provide services as
part of their offering such as after sales service.
Care must be taken in adapting the principles of lean management from the manufacturing context but
service organisations can make use of lean principles to improve productivity.

Given that the defining characteristic of lean management is the elimination of waste in all its forms, it
follows that the essential object in any lean management programme is to first analyse the process by
which a service is provided and then taking appropriate steps to eliminate it.
Amended definitions that help to identify waste in services that need to be eliminated are as follows:

Delay for customers waiting for any kind of service.


Duplication as can be involved in having to repeat requested information from several
different sources for the same organisation.
Unnecessary movement such as having to queue a number of times to obtain the one
service.
Poor communication that leads to misunderstandings, the need for repetition and delays.
Lack of stock as happens when one is seeking out a product and being passed from supplier to
supplier.
Poor service in the sense of not providing a friendly service by ignoring customers, keeping them
waiting and not establishing rapport so that potential future custom is lost.
Failure to provide the quality of service the customer expects because of damage to goods or
not being produced to specification.

The use of flexible workforce techniques, high commitment human resource policies and a commitment
to continuous improvement are also essential ingredients of a lean management approach to services.

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f) Describe the key aspects of a programme to implement Total Quality Management


(TQM) within a manufacturing organisation.

Requirement (f)

Clarify the meaning of quality in respect of the product(s) manufactured: this will involve the
anticipation and satisfaction of customer needs.

Agree the specification of quality criteria including measurement so that all employees
are aware of the targets they are seeking to attain.

In order to obtain full commitment, a programme of training and education will be required
together with full consultation and communication.
Training must cover all levels in the organisation including the senior management.

The establishment of a steering committee in a larger organisation will be necessary,


containing representatives from all levels and disciplines.

The committee members should be trained so that they can help cascade the TQM principles
throughout the organisation.
The establishment of quality circles, each trained in problem solving and data collection, will
help promote and reinforce the push for quality once the programme gets under way.

It helps to document the processes, procedures and activities undertaken thoroughly to help
ensure the continuity of the programme as it develops.
Feedback on the extent to which quality targets are being met will be required once the
programme is under way so that remedial action can be taken.
A philosophy of continuous improvement should be adopted so that constant effort is being made to
seek to improve quality

SECTION C 50 MARKS

Question Three
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

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Required:
a) Discuss the contributions of both Middleregions Human Resources Department and line
managers in developing and then implementing HR practices.
(10 marks)

Requirement (a)
Middleregions Human Resources Department
Middleregions Human Resources Department has a number of important roles to perform, some of
which are listed below.
Ensuring alignment of HR to corporate aspirations
It should be the responsibility of the department to ensure that HR activities are aligned to the corporate
strategy. The department should also make sure that new policies arising from the workforce strategy
must support Middleregions corporate strategy and broader organisational aims and philosophy. As
such, the department will need a mature understanding of organisational requirements and will need to
see the link to strategic and operational human resourcing.
Leading HR planning processes
As subject specialists, the department should take the principal role in matters of strategy
development including leading the development of the new workforce strategy. The leadership it
exercises should emphasise inclusivity and it must ensure that all key stakeholders, including line
managers and employees are involved in the process. This involvement is important to ensure
workforce commitment and successful implementation.
Bringing expertise to the planning process
The Human Resources Department can bring specialist knowledge and skills into the planning process.
As such, it should keep abreast of any developments to service provision which could affect the
workforce strategy and then be prepared to brief others on the implications for Middleregion. The
department is also in the best position to suggest new initiatives and approaches. As such, it could use
its contacts and professional association to find out what happens in other regional units of government,
other areas of the public sector and best practice within the private sector.
Maintaining Middleregions human resource asset
Human resources activities should be aimed at delivering agreed strategy. As such, it should assume
responsibility for continuously developing the skills and capacity of the workforce. In particular the
department should put in place measures to remedy skill gaps identified as part of the planning process.
Develop monitoring and review mechanisms
As a public body, Middleregion will need to demonstrate the impact the strategy is having on performance
improvement. Middleregions progress towards achieving its strategy means that targets and performance
indicators are required, and the department should suggest and agree key performance indicators (KPIs)
and other rubrics. Regular review and reporting mechanisms should also be formalised by the
department.
Ensure adequacy of HR function
Senior HR managers will need to ensure that the function is capable of supporting and delivering strategy
and fulfilling its organisational obligations. As such, they will need to make sure that it is staffed to an
adequate level with those possessing the necessary skills and experience. The budgetary provision to
operate the department will need to be adequate and, if not, a case should be made for additional
funding.
Support managers
A key role of the department should be to help and support line managers in carrying out their role
correctly and effectively. As such, it should find ways of providing advice and support in order to improve

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management practice. The department should be accessible to managers and should encourage
communication and a dissemination of good HR practice within the organization.
Middleregion line managers
Classically the role of management has been expressed as organising, planning, controlling and
influencing. Middleregions line managers are no different in respect of human resourcing issues. As
such, their main role should include:
Organising: Strategy and policy implementation
Line managers need to recognise the potential impact they have on subordinates who are responsible
for service delivery improvement and the achievement of corporate goals and strategy's objectives.
These managers can play an important role in understanding and implementing the workforce strategy
and people management policies. They do this by translating these into operational terms. In doing
this, they may need to adapt and organise ways of working in order to fulfil the strategy requirements.
Planning: Participation in strategy and policy development
Whilst the Human Resources Department offers specialist knowledge and skills, line managers can
complement this by bringing local knowledge and practical on the ground experience to HR
planning processes. This should help in having practical discussions of what might or might not
work.
Controlling: Monitor strategy achievement
Part of the management role is that of monitoring and control. Line managers should monitor how well
employees they are responsible for are performing against the strategic targets. By way of example,
managers may wish to compare their teams sickness and absence or staff turnover rates with overall
organisational targets. As such, they may wish to determine (in conjunction with the Human Resources
Department) local policies and measures to improve matters. More generally, line managers with their
particular on the ground perspectives will be in an ideal position to feedback issues that are getting in
the way of achieving strategy or organisational policy.
Influencing: Communicate with and positively influence the workforce
Line managers represent the filling in the sandwich; the link between policy makers and front line
workers and, as such, they will represent the most direct communication mechanism for most staff. In
terms of new initiatives, such as the proposed workforce strategy, they should look to gain the support of
employees by:
a) explaining its main features and its impact on individuals
b) selling policies
c) defending policies on behalf of the organisation.
Asking for guidance
The Human Resources Department should be seen as a source of guidance and support when dealing
with people issues. Line managers must be willing to seek advice and support in order to improve
management practice and deal with workforce problems and issues. The alternative of going it alone or
looking for quick fix solutions could be organisationally damaging.

(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)

Requirement (b)
The external auditor has reported that a new workforce strategy will need to take account of a changing
environment and be relevant to local conditions. Middleregion should plan a new workforce strategy that
is mindful of these issues through:
thoroughly analysing and understanding external factors,
thoroughly analysing and understanding internal factors,
planning collaboratively,
planning flexibly,

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establishing review mechanisms and being prepared to adjust strategy accordingly.

Analysis of external factors


It is increasingly difficult for organisations to plan rationally when faced with a changing, and at times
unpredictable, external environment. This means that there needs to be effort to analyse the
environment within which an organisation exists, as part of the planning process. The macro
environment is of great significance to Middleregion for instance:

the likelihood of a change of national government may mean different funding or expectations,
funding comes from local taxes and government grants. Issues of national prosperity and
employment levels have heightened significance.

In terms of planning for a future workforce, external data requirements will include regional employment
trends and unemployment levels, demographic projections, skill levels and shortages, education levels,
transport and planning proposals, labour mobility, and migration and immigration trends. This data can
help in developing forecasts of people requirement where issues of future methods of production and
technology usage and likely government levels of funding assume high significance.
Analysis of internal factors
It is important to understand the current and future local context facing the organisation when developing
the strategy. This will help the strategy reflect the diversity of the workforce
and key organisational challenges and changes. To this end, existing organisational strategy (possibly
expressed as a corporate strategy) represents a first consideration. The whole purpose of a workforce
strategy is that it focuses on human resourcing issues as a way of delivering overall organisational
strategy.
It is also important to collect and analyse workforce planning data. A considerable amount of data,
relevant to local conditions and internal issues needs to be collected and analysed. Some internal data
requirements include employee analysis: numbers, gender, qualification, trade and job skills, experience,
etc., categories of staff, staff suitable for promotion or redeployment, overtime levels and trends, labour
turnover analysis and reasons, absence level by category and trends, productivity ratios and trends,
comparison with national, regional and general public sector trends.
Issues of staff retention, turnover and absence need careful consideration in the light of issues
such as:

past retention, turnover and absence rates and those expected by reference to
government targets and other units of government;
the rate at which staff are leaving and their reasons for leaving (based on exit
interviews);
numbers of employees retiring and likely future projections based on age profiles.
If a significant cause of turnover is due to a lack of promotion opportunities, inadequate training, low
morale or poor management, then these problems need to be addressed within the strategy.
Problems in achieving future plans might to a degree be predictable and may well, in the past, have
centred on:
retention, especially when employees are well trained or have specialist skills;
slow promotion leading to staff turnover;
difficulties associated with putting succession planning into practice;
vacancies arising in very senior positions or in vital skills areas, etc.
Measures need to be incorporated into the new workforce strategy that anticipate these difficulties
and counter them with positive actions.

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Consideration should also be given to the organisations ability to continue to attract suitable recruits
into its various operations. Again, if there are difficulties these should be addressed through the HR
plan. Having considered the existing supply of labour, an organisation will need to project a view of what
the workforce will need to be like in the future in order to fulfil its strategic plans. The difference between
the two projections of supply and demand can be made (gap analysis) and plans developed
accordingly. This might involve, for example, retraining, part time workers, use of consultants and
contractors, overtime, computerisation recruitment, redundancy policy, etc.
Planning collaboratively
Workforce planning should not be seen as the job of Middleregions Human Resources Department but should
instead be a shared process involving a range of stakeholders from across the organisation in order that the
plan ultimately is realistic, and workable. By adopting such an approach the strategy that emerges should more
fully reflect local conditions and culture. In terms of the external environment, a wider planning group should
also lead to better intelligence sharing and a more robust basis upon which to develop strategy. If it is felt that
insufficient expertise exists to build a realistic picture then Middleregion might consider using specialist
environmental scanners and strategy consultants to provide the necessary analysis.
Flexibility
The changing demands on Middleregions service need to be reflected in its workforce strategy, so
ensuring it is up-to-date and relevant. Since employees are probably the most unpredictable
organisational resource, the best plans will be those that allow the greatest flexibility, this might be
achieved in a number of ways, including:

scenario planning and consideration of what if options,


shorter planning time frames and cycles,
revisions to the strategy in the light of changing circumstances.

When the external environment is uncertain, complex and subject to rapid change, it may be impossible
to develop a single view on environmental influences. In order to take account of what if options or
possibilities, plans might be constructed on the basis of both best case and worst case positions.
Scenario planning builds on plausible views on how environmental changes might impact on the
workforce and what might be done if this is the case. (This planning process might be assisted
considerably by the use of IS and IT through spreadsheets and modelling applications.)
Middleregion should ensure that planning time frames are realistic. To that end, every aspect of the
strategy will need to be fully reviewed on an ongoing basis. Most HR plans are developed on a rolling
three-year basis, which means that forecasts for next year and the succeeding years in the cycle are
updated every year in the light of this years experience. Detailed plans for securing sufficient and suitable
employees for current needs are made for a one year period, in line with current budgets. Less detailed
plans are made for the three-year period, prepared in line with the organisations corporate strategy.

Review Mechanisms and being prepared to adjust strategy accordingly


Middleregion could introduce more sophisticated monitoring, control and evaluation mechanisms. It is
important to determine as part of the planning process how progress against the workforce strategy
objectives will be measured. Once the strategy has been implemented, Middleregion will need to take
measures to evaluate its success by considering what performance indicators should be used, what
targets will be set, how success will be measured. Rather than being cast in stone, strategy might evolve
and be adjusted in the light of ongoing experience and might lead to, for instance, resources being
reallocated to accommodate changing circumstances.

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C) Explain the costs Middleregion should take account of when considering moving to e-HR.
(5 marks)

Requirement (c)
Middleregion should consider moving to e-HR by using technology to improve HR services, such as
recording and monitoring systems, automating administrative tasks like recruitment, and disseminating
HR policies and information on the intranet.
Software purchase or development costs
The cost of moving to e-HR will depend on what Middleregion requires the system to do. A system can
be purchased or developed to undertake one task, such as the recording and monitoring of overtime
levels, or can be integrated so that it supports a range of HR activities and is linked to other
organisational systems such as payroll. Middleregion needs to clarify the HR services and information it
requires. Once this is done, the scope of e- HR should be determined by considering whether these HR
services and information needs are best provided in their current form or whether provision by e-HR
would be preferable. Following this, costs might be estimated and a decision taken involving a weighing
of costs and benefits. What is important is to articulate how e-HR will support and add value to the
achievement of Middleregions workforce strategy.
Associated costs
Middleregion will also need to consider related costs such as new hardware required as a result of eHR, and running costs associated with maintaining the new system or systems. It is also conceivable
that certain HR systems are computerised but need upgrading or scrapping which will have cost
implications. If the newly introduced e-HR system is incompatible with existing systems or fails to meet
user requirements, then additional development costs might be involved in order to bring about the
necessary adaptations.
Cost of staff training and cost of disruption
New systems will involve employees undergoing training in their use. This may involve the cost of hiring
external consultants and will also involve the cost of the participants' time away from productive activity.
Opportunity costs
When making a decision to implement e-HR, Middleregion will need to carefully consider the objectives of
the system and set out a clear specification for what is required, balanced against the budget available.
Inevitably, the provision of a budget will represent an opportunity cost as there will be many other
pressures and potential projects competing for budgetary provision. (An alternative situation may be that
if Middleregion is highly reliant on manual effort at the moment, net cost savings may accrue through
efficiencies implying a budget reduction).
Adjustment of business processes to fit software
There may be a need to adjust existing business processes to fit the software. Similarly, it will be necessary to
review the current Human Resources function and if it is structured in a way that will not support e-HR,
restructuring may be necessary possibly involving greater cost.
Middleregion should explore costs further by reference to the experience of other Regional Units who
have introduced e-HR, the external auditors and potential suppliers of software solutions.

Question Four
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

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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.
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:

Discuss the implications of DDs activities on its ethical stance and CSR position.
(10 marks)

Requirement (a)
Corporate Social Responsibility
The social implications of DDs marketing activity can be understood within the context of Corporate
Social Responsibility (CSR). Although different understandings and definitions of CSR exist, one
popular definition is the continuing commitment by business to behave ethically and contribute to
economic development while improving the quality of life of the workforce and their families as well as of
the local community and society at large. Common features associated with CSR include:

an integration of social concerns into business operations,


voluntary actions on behalf of the organisation,
operating in ways that exceed ethical, legal, and societal expectations, and
making a positive difference for society.

Promotion of healthy lifestyles


DD has a long history of supporting sporting events as part of its stated commitment to help promote
healthy lifestyles. This appears consistent with the use of natural ingredients in its products. DD may be
seen as acting in a consistent, socially responsible fashion. DD is demonstrating a voluntary
commitment, an integration of social concern within its business model, and a desire to make a positive
difference for society.
For the first time DD now spends an equal amount on online advertising. This might encourage sitting
in front of a computer rather than exercising, which could appear to work against the healthy lifestyle
philosophy DD is trying to champion.
Stakeholder social concerns
External stakeholders look at a companys actions in terms of its products and its impact on the
environment, the locality and its workforce. DD makes charitable donations, so benefiting local
communities, and clearly has a concern for its workforce, hence its reputation as a good employer. In
terms of the environment, DDs products are made using natural ingredients but there is no detail in the
scenario as to whether these sources are self sustaining. Similarly, there is little detail on how
environmental concerns might be addressed (particularly in manufacturing practices and product

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packaging).
Philanthropic donations
The history of an organisation can be of significance as it can help to shape organisational culture,
business philosophy and ways of operating. The DD drinks company was founded over one hundred
years ago on religious principles. A percentage of all DDs profits are allocated to a number of charitable
causes (indicating a desire to make a positive difference). There is no detail as to what these causes are
but superficially at least this is voluntary action aimed at giving something back to society. Cynics may
argue conversely that DDs charitable donations represent tokenism, a way of reducing taxation or a low
cost public relations exercise.
A focus on children
DD spends heavily on making its drinks products appealing to the market. Undoubtedly, a main target is
a potentially vulnerable group, namely children. (TV advertisements are based around childrens
programmes and DD uses expensive packaging). Children influence their parents to purchase the
products and ethical issues arise as to whether this is right. Promotional success is based upon
children placing demands on their parents and if some parents cannot afford it, this could cause
difficulties.
In addition, the sugar content (and possibly other ingredients) appears important in achieving a taste that
children like, but ethical questions can be raised about manufacturing and selling potentially harmful
products to vulnerable groups. In addition, the heightened use of online advertising means that parents
may never see the advertisements that their children are exposed to when they sit at a computer alone.
Product endorsement by an unsuitable role model
An organisations reputation impacts not only on customer perceptions but also on workforce morale and
business partners attitudes. Good reputations need to be maintained because once they are tarnished they
could be very difficult, if not impossible to regain. DDs new initiative of seeking celebrity endorsements
may have been well founded but the choice of celebrity was clearly inappropriate and could have lasting
damage on a reputation which has been built over a long period. Although the rapper might appeal to its
target market segment, particularly teenagers, the musics bad image either was not fully understood or
was ignored by DD. The criticism by religious and political groups and in the newspapers led to a
dropping of the plan and the public acknowledgment that an error had been made. Viewed positively,
this was an honest mistake. DD was prepared to listen to public opinion and changed its plans before
any lasting damage was done. The company acknowledged the mistake (but no apology appears to
have been issued). A less generous interpretation might be that this was a calculated risk. The proposal
to use Mr TT could have been a cynical strategy that was abandoned when the public backlash was
greater than anticipated.
Product content
An international health watchdog body claims that DDs products contain potentially harmful levels of
sugar and, if drunk excessively by children, can lead to long term gum and tooth decay. The fact that
secret ingredients have always been used by DD adds to the potential confusion and suspicion that DD
may not be operating in a socially responsible fashion. This further adverse publicity may impact upon
sales and is clearly at odds with its stated commitment to help promote healthy lifestyles. DD will need to
decide how it responds to the watchdog claims, with options including:
conducting further research and possibly challenging the claims,
discrediting the findings and the body making the claims,
modifying product content so there is less sugar present and make this public,
increasing promotion to compensate any fall off in sales as a result of bad publicity.
A socially responsible organisation might look to work with the international body in order to investigate
the product content and reduce the level of, or completely remove, potentially harmful ingredients.

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(b)

Explain the role that the basic marketing mix and branding have in DDs positioning to
appeal to its target market segment.
(10 marks)

Requirement (b)
Segments, targeting and positioning
Market segmentation involves an organisation dividing a market into similar customer groups with similar
common characteristics. Following on from this activity, targeting is the process of selecting the most
lucrative market segments for its product(s). From the scenario, it is clear that DDs targeted market
segments are children and teenagers. As the world's leading manufacturer and distributor it is assumed
that further targeting geographically has not been chosen and that the targeted market segment is
youngsters world wide.
Positioning involves developing a marketing mix which aligns an organisations products to its targeted
market segment. The apportionment of effort, the precise combination, and the integration of all four
marketing mix elements to achieve organisational objectives represent an organisations own marketing
programme or mix. In the case of DD the important aspects of the mix are described with reference to
branding.
Product mix
Principal features of the product mix in this case include quality, taste, package design, product range
and, significantly, brand. DDs brand with associated brand names, logos, and packaging conveys
messages about quality. There is good reason for believing that these associated features and packaging
are more significant aspects of DDs product mix than the content itself. (Some products are sold as own
brand alternatives for some large supermarket chains, and although these sell more cheaply than DD
branded products and are less costly, the minimal sales underline the point that branding, packaging and
advertising are crucial to sales).
DD has an ever expanding line of products in addition to own brand alternatives sold by supermarkets.
The strength of the DD brand means that customers are likely to try new drink flavours in a way they
might not for a company with lower or no brand recognition offering similar products.
In terms of product content, and hence taste, secret natural ingredients (and doubtless sugar content)
are important factors.
Promotional mix
DDs promotional strategy involves a pull philosophy whereby a great deal of effort is devoted to
communicating with the final customer who in turn demands that retailers stock DDs products.
The main promotional tools used to communicate with customers about its products appear to be:
television advertising,
advertising using the internet,
promotion through brand recognition.
As such, the advertising is non-personal and mass by nature, being aimed at the market segment at
large.
Noteworthy features of DDs promotional mix are significant budgets for both television and internet
advertising. Continued advances in the newer internet medium mean that DDs promotional potential
in the future may be significantly enhanced.
Public relations (PR) are also part of DDs promotional mix. The companys reputation as a good
employer, its support for sporting events, promotion of healthy lifestyles and charitable donations provide
a platform for maximising public relations and supporting the promotion of the DD brand and products.
Brand development is an important part of the promotional mix by helping communicate the brands
values, differentiating DD from its competitors, and enhancing buyer loyalty.
Place mix
The place mix covers arrangements for the movement of goods from production to consumption including

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distribution channels and coverage, methods of transportation, locations of sales outlets, arrangements of
sales areas, stock levels, and warehouse locations, etc. An effective place mix will result in getting the right
products to the right places at the right time. In terms of DD, what is known is that it is the world's leading
manufacturer and distributor, so it can be safely assumed that these logistic arrangements, including
distribution channels, coverage and transport are at worst satisfactory, at best world class.

DDs pull promotional philosophy and the strength of its brand means that all sales outlets of nonalcoholic drinks will feel obliged to stock DDs products. As such, DDs drinks are likely to be on sale in
supermarkets, from vending machines, and in cafes, bistros, pubs and restaurants, etc.
Pricing mix
Although there is little direct information in the scenario, reasonable assumptions about the pricing mix
can be made based upon what is known. Overall, DD is profitable which suggests that its pricing mix is
appropriate. (The profitability is alluded to in the fact that a percentage of its profits are allocated to a
number of charitable causes every year).
It is apparent that DDs competitive strategy is not based on low costs and low pricing. Instead, DD is
differentiating its products from competitor products by using secret natural ingredients and investing in
its brand through promotional campaigns and product packaging. Clearly, a product differentiation
strategy can be costly and such costs need to recovered in the selling price of DDs products. (DDs
customers are in effect prepared to pay extra for these differentiated features. This much is clear from
the experience of selling own brand alternatives alongside the more expensively packaged, branded
goods in supermarkets).
DD is described as the world's leading manufacturer and distributor of non-alcoholic drinks and, as
market leader, the selling price DD arrives at will become something of a measuring rod against which
competitors set their own prices.
The value of a brand is when it positively influences buying decisions and it can be exploited within the
pricing mix. In short, branded products tend to attract higher prices, a fact undoubtedly understood by
DD.

(c)

Discuss the likely benefits of DDs increased use of the internet for marketing
purposes.
(5 marks)

Requirement (c)
Encourage global appeal
The phrase world wide web confirms the potential scope of the medium. DD is the world's leading
manufacturer and distributor of non-alcoholic drinks and the internet will ensure that it reaches a truly
global market.
An effective website
DDs increased marketing dependence on the internet means that users will expect a high quality home
webpage. Such an investment by DD could prove worthwhile and could become a further source of brand
reinforcement and product promotion. DDs website might contain competitions or other attractions for the
user and will aim to gain user preferences and/or capture information on customers.
Encourage traffic to DDs website
DD might use search engine websites such as Google by paying to display advertisements with links to
its own web site. Under this arrangement, DD would pay only when a user chooses to follow the link
from its advertisement. This and other methods might be used to encourage people who are interested
to visit DDs website.
Brand management
The internet can help in projecting and reinforcing a companys brand messages. The most successful brands
are those that create special relationships with customers by encouraging strong emotional responses from
them. DD is using the internet to reinforce its brand.

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Maintain competitive position


As the market leader, DD will not wish to be upstaged by its competitors. As such, DD has little option
but to invest heavily in the internet. DDs market segments (children and teenagers) are comfortable
and familiar with the internet and DDs presence on it and the messages it conveys are doubtless
more compelling than if other older media were used.
Conduct advertising campaigns
When conducting specific advertising campaigns, the internet can complement other media. DD spends
equally on online and television advertising. Television adverts often have high production values but
are costly to make. Now the impact of these advertisements can be maximised by making them also
available online. Whilst television adverts are shown at a specific time, internet adverts can be seen at
any time. The internet therefore is particularly useful in helping maximise the benefits of celebrity
endorsement and strengthen particular campaigns.
One innovation used by some companies such as global drinks companies is the use of viral marketing,
which encourages users to pass on sites showing memorable or cult advertisements.
Introduce new products
DD can use the internet to introduce new products and product lines quickly and easily. The internet is a
key medium for delivering product information effectively by use of classified or display adverts. It is
also possible to get immediate feedback through discussion forums, blogs or online questionnaires as
new products are launched.
Understand segment better
Online advertising can take a number of forms, including targeted email campaigns, which can result
in getting product feedback and understanding the market segment better. Few other mechanisms
can offer the interactivity that emailing does so helping to develop DDs relationships with its
customers.

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E1 Enterprise Operations
May- 2011
Question One
1.1
Transferring some part of an organisation's activities to a subsidiary in another country is an
example of
A

free trade.

outsourcing.

offshoring.

delegation.

1.2

'Servqual' relies on feedback from

customers.

managers.

careful business process re-engineering.

a 360 degree appraisal.

1.3

Attempts by a country to help local producers by restricting international trade is known as

factor conditions.

enterprise management.

governance.

protectionism.

1.4

Total productive maintenance involves

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.


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1.5

The ABC system is a method of

managing inventory.

selection criteria.

production improvement.

quality compliance.

1.6

A computerised payroll package is an example of a

data processing system.

management information system.

decision support system.

web dependent application.

1.7

The acronym SDLC normally relates to

skills, deliverables, limitations and capability.

collaborative quality orientated activities.

standard data listed code.

a system (or software) development lifecycle.

1.8

Electronic data interchange relies on

structured data and standard business documents.

networking and creativity.

social networking and intelligence sharing.

software development skills.

1.9

Corrective, adaptive and perfective are forms of

rewards and punishments used in people management.

performance management variables.

systems maintenance.
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stock control methods.

1.10 Data integrity and elimination of duplication are key features of


A

effective databases.

end user flexibility and autonomy.

autonomous (independent) working by different functions.

all Web 2.0 tools.

Answer to Question One


1.1

1.2

1.3

1.4

1.5

1.6

1.7

1.8

1.9

1.10

SECTION B 30 MARKS

Question Two
a) Explain the relationship between organisational competences and decisions relating to the
contracting out of activities.

Requirement (a)
Organisational competences
A competence is an activity or process through which an organisation deploys or utilises its resources.
Unlike a resource, it is something the organisation deploys, rather than something it has. (This thinking
forms part of the broader 'resource based' view of strategy that assumes that an organisation is a
collection of resources, capabilities and competences that provides a basis for its ability to compete.)
Core competences
A competence is classified as being 'core' when it does something differently or better than competitors
and this forms the basis of its competitive advantage. Core competences are difficult for the competition
to acquire or imitate and so allow the organisation the opportunity to exploit them.
In terms of strategic supply chain management, core competences are areas where the organisation
should never consider outsourcing. It is what the organisation knows best and is good at. The
organisation should never contract out core competences but should instead keep them 'in-house'.

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If core competences are precious and should not be contracted out, it follows that only non-core
competences should be considered for contracting out.
Complementary competences, residual competences
Two non-core competences are relevant:

Complementary competences. Here the organisation may decide to outsource but only to trusted
key suppliers who have the necessary skills to deliver what is required. Whilst not as fundamental
as core competences, complementary competences need safeguarding and the organisation
would need to develop a strategic relationship with the supplier if it chose to contract out.
Residual competences. Here the organisation should outsource but will not need to develop
strategic relationships with the supplier, instead the relationship can be more 'arms length' by
nature. When making a 'buy or make' decision, this will involve a straightforward 'buy' decision.

Quinn and Hilmer consider the risk of potential failure on the part of the outsource partner and the
centrality of the competence to organisational strategic success. They put forward three tests for whether
any non-core activity should be contracted out or not:

What is the potential for gaining a competitive advantage from this activity? The lower the
potential, the more sensible it is to outsource.
What is the potential vulnerability to market failure that could arise if the activity was
outsourced? The lower the potential, the more sensible it is to outsource.
What can be done to reduce risks of contractor failure by structuring arrangements in such a way
as to offer protection? The more the organisation can protect itself, the more sensible it is to
outsource.

b) An organisation is reviewing its decision-making information systems and has asked you to
identify suitable assessment criteria for this review.
(5 marks)

Requirement (b)
Value for money. Value for money offered by the information systems that produce decision making
information is a relevant criterion. Value for money is often expressed as the 3 Es - Economy, Efficiency
and Effectiveness. An economical operation acquires these resources in appropriate quality and quantity
at the lowest cost. This might be interpreted as asking whether the software has been acquired at the
lowest possible cost commensurate with its quality. Efficiency concerns performing tasks with reasonable
effort ('doing things the right way') whereas effectiveness is the extent to which objectives are met ('doing
the right things') . Effective information embraces many of the other criteria including relevance to the
business process, as well as being delivered in a timely, accurate and consistent manner.
Cost. Ongoing cost of the existing system is obviously a significant criterion especially when set against
other factors such as other organisational investments.
Timeliness. Information must be provided to decision-makers in sufficient time for it to be used in the
decision-making process.
Relevance. Information needs to be relevant to the decision being made by reducing uncertainty and
increasing knowledge about that decision. For example, making a decision about offering credit to a new
customer might include an analysis of the customer's
previous credit history.
Understandability. Information needs to be clearly presented or displayed in an
understandable form that permits the user to apply it effectively to a decision-making situation.
Consistency. Information should be presented in a consistent fashion and compiled on a consistent

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basis in order that there is no confusion in interpretation by decision-makers.


Accuracy. Information must be sufficiently accurate for it to be relied upon by the decision-maker and
for the purpose for which it is intended. (It is sometimes accepted that absolute accuracy can be
sacrificed if it means greater timeliness or lesser cost).
Completeness. The degree to which information includes detail about every relevant event necessary to
make the decision is also an important criterion. The content of information, particularly if the information
is provided to decision-makers, should be of strategic importance, meaningful and actionable. Complete,
meaningful information is synthesised from various pieces of data.
Bias free. This means that information is not biased towards one particular perspective or from one
particular source. Biased information is likely to lead the decision-maker to the wrong decision or an
incomplete decision.

c) Briefly describe Hofstede's dimensions of national culture.


Requirement (c)
Geert Hofstede first researched the role of national culture within the organisation in a study of many
thousand IBM managers. He identified a framework of four dimensions which he argued largely
accounted for cross-cultural differences in people's belief systems and values, referring to them as:
Uncertainty avoidance
Masculinity
Individualism
Power-distance
Later he added a fifth dimension, long versus short-term orientation or 'Confucian dynamism'.
Uncertainty avoidance
Uncertainty avoidance measures a society's tolerance for uncertainty and ambiguity. In other words, the
extent to which a national culture programmes its members to feel comfortable in novel, unknown,
surprising, or different situations. Uncertainty avoiding cultures (such as Japan and France) try to
minimise the possibility of such situations by strict laws and rules, safety and security measures.
Uncertainty accepting cultures (such as Denmark and Sweden) are more tolerant of opinions different
from what they are used to and try to have as few rules as possible.
Masculinity (versus femininity)
Masculine cultures (such as Japan and USA) emphasise 'assertiveness' compared to 'nurturance' for
feminine cultures (such as Denmark and Sweden). Men in feminine countries have the same modest,
caring values as the women, but in masculine countries women are more assertive and competitive; but
not as much as men!
Individualism (versus collectivism)
This dimension measures the degree to which individuals are integrated into groups. Individualist
societies (such as UK and USA) expect individuals to look after themselves and their immediate family,
differences are admired and the cult of individuals prospers most. Collectivist societies (such as China,
Pakistan and Taiwan) have individuals integrated into strong in- groups, such as extended families
which protect one another. Here, conformity is generally considered the norm and society's rights and
responsibilities are dominant and individual needs are subservient.
Power-distance
Power- distance is the extent to which the less powerful members of organisations accept and expect that
power is distributed unequally. In high power -distance organisations, superiors display their power and

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exercise it. Subordinates expect this behaviour and feel uncomfortable if they do not personally
experience their superiors displaying their status and power. In high power-distance cultures (such as
France and India) subordinates feel separated from one another. In low power -distance societies (such
as Denmark and Austria) members of organisations, and of society, tend to feel equal and relatively close
to each other at work. Power is much more likely to be delegated in low power-distance cultures.
Confucian dynamism
Asian cultures replace the dimension uncertainty avoidance by Confucian dynamism which relates to
different values taken from long verses short term orientation. Long term oriented countries like China
and other Asian countries value persistence and thrift. Western countries (e.g. Germany and USA) by
comparison have a short term orientation where people value actions and attitudes that are affected by
tradition and the past.

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)

Requirement (d)
There are two categories of controls, referred to as general controls and application controls.
General controls
These controls are designed by the organisation to ensure the completeness and effectiveness of the
organisation's overall control environment over its information systems. These controls concern the
overall transaction processing environment and include:
Personnel controls, including the appropriate segregation of duties, policy on usage and
hierarchy of access.
Access controls, such as password systems, user identification, timed lock-outs, etc.
Computer equipment controls to protect equipment from destruction, damage or theft.
Business continuity planning which involves a risk assessment to establish which
activities/systems will have a critical impact on the ability of the organisation to continue its
business activities.
Application or program controls
These controls are performed automatically by the systems and designed to ensure the complete and
accurate processing of data, from input through to output and may also help ensure the privacy and
security of data transmitted between applications. These controls vary based on the purpose of the
specific application, but the categories of IT application controls can include:
Completeness checks to ensure that all records are processed from initiation to
completion.
Validity checks to ensure only valid data is input or processed.
Identification and authorisation checks to ensure all users are uniquely identified and authorised.
Problem management facilities to ensure that all application problems are recorded and
managed in a timely manner.
Change management controls to ensure that all changes are implemented.
Input controls to ensure data integrity.

e) Describe briefly FIVE major developments over the past twenty years or so that have led to
globalisation.

Requirement (e)
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Globalisation refers to the closer integration of countries and people around the world. It is the result of a
number of factors, some unrelated, some interconnected, some of which are briefly described here.
Reduced trade barriers
Trade barriers have been loosened and this has been a driver of globalisation. In recent years, the
World Trade Organisation (WTO) which comprises over 150 countries has been prominent in advocating
free trade and has been instrumental in reducing barriers to trade in goods and services.
Improved transportation
Transportation systems, especially rail, shipping and air travel have improved. More goods than ever
can now be moved relatively easily, quickly and cheaply from where they have been produced to
countries and regions where they are consumed. In particular, the introduction of cold storage facilities
and handling has made a significant difference to the extent of international trade.
Low cost efficient communication systems
Advances in, and the subsequent spread of, new technologies have revolutionised international
communications and encouraged the development of global patterns of production and consumption. It
is now possible for people to communicate with each other instantaneously and meet regularly, despite
living and working in different parts of the world. As such, videoconferencing, email and webcams have
all been significant developments.
Increased movement of capital and technology
Easier access and cheaper transport has led to increased movements of capital and technology across
borders. Inevitably, this has, in turn, impacted on local cultures, knowledge sharing and learning as
people travel further.
Production efficiencies
The development of industrial and agricultural production processes through greater automation and
improved methods has decreased reliance on labour for basic agricultural and production needs. This
has led to a redeployment of people to satisfy global consumer needs and wants.
Improved financial systems
The efficient and safe transfer of funds from the buyer to the seller is essential and so improvements in
the financial systems have been important in developing international trade. There has been an
enormous expansion of international financial markets. In addition, the growth of international financial
institutions has enabled capital to be obtained in the cheapest markets and this would enable large
projects to be undertaken in most countries and enable the countries to exploit their natural resources
and skills.
Emergence of BRIC economies
There has been a large increase in foreign direct investment (FDI) flowing to developing and transition
economies. The emergence of the BRIC economies (Brazil, Russia, India and China), plus others such
as Indonesia and Mexico has fuelled world trade and globalisation. Their declining dependence on
agriculture and governments encouraging foreign investment has led to a rapid growth in trade,
especially of manufactured exports.

f) Describe Reck and Long's purchasing development model.


Requirement (f)
Supply is now accepted as a more fundamental and strategic concept when compared to purchasing. Twenty
years ago Reck and Long (1988) were prominent in identifying a coherent purchasing development model. The
model describes different development stages for an organisation's function and reflects the way in which the
supply chain is being managed.

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According to this thinking, an organisation might position itself strategically according to a continuum
that includes:
Passive
The purchasing function acts on the requests from other departments and attempts to get the best deal it
can. Some departments may get involved in the detail of the negotiations, others may not. Purchasing
has no strategic direction and passively reacts to the requests from other departments.
Independent
The independent stage is further developed from the passive stage and involves a more
professional approach to purchasing including use of technology and enhanced
communication. The function may adopt some of the latest purchasing practices but the strategic
direction it takes is independent of organisational corporate strategy.
Supportive
At this supportive stage, purchasing is corporately recognised as being essential. The function
provides timely information about price and availability. Strategically, the function supports the
organisation's competitive strategy through its purchasing techniques and activities.
Integrative
The final stage of development means the function is fully integrated with the organisational strategy.
Purchasing is integral to organisational competitive strategies and its management is involved in its
development.

SECTION C 50 MARKS
Question Three
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

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Executive hopes for. Others are eager to see details of the new reward scheme and whether it has taken
account of all relevant factors.

Required:

(a) Describe the potential benefits of quality standard ISO 9000 certification to 2TW.
(10 marks)

Requirement (a)
The International Standards Organisation (ISO) issues standards that are globally recognised, and
include the ISO 9000 series. ISO 9000 provides a systematic approach to managing business processes
to manufacture products that conform to customer expectations. The Chief Executive believes that
significant benefits to 2TW might arise through gaining the quality standard ISO 9000 certification.
Overcoming internal weaknesses
Currently 2TW has inadequate quality control systems which have led to differing operating efficiencies
between SBUs and there are significant numbers of returned goods which require replacement or
reworking. ISO 9000 accreditation should help in overcoming these weaknesses as it is based on product
standardisation and quality control.
Customer satisfaction
The significant numbers of returned goods mean that customers are not currently receiving products of
the quality they expect. The standardised practices guaranteed by a company complying with ISO 9000
will mean that consistently dependable processes and products will reverse this situation. Fewer returns
should result in improved customer satisfaction.
Enhanced company reputation
If 2TW customers are not currently receiving products of the quality they expect then this can be very
damaging to the company's reputation. The outcomes arising from achieving ISO 9000 will improve
customer satisfaction and customer loyalty, leading to repeat purchasing and an enhanced company
reputation.
Improved sales
Organisational growth could arise as sales improve through:
Repeat purchases by satisfied customers.
New customers attracted through the recommendation of existing customers.
New customers attracted through a growing reputation and a guarantee of quality through
ISO accreditation.
New sources of business might also arise once 2TW has ISO 9000 accreditation as some large
organisations often have approved supplier lists that exclude companies without accreditation.
Standardised practices
The review has identified differing operating efficiencies between SBUs. By gaining ISO 9000
certification, 2TW will develop systems that should lead to standardised practices and the maintenance
of consistently dependable processes. The consistent approach to policy documentation is a requirement
of certification which also includes systems for control of products that do not conform to the agreed
standard. The standardisation gained by the process will improve the efficiency of business processes
and should reduce expenditure (and therefore improve profitability).
Elimination of inefficiencies
Adoption of the most efficient processes will allow SBUs to discuss and consider mutual learning and best
practice. SBUs will need to agree upon common modes of operating and standards to be achieved and will
allow 2TW to identify the most efficient processes. This should drive out bad practice and inefficient

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operations. This should increase profitability.

Mechanisms for quality control


The need for control of quality records (according to the standard 'at all locations where operations essential
to the effective functioning of the quality systems are performed') means
that once a recognised mechanism is in place, an effective quality control mechanism can be
established. Compliance can be easily assessed by conformance of a particular operation to the agreed
standard. This may help the Chief Executive overcome his/her fears of a loss of control over SBU
operations.
Improved management information
As part of quality control, the standard encourages a company to use these statistical techniques that
would be most appropriate for its industry. This would force 2TW to adopt such techniques routinely in
order to correct that which does not comply to the standard and to prevent poor quality occurring. These
techniques and systems will improve business processes by improving decision making as SBU
managers would be able to base decisions on more reliable information in future.
A stimulus to continual improvement
The need to document every procedure and work instruction will make the way in which 2TW operates
visible and will lead to improvements if unnecessary practices are identified or an improved method is
identified. In this way the system might stimulate continuous quality improvement leading to improved
business processes, reductions in waste, improved product quality and cost savings. By seeking the
international standard, 2TW will be forced to focus on how it does business and, unlike a training
programme, this initiative is more than a one off exercise or event. Periodic audits conducted by external
independent auditors are a requirement of certification. This will keep the issue of quality permanently 'on
the agenda'.
Improved employee morale
As 2TW's external reputation grows through rigorous quality standards, employees will be proud to be
associated with the company. The fact that the standard implies a need for the workforce to take control
of its processes and document its work processes will mean that it will feel valued. A key message of a
shared responsibility for quality should provoke a positive attitude throughout the organisation. Such an
attitude should lead to an increase in workforce morale, a nurturing of goodwill and a positive
organisational culture.

(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)

Requirement (b)
Appropriateness of basic pay as part of the remuneration and reward package
Redesign of the package will need to balance basic and performance related pay in an
appropriate way. The basic pay element should recognise factors such as:
the size of the SBU,
the relative contribution of the SBU to the company as a whole, and
the responsibility, past experience and specific skills and competences demanded of the
individual manager by the nature of the SBU.
A need to address recruitment and retention
The overall reward package will need to address not only internal targets of quality and profitability but also
marketplace levels of reward for similar work. If not, there may be problems of both recruitment and

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retention of good managers. As 2TW operates across the continent, local pay rates may vary enormously
between countries in which the SBUs are situated, meaning that basic pay levels will need to be varied to
reflect these conditions.

Ability of package to influence behaviour


The entire employment relationship is built on a 'wage-effort bargain'. Rewards must be commensurate
with effort and attainment. Consistent with expectancy motivation theory, if bonuses are relatively small
they may not change behaviour. Similarly, if they are difficult to achieve, they may not motivate
managers.
Control of total payroll costs
Although the scheme is in part based on profitability, 2TW cannot leave the scheme cost open, otherwise it
may be writing an 'open cheque'. 2TW needs to decide how much it can afford in overall payroll costs. Once
the costs associated with other groups are calculated, then the base salary costs and performance related
payments for managers can be determined. The HR department will conversely need to recognise that too
great a constraint
on performance related pay available could act as a source of dissatisfaction for SBU managers.
Levels of performance related pay
Performance related pay represents an attempt to establish closer links between results (improved
quality and profitability) and rewards. The success of the scheme is dependent upon SBU managers
behaving in the ways in which the Chief Executive would wish and incentives should be directed towards
those who adopt the behaviours required. As such, the incentive of performance related pay should be:
seen as no less generous than the previous bonus scheme;
sufficient to make managers improve quality and improve bottom line performance.
Non-financial incentives
A belief that money alone can encourage the enhancement of individual management performance is
incorrect. Other forms of incentive should also be considered including promotion, training and career
development opportunities. The reward system could therefore also involve adjustment to issues such as
succession planning and career progression or promotion using developmental pathways and career
ladders, etc.
Accounting for non-controllable factors that influence performance
An underlying philosophy of performance related pay should be to provide a fair and consistent basis for
rewarding managerial performance. However, other organisational factors such as the local economy
within which the SBU is situated, availability of technology, raw materials and financial resources will also
have an important effect on SBU performance. Consideration needs to be given as to how to account for
these factors.
Potential corruption of existing systems
The Chief Executive has announced that the new performance targets system will be linked to the
appraisal process. This means that performance appraisals involving SBU managers (presumably
conducted by regional directors) may cease to be positive developmental processes and become more
defensive and even confrontational.
Impact of adjusted HR policies on other groups
The positive impact of workgroups on individual motivation has long been recognised and famously
illustrated by the Hawthorne studies. The new reward system should not therefore be seen in any way
undermining teamwork within SBUs. SBU managers are the main focus of the Chief Executive's initiative.
Other groups however, such as directors and other members of the workforce also contribute to SBU
profit and quality levels. If managers alone are perceived to be receiving unfair reward and recognition,
this might have a negative impact on these other groups and lead to workplace disharmony and
endanger improved overall performance. It is likely that HR policies will also need to be reviewed for all
other groups to prevent this happening.

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A need for consultation


Consultation with SBU managers, trade unions and other relevant groups is necessary. The Chief
Executive appears not to have consulted with SBU managers before making the announcement. If the
revised scheme is to be accepted by SBU managers, there needs to be wide consultation in order that
there is universal 'buy in'.

(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)

Requirement (c)
2TW's HR department will redesign the remuneration and reward package for SBU managers including the
existing bonus scheme. SBU managers need to be aware of the levels of performance they need to attain with
absolute certainty. Indicators that are not SMART (specific, measurable, achievable, realistic and time bound)
may invalidate the whole scheme.

Specific
So far, the Chief Executive has announced the initiative in an open letter to all SBU managers. Further
dialogue between 2TW's HR department (which is responsible for the complete redesign of the remuneration
and reward package including the bonus scheme) and these managers will have to take place. Although
SBU managers will need to agree precise targets as part of the normal appraisal processes, measures
need to be readily available. Any measures devised would need to be agreed by SBU manager groups
(and possible relevant trade union groups if they exist within 2TW) as being appropriate and fair. If no
such agreement is reached then the whole scheme is discredited.
Measurable
Rewards for SBU managers will need to encourage profitability and quality. Precise quantifiable
measures are readily available in respect of net profit. Appropriate metrics and evaluation criteria need
to be agreed upon and put in place presumably aligned to ISO 9000 standards and levels, cost of
returns and reworking. For a scheme to be viewed as fair and workable, as much subjectivity as
possible should be eliminated. Profitability is subject to decisions as to what might be charged against it.
However, returns, reworks and ISO metrics might possibly be seen as more precise.
Such measures should be immune from potential manipulation by SBU managers anxious to gain
performance related payments. Avoidance of undesirable behavior (such as a slackening of safety
standards, mistreatment of subordinates, or a lack of cooperation with other SBU managers, etc.) in order
to hit targets should also be avoided.
Achievable
2TW's HR department must recognise that individual managers need to have control over reaching
performance targets. If hitting a target is primarily the result of events outside of their control there will be
difficulties. Under these conditions individuals may become frustrated and demotivated because, irrespective of
their effort, the targets may remain elusive.
Realistic
2TW's HR department needs to translate scheme aims into realistic targets which are recorded
accurately and reliably. Otley's work (1987) into behaviour and accounting control indicated that if targets
are unrealistic or are not met, a demoralising effect might occur whereby there is a dramatic fall-off in
performance. The scheme may be counter-productive if this happens and may cause a worsening rather
than an improvement in profit and quality.
Time-bound
Pre- set dates should be established when 'snapshots' of performance over a period are taken and
awards paid (this might be annually or bi-annually). Issues of who collects the data and the recording

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mechanisms used will need to be addressed. The HR department should ensure that a mechanism is in
place to deal with instances where managers dispute attainment against targets within a pre-determined
time frame.
Transparency of targets and awards given
It would be counter -productive to keep awards secret and a lack of transparency could lead to suspicion
and lack of trust. The publication of all awards should act as a stimulus to improved performance and
encourage an open, sharing organisational culture.

Question Four
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 lowcarbon 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.

a) Explain the reasons why a strong brand is so important to companies such as 99.

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(10 marks)

Requirement (a)
Communication of the organisational vision
Brands are a shorthand means of communicating to the market place what an organisation stands for. As well
as communication of the unique product characteristics, brands assist image creation and vision projection.
These factors are important for 99, which through its brand can share its vision for globally available clean
water whilst respecting the environment.
Differentiation of product from competitors
A strong brand distinguishes a company from its competitors by making it easily recognisable. 99 is recognised
as a charity brand. In this case, a particular difficulty is that there are plenty of natural bottled natural spring
water products on the market and competition in the industry is intense. This makes the value of the 99 brand
more important because it helps emphasise a source of differentiation from the competition. It appears that
because of its beliefs, 99 has already found a market niche in the face of bigger competitors but the basis of
differentiation may need greater emphasis through effective brand management.
Ability to command premium prices
Branding that communicates 99's social and environmental credentials allows 99 to charge a little more
for its products. The importance of 99 having a strong brand is what it can achieve through it. A strong
brand is good for sales, so contributing to 99's corporate aims. The scenario indicates that most
consumers choose socially and environmentally responsible products over others. This is fortunate for 99
as a relatively small player in a large bottled water market. Due to an insufficient volume of production
and consequent diseconomies of scale allied to the more costly green electricity, 99's unit costs are likely
to be relatively high. Unlike large bottled water producers, 99 is unable to compete on the basis of
charging low prices for its products. The strength of the brand and customer loyalty means that despite
the fact that unit prices may not be the cheapest, 99 can still remain competitive.
Perceived superiority of the product
Branded goods will always attract higher prices than unbranded products. Their appeal is that because of
branding they are somehow perceived as being 'superior' in some way. In the case of 99, the nature of
this superiority is the company policies and aspirations that lie behind the product. The product is, as a
result, less price sensitive in the face of competitor actions such as price cuts, due to its brand.
Connection with the customer base
The 99 brand represents the linkage between the product and what it stands for and the consumers'
beliefs. Successful brands create special relationships with customers because of their intangible
qualities that provoke strong emotional responses by individuals. Presently, 99 uses 'green' electricity and
funds the provision of clean water to some of the poorest communities in the world. These ideals
apparently resonate with consumers. Modern consumers have higher expectations of companies than
ever before, thanks to greater choice of products and easy access to company information. A brand is a
way of describing all the information or perceptions that are connected with a particular product or
service. The brand is therefore important in captivating consumers and fulfilling their expectations.
Perception management
Brands shape perceptions. There is no suggestion that E has expertise in brand development and
management (indeed he sees the tie-up with Z as an opportunity to develop the 99 brand further). A
recent national survey indicates that customers blame large retailers for not providing more
environmentally and socially friendly products. It may be that this widely held view has worked to 99's
advantage. In short, 99's growth might in part be explained as being a result of being an independent,
small brand with, so far, possibly unsophisticated promotion and packaging. One danger of a tie-up with Z
might be that customer loyalty could be jeopardised. Care will have to be taken to ensure that 99 loses
none of its 'smallness appeal' but the brand is developed sensitively.

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Customer loyalty
When customers have a level of familiarity and recognition for the 99 name and its associated aspects
such as symbols and strap line, brand awareness has been achieved. This awareness will hopefully lead
to brand loyalty, repeat sales and habitual buying of 99's water (subject to easy availability). Repeat sales
are particularly important for fast moving consumer goods (FMCG) such as 99's water which by nature
are low cost and rely on sales volumes. A maxim of marketing is that it is more effective to satisfy
customers who will make repeat purchases rather than having to constantly attract brand new customers.
For the customer, choice is simplified when making a purchase because the 99 brand is in tune with their
needs and wants. Satisfied customers also act as a source of promotion and influence to others leading
to increased sales and market penetration.
Brands as corporate assets
Positive brands are a significant source of organisational strength and may even be a key organisational
asset. Despite being intangible, brands such as 99 can be of substantial value. 99's success has led to
two take- over bids being made because larger players value the 99 brand that has been created and
developed. Sources of water and green technology are in no way unique or particularly valuable. What is
of value, however, is the inherent goodwill and reputation the brand communicates when persuading
customers to make a purchase or retailers to stock 99's water.
A means of customers making a statement
Brands are important because they allow individual customers to make statements about themselves.
For instance, branded watches, jewellery, footwear and clothing help project images for those who wear
them as being either sophisticated, trendy, fun-loving or sporting etc. In the case of 99's water, it is
likely that customers buying a bottle of water will feel that they have (however indirectly and modestly)
somehow contributed to some worthy cause. The statement customers are making when they buy 99's
water is that they 'care'.
Reassurance over the purchase
Following a purchase, the individual customers will inevitably consider whether they made the 'right'
choice or not. Companies hoping to achieve long-term success need to create relevant and consistent
experiences for their customers. In the case of 99's water, the drink itself must have an acceptable taste
and the bottle must be of an appropriate standard. It is the underlying ethics of the company however,
that give reassurance to a customer that they have made the 'right' purchase.

b) Describe the key aspects of the product and place mix involved in a deal between Z
and 99.
(10 marks)

Requirement (b)
The product mix and place mix form part of the variables of the marketing mix comprising product,
promotion, place and price.
In terms of a tie- up between the two companies there appear to be mutual advantages. For 99, these
would include strengthening the place mix through an improved distribution network, environmentally
cleaner transport and an ability to get 99's water onto supermarket shelves. 99 would also strengthen its
product mix through the opportunity to ensure bottles and packaging become 100% biodegradable or
recyclable, and expertise to develop the 99 brand further. Z, by comparison, sees the acquisition of 99
as a way of strengthening its product portfolio and hence its product mix.
Product
Products are the items that the organisation offers for sale, including their features, so includes
issues of quality, design, brand name, packaging etc.
For 99, the product range is rather modest; limited as it is to two individually sized (plastic) bottled products,

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still natural spring water and sparkling spring water. The key characteristics of these products are not so
much the basic product content (water) or its packaging, more the vision the product represents; what the
company is trying to do and how it operates.
Z has a rather more extensive range of products it is offering to the market. There is no detail whether its
brand image is as strong as 99 or not. Z is described as a large food and drinks company which sees the

acquisition of 99 as a way of complementing its product portfolio. This suggests that its portfolio of
products does not presently include bottled water (or if it does, it does not possess the brand kudos 99
has). Z's products have already helped build a 'green' track record through its practice of carbon
labelling on all of its products and its environmental plans to make all packaging biodegradable or
recyclable, and 99 fits in well with the portfolio ethos.
Z's approach to purchase 99 represents an attempt to strengthen its product mix. Where small brands
have proven successful, larger competitors tend to respond by either launching rival products or buying
these smaller brands. It is often easier and certainly quicker for companies such as Z to choose the 'buy'
option rather than attempt to build market share themselves through internal growth.
Assuming Z adopts the marketing concept as a business philosophy, it will have stayed close to its
customers and attempted to understand and then respond to their feelings, wants and desires. Even
before the national survey was conducted therefore, Z should have already noticed that consumers like to
believe that in some way they are 'changing the world' with the choices made in their shopping baskets.
Increasingly consumers are interested in companies' responsibilities to their customers, employees,
communities and the environment. (Possibly they may believe that where governments may have failed
to address certain concerns, then business can and should.) Ethical products are therefore seen as
addressing a number of agendas including issues such as environmental, organic, fair trade, as well as
animal rights, etc. Given that there are a growing number of consumers with ethical concerns, 99's
business ethos fits this thinking by providing products with green and ethical credentials.
It is apparent that the 99 brand has considerable strength already and Z has expertise to develop the 99
brand still further. For Z this means that adding further products or product lines in the future will be less
risky, as existing customers are likely to try the new product(s), thanks to brand loyalty.
99's products involve packaging its natural spring water (both still and sparkling varieties) in individually
sized plastic bottles. Obvious extensions to the product range include different sized bottles (e.g. mini
or large), different packaging (e.g. paper cartons or glass) or taste varieties (e.g. flavoured water).
99's products are fast moving consumer goods (FMCGs) which tend to be purchased for personal
reasons and generally involve many relatively low financial outlays. FMCGs often involve habitual
purchasing but their products tend to have short life cycles. Of particular relevance to FMCGs is
advertising, branding and packaging. It is important, therefore, that longer term the 99 brand is
developed still further and therefore E's belief that by agreeing a deal to access Z's greater expertise is
well founded.
Place
Place involves more than just the location of sales outlets and includes distribution channels and
coverage, stock levels, warehouse locations, etc. In this case, 99's water is sold in a few garages, on
airplane flights and in airport shops but not, significantly, in supermarkets. E believes that a tie-up with Z
would be beneficial because of its ability to get 99 onto supermarket shelves. This suggests that Z's
products are currently sold in supermarkets. Supermarkets are the place where large volumes of sales
are achieved; something important if the product happens to be a FMCG such as 99's water.
In terms of distribution, 99 sees advantages in joining Z which offers an improved distribution network. Z
is described as 'a large food and drinks company' and as such operational issues including distribution,
stock management and warehousing represent threshold competences for continued operation and are

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likely to be well established and robust.


99 would also benefit from the more environmentally friendly transport as Z's distribution involves the use
of low-carbon vehicles.

(c)

Discuss the positive features of 99's past success which could help inform Z's review of
its own HR activities.
(5 marks)

Requirement (c)
Team working and empowerment
It is important that every member of the workforce should support the company's marketing activities and
corporate ethos. In the case of 99, only 10 people, apart from E, are used in the production and sale of
its products. As such, they will be well known to one another and are likely to operate as an intimate
team. It is unlikely that there would be much specialism given the size of the operation; more likely
individuals will be multi-skilled and adaptable. Their focus on the sale of sufficient bottles of water to
finance a charitable purchase of a clean water pump is reinforced by visits abroad to help with the
installation. From this Z might learn something about effective team working, empowerment and a shared
focus on outputs. This thinking has implications for Z in terms of organisational structuring and culture.
Connecting workers to company outcomes
The Chartered Institute of Marketing explains internal marketing as ensuring 'everyone within the
organisation not only understands why the organisation exists but also its key outputs and metrics and,
most importantly, how every person and department contributes to the delivery of the proposition'. Due to
its size, 99 has achieved this. Doubtless, as a large employer, Z will have policies for training and
development. Possibly these should focus more on improving the way employees contribute to
organisational values, goals and the future direction of the organisation.
Retention
The recent national survey indicates that two thirds of people say they would work for an ethical
employer even if it meant being paid less. The evidence is borne out by the fact that the wages of 99
employees are modest but no-one has ever left the company, suggesting that staff are engaged and
content. This means that so long as pay rates are reasonably competitive, work is engaging and Z
maintains its credibility as a good ethical employer, then the chances of retaining key staff will be
enhanced.
Recruitment/Employer branding
If potential employees believe that a potential employer's ethical approach and track record is important
then recruitment may be easier. 99's stance has achieved success amongst consumers and represents
the core of its external brand. If the same stance is adopted by Z, it should also lead to superior employer
branding which in turn will improve recruitment possibilities. A consequence of this is that in a battle for
talented workers, Z will be a more attractive organisation to join.
Overall reward package
Staff at 99 may feel that they are contributing to a noble cause and that by accepting reduced pay, more
funds might be directed to worthy causes such as installing water pumps. This demonstrates that the
reward is more than monetary remuneration and it might be speculated that trips abroad and charitable
work installing pumps represent part of an enriching package for 99's workers. Z might learn from this the
value of developing a broader reward package including both pay and non-pay features.
Motivation
When workers take a similar perspective to owners and managers, the so-called unitary view of the
organisation exists. It is likely that, under these conditions, staff will be motivated by company values
and a positive organisational culture. Every time 99 sells enough bottles to build a new pump, it sends

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two members of staff out to help with the installation and pictures are published on the company
website. This represents a positive connection with the corporate cause. Z might also consider ways of
connecting its workforce with the causes it engages in, such as the charities it supports, its carbon policy
and its packaging policy. Such engagement can provide a motivational stimulus to workers.

E1 Enterprise Operations
November- 2011
SECTION A 20 MARKS
Question One
1.1

Balanced trade is

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.

1.2 Hofstede's cultural dimensions do NOT include which ONE of the following:
A

Individualism versus collectivism

Masculinity versus femininity

Weak versus strong uncertainty avoidance

Corrective versus perfective approaches

1.3

EOQ represents a form of

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.

1.4

5S and 6 Sigma are examples of

portfolio analysis frameworks.

marketing communication.
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quality improvement practices.

Human Resource Development models.

1.5

The use of assessment centres and psychometric tests is normally associated with processes of

recruitment.

selection.

induction.

appraisal.

1.6

CIMA's Code of Ethics for professional accountants is based upon

a framework of fundamental principles.

a framework of strict rules.

a scale of penalties for non compliance.

sustainability principles and best practice.

1.7
According to Herzberg's motivation theory, which ONE of the following is the cause of
dissatisfaction?
A

Demotivators.

Motivation detractors.

Hygiene factors.

Process theories.

1.8

David Kolb identified a four stage model representing

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.

1.9

The headings found in a person specification are likely to be based upon

Rodger's 7 point plan.


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job enrichment principles.

employment best practice guidelines.

the main tasks within the job role.

1.10 A key feature of a lean philosophy within operations is


A

removal of waste.

incremental change.

official accreditation.

continuous improvement.

Answer to Question One


1.1 A
1.2

1.3

1.4

1.5

1.6

1.7

1.8

1.9

1.10

SECTION B 30 MARKS
a) Describe briefly FIVE forms of protectionism a government could engage in to discourage
imports.
(5 marks)

Requirement (a)
A government could engage in one of several forms of protectionism, including:
Import tariffs
Import tariffs increase the cost of foreign goods for the consumer, so protecting home competitors whose
products appear to be less costly. Import tariffs of this kind account for a third of all protectionist measures
according to the World Bank. (One recent example was called 'green protectionism' imposed by certain
developed nations and involved imposing new tariffs on imports from countries with weaker carbon
emissions reduction targets than themselves. This was seen as being an excuse to make imports from
nations such as India less attractive to home markets.)

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Regulations
When a countrys government adjusts regulations such as technical standards or health and safety
standards on imported goods and services, possibly for no good reason, protectionism occurs. These
governments may claim that such regulation is needed for consumer protection and the impact will be
that foreign exporters may find that their products are no longer welcome on technical grounds. Like
import tariffs these restrictions act as protective barriers for home producers (assuming that they
comply with such regulations).
Subsidies
A government may offer subsidies for home producers. This may take several forms. Making finance
available to local manufacturers more cheaply than commercial rates is one such example. This in effect
gives home producers an unfair advantage over foreign producers who would not be able to source finance
at such privileged rates and may price their products less competitively as a result.
Buying home products only
A government may promote domestic businesses by issuing restrictions on purchasing departments
they have control over. A requirement upon government departments to purchase only goods
produced in the home country may prove more costly for the tax payer but would protect local
producers by eliminating some competitors from their markets.
Bail outs to struggling businesses
Government bail outs that allow unprofitable businesses to continue trading can unfairly protect these
businesses against more robust foreign competitors. A recent example was widespread bail-outs by
national governments to certain home banks to make sure they do not go into liquidation.
Export barriers
Governments may recognise the relationship between supply and demand in determining price.
When, for instance, food prices rise sharply, major crop-producing countries may restrict exports by
home producers. The impact would be to increase supply at home so reducing domestic prices.

b) Explain, with examples, the meaning and nature (dimensions) of corporate social
responsibility (CSR).
(5 marks)

Requirement (b)
Although Corporate Social Responsibility (CSR) does not have a generally agreed definition, most feel it
to be a description of ways of integrating economic, social and environmental agendas within
organisational activities. CSR therefore might be understood as an organisations corporate conscience
and involves corporate citizenship, social and sustainable practices and its general sense of
responsibility, etc. (Some CSR writers refer to honouring the triple bottom line of people, planet and
profit).
CSR encompasses at least four main dimensions:
Economic (the way in which a company is contributing to the development of a local economy
in which it operates).
Legal (the extent to which a company is restricting its operations so as to comply with the law).
Ethical (approval by society of companys operations as being 'right')
Philanthropic (the degree of voluntary contributions a company makes to society).
When making a business decision, therefore, CSR refers to a firms obligation to maximise positive
and minimise negative impacts upon stakeholders in these main ways. The following are offered by
way of example and further explanation

Economic. This dimension of CSR involves organisations recognising their responsibility to

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contribute to the development of economies. A good example is The Body Shop which is
actively involved in community trade and against exploitation of suppliers. Through its
Community Trade purchasing programme, The Body Shop buys ingredients, crafted items
and accessories from marginalised communities around the world in return for a long term
relationship based on fair trade. This in turn leads to villages in (say) Africa enjoying healthy
returns for natural ingredients they provide and assistance with building and developing
facilities.
Legal. A key element of CSR is the management of an organisations relationships with
governments and regulatory agencies. It is alleged that in 2010 the oil giant BP and its partners
minimised US health and safety regulations, resulting in a massive explosion costing the lives of
10 employees and an environmental catastrophe in the form of an enormous oil leak. If the
allegation is correct this implies a failure in respect of this dimension of CSR.

Ethical. This dimension centres on how ethical or morally acceptable the operations of the
business are to society. Operations may be legal but may not necessarily be ethical. In this
respect sports retailers such as Nike and their supply chain partners have in the past been
accused of ethically dubious practices. Practices that could be considered unethical include using
forced or child labour, as well as ignoring living and working conditions and safety of the workers.

Philanthropic. The voluntary donations and contributions which organisations make to worthy
causes both monetary and materially offers a fourth dimension of CSR. It is not uncommon for
companies such as Marks and Spencer to routinely engage in partnerships with charities (in this
example Oxfam) to raise large sums of money.

Note: other issues and examples related to non-discrimination in employment and marketing practices,
avoidance of the use of non-renewable resources, non-production of socially undesirable goods and
production of non-degradable packaging/products, etc. might also be included in an answer and would
receive credit.

c) Explain the importance of assessing political risk for organisations engaging in Foreign
Direct Investment (F.D.I.).

Requirement (c)
Foreign Direct Investment (F.D.I.) by transnational businesses and Non-Governmental Organisations
(N.G.O.s) continues to grow in emerging markets. Some of these markets may be challenging
underlining the value of political risk analysis in providing management with a quantified assessment of
the likelihood of the occurrence of threats and the consequent level of potential loss as a result.
The importance of assessing political risk for organisations engaging in FDI is as follows:
Make informed decisions
Investing in, operating in or extricating funds from these markets can even be dangerous, a point central
to assessing political risk. An assessment of the likely risks associated with an investment can be set
alongside the potential benefits in order that senior managers might make informed investment decisions
on behalf of their organisations.
Awareness of groups that represent a source of danger
By understanding political risk analysis, organisations would be forced to recognise the groups that
could present a danger and why this should be. Groups that offer threats potentially include current
government departments and agencies, opposition groups that have political influence, organised
interest groups (e.g. trade unions), international organisations (e.g. World Bank), vested interests of
local businesses and competing religious groups, etc. An awareness of these factions may lead to
organisational strategies to manage relationships positively with groups considered to have a

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legitimate interest.
Awareness of conditions that represent a source of danger
In addition to identifying groups, political risk analysis would make organisations aware of conditions
that represent a source of danger. As such, organisations will be better briefed on contextual factors
such as newly created international alliances, political philosophies that are changing, changing
economic conditions, social unrest, rising nationalism and impending political independence, etc.
Avoidance of loss
Political risk analysis helps organisations avoid being exposed to unnecessary risk. The risk analysis
can be used by management to limit levels of potential loss by strengthening areas of organisational
vulnerability and safeguarding areas where the organisation feels particularly threatened. (This thinking
is akin to disaster recovery planning in IS). Through this activity potential losses may be avoided or at
least reduced.
Identification of unacceptable risks
It may be that, as part of the process of political risk assessment, potential risks are highlighted that an
organisation may consider unacceptable possibly on ethical grounds. Some markets can be quite
hazardous and an assessment of the likelihood of war, civil conflict, terrorism, insurgency and crime is
helpful when gauging the risk to people. Impacts such as fatalities, injuries or threat to the workforce may
lead to a decision not to invest in a particular market.
Avoidance of company damage
Without political risk analysis there may be disruption of trade, a companys good reputation may be
damaged and losses may arise. Potential expropriation of assets (possibly without compensation),
unfavourable laws, restriction on operating freedom, cancellation or revision of contracts, loss of
freedom to repatriate profits and increased taxes and financial penalties, etc. would undoubtedly impact
on financial performance, share price and company reputation.
Strengthen subsequent planning processes
If undertaken and revisited on a regular basis, political risk analysis can act as a vital dimension to
understanding an organisations outside environment and form an integral part of corporate and
business planning processes.

d) Explain how Cousins' strategic supply wheel can help an organisation which is
considering moving away from price-based procurement and policies.

Requirement (d)
Increasingly companies are recognising procurement as a strategic resource from which a competitive
advantage might be gained. The notion of strategic supply is based upon the importance of organisationwide thinking where functional and business units within the organisation as well as key suppliers and
customers outside it work together to achieve value in the supply chain. Organisations considering
moving from price-based procurement and policies would do well to consider Paul Cousins' (2000)
strategic supply wheel. Cousins thinking is based on the notion that an organisations supply strategy
should involve a number of key areas described as 'spokes' in the wheel. (These spokes being
organisational structure, relationship portfolio, cost/benefit analysis, skills/competencies and performance
measures). As such, the model can help an organisation concentrate on key areas for attention and
action.

Viewing supply as central. The model emphasises the importance of viewing supply as
central to the organisation and its effectiveness. The wheel depicts the corporate supply
strategy at the hub of a wheel and underlines the need for an integrated approach to supply

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strategy involving a balancing of all five spokes.

The importance of structuring to maximise benefits. Structure should enhance rather than
hinder strategic supply. The model highlights the importance of structure and a need for
structuring to maximise benefits of organisational operations. Organisational structure affects
interactions with the rest of the organisation and the way in which control is exercised, whether
centralised, decentralised or some combination.

The need for good relationship management and partnership sourcing. The nature of
relationships with suppliers and impact on the strategic success of the organisation are
significant dimensions to Cousins' thinking. Supply relationships may be based on driving
deals on price and can be quite adversarial. Alternatively, they may be more collaborative
where there is a joint quest to reduce costs and a sharing of technology and innovations
(known as partnership sourcing).

Decisions based on benefits as well as costs. Supply decisions should be based on benefits
as well as costs, and cost/benefit analysis is a further spoke in the wheel. According to Cousins
this technique should be at the heart of rational decision making over the most appropriate
strategic approach to follow.

The importance of acquiring and then maintaining appropriate skill sets. The model
emphasises the importance of acquiring and then maintaining appropriate skill sets. Appropriate
skills and competencies are vital in order to implement a chosen strategy. Long-term relationships
with suppliers might (for instance) lead to a need to re-orientate and train

key personnel. (This thinking is consistent with the McKinsey 7S framework that highlights the
relationship between strategy, staff and skills).

Effective monitoring and control mechanisms. Strategic planning and implementation needs
to be supported by strategic control and monitoring. This is recognised by Cousins who highlights
performance measures for monitoring and control as a vital spoke in the strategic supply wheel.
Such measures need to be aligned with the strategy and extend beyond price alone.

Achieving organisational synergy and coordination. The model highlights a need to strategically
achieve organisational synergy and coordination by emphasising the point that these five spokes
need to be achieved and each factor should be supportive of the other.

e) Describe the main types of inventory management systems


Requirement (e)
Continuous inventory: fixed order quantity replacement systems: Inventory levels are continually
monitored and, when stock drops below a predetermined level, a fixed amount is ordered to 'top up' levels. The
tinned food or cleaning materials held in a person's home are domestic examples.

Continuous inventory: Economic Order Quantity systems: A variation on the fixed order quantity
replacement system is an Economic Order Quantity system (EOQ) which takes into account total sales
per annum, variable costs associated with ordering and holding the item to determine the re-order
quantity.
Periodic inventory (or bin) systems: Stock levels are not kept under continuous review; instead
they are checked after a specific time and this leads to variable ordering of new stock in variable
quantities. This system is commonly used in smaller retail outlets at the end of the day or week's
trading.

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ABC systems: ABC is not an acronym, but is instead a classification bases on the Pareto 80/20 rule
which suggests that 20% of the items are likely to account for 80% of the annual expenditure. ABC
focuses on those items that are most important and therefore need careful monitoring. The
classifications are as follows:

A: items of high value, close monitoring is needed including managing the supplier/buyer
relationship.
B: medium items, less tightly managed.
C: low value inventory requiring little management (e.g. nails, screws, tacks, etc.).

Just-in-time systems: JIT systems have an objective of procuring products as they are required by a
customer or for use. Attributed to the Japanese quality philosophy, the obvious advantage of JIT is the
elimination of large stocks of material; indeed stock is reduced to near-zero levels. Financial savings are
easily apparent as is the requirement to foster an effective working relationship with suppliers to avoid
stock-outs.

F) Explain the different types of workforce flexibility that an organisation could use.

Requirement (f)
Since the mid 1980s the term 'workforce flexibility' has been used in a variety of ways. The following
help organisations operate in more flexible ways.
'Internal flexibility' might be achieved in a number of ways including those identified:

Task or functional flexibility. Task flexibility might be achieved by an organisation developing


its workforce to be more multi-skilled and less specialist. In this way the organisation achieves
flexibility by moving employees from one job to another as required. This fluid movement by
workers effectively ignores traditional job demarcations and involves a potentially broader set of
tasks. This expansion of tasks has been described as both horizontally (at the same level) and
vertically (undertaking tasks previously carried out by employees at other levels e.g. by superiors
or subordinates). Task flexibility is linked conceptually to attempts at job enlargement and job
enrichment.

Numerical flexibility. In the context of numerical flexibility, Atkinson identified two categories of
worker, core and periphery. Core workers possess key scarce skills and enjoy status, security
and promotion prospects. Periphery workers include those with either temporary or part-time
contracts rather than full contracts of employment. On a similar theme Handy described a
'shamrock' organisation as including core workers supported by contractors and casual workers.
The flexibility of using non-core workers is that they can effectively act as a buffer against
fluctuations in demand. So numerical flexibility is achieved by using a variety of casual, on-call,
temporary and part-time staff to supplement the efforts of core workers. When measuring the size
of an organisation's establishment it is a moot point whether such staff should be included or not.

Working hours flexibility. Flexibility is being achieved by organisations which effectively


redefine the notion of a 'normal working day' which traditionally has been seen as '9 until 5'. In
this way, organisations can open 24 hours a day if they wish (e.g. hospitals and on-line banks).
Where there are 'peaks and troughs' in demand, this flexibility helps organisations cope. This has
been achieved by workers operating in differing time patterns over a week or monthly cycle. The
mechanisms for achieving this have included variable shift patterns, flexitime and monthly rather
than daily accounting of hours input.

Financial flexibility. Organisations aim to achieve payroll flexibility through individualised and
variable reward systems based upon bonuses and performance related pay schemes. Further

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flexibility has been achieved through paying fees for services rather than by making payments
for wages and salaries. This is a direct result of subcontracting work outside the organisation to
agencies, consultants and other experts. Agents may be paid on commission whilst other
payments might be based 'by the hour' or 'by the day', etc.
'External flexibility' might be achieved through:

Location flexibility. The use of designated peripatetic workers such as sales staff and
specialists travelling from one location to another allied to the use of home working by
employees away from the organisations premises offers flexibility. (Normally facilitated by
maximising the benefits of communication and information technology). In this way savings
may be made to location costs and employees may be better placed geographically to
respond to the needs of customers in different parts of the country.

SECTION C 50 MARKS

Question Three
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)

Requirement (a)
TTs current marketing approach is very reactionary and certainly not strategic with the adoption of
'copy cat' strategies originally initiated by its competitors. More systematic planning processes
culminating in the development of an effective marketing strategy will be needed. The following
features should be reflected in TTs strategy in order that it might be considered effective.
Centred on priorities
The marketing strategy should be consistent with TTs organisational mission and help achieve TTs

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strategic vision, aims and objectives. The strategy should develop key priorities identified in the overall
corporate strategy and should support corporate aspirations. As the marketing strategy would need the
approval of TTs Executive Board this should enable an important check that the strategy is properly
centred on corporate priorities.
Internally relevant
TT should take account of the key internal factors that are relevant when determining marketing
strategies. The strategy should be realistic in terms of the capability of the organisation to achieve any
identified strategies. Relevant internal factors include TTs existing portfolio of products (including black
teas, green teas, flavoured teas and fruit infusions) and the knowledge and accumulated skills of its 300
strong workforce as well as its supply networks. The strategy should build on TTs competences and key
organisational resources. If these competences and resources are unique they can represent a source of
strategic strength and could form the basis of a cohesive strategy. Conversely if weaknesses are
identified as part of this internal analysis, then actions should be determined to eliminate or reduce them.
Externally focused
The external environment in which the organisation operates can have a major impact upon TTs
performance (either positively or negatively). It is vital that these influences are understood in order
that opportunities might be seized and threats accounted for. A key stage in developing a strategy
involves an environmental audit in order that the strategy itself is outward facing and relevant to
external factors and trends.
In order that TT might develop an effective strategy that is truly externally focused it needs to:

Reflect any relevant existing marketing research and possibly commission new or further
research.
Address significant macroeconomic factors.
Focus on marketing implications of the external environment, including customers, market
conditions and competitors.

Marketing research
Marketing research involves a structured investigation of TTs marketing activities. This research can be
used to review TTs existing activities and strategies and provide a basis for developing a new strategy.
This therefore includes the impact and potential impact of TTs branding, product mix, pricing,
advertising, sales promotion, public relations, packaging, and distribution, etc. In this way, the importance
of marketing research is to provide information that will enable effective marketing decisions to be made.
Macroenvironmental factors
A PEST or PESTEL (Political, Economic, Social, Technological, Environmental, Legal) analysis
represents one framework for considering the macro environment and determining relevant external
factors and trends influencing the market. A consideration of the position of TT relative to these factors
is needed for an effective strategy to emerge.

Implications of the external environment


This includes customers, their buying habits, nature and expectations, etc. TT needs to identify its
customers, understand their needs and preferences, analyse their attitudes to promotion and other
factors that influence their purchasing decisions and persuade them to buy TTs products rather than
competitor products. TT should also try to gain an appreciation of the market including its segmentation
possibilities, TTs position within it and potential for future development. Equally important is knowledge
and understanding of the competition (who they are and the basis upon which they are competing, also
their distinctive strengths, weaknesses, track record, etc.). To this end TTs new Director of Marketing
previously worked for a rival drinks company and may be able to offer some vital intelligence.

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Clear position statement


The position statement summarises the position of TT relative to all the factors discussed above and is
most conveniently captured in summarised form by use of a SWOT (strengths, weaknesses, opportunities
and threats) analysis. This is usually depicted by a four -cell matrix where SW factors are internal and OT
external factors. Internal factors are controllable, but external issues are normally beyond the control of
TT.
Makes alternatives explicit
Having determined TTs position and with specific goals defined then strategic alternatives to the current
position can be discussed and ways to achieve them can be chosen. For the strategy to be considered
effective, these options need to be made explicit before choices are made. Discussions centred on developing
an appropriate marketing mix to achieve corporate aspirations can then occur.
Performance orientated
An effective marketing strategy should include targets and performance measures incorporating
SMART (specific, measurable, achievable, realistic time bound) targets. This is important for future
monitoring and control purposes and will lead to a specific plan of action which can be constantly
revised and updated as marketing campaigns progress.
Cohesion
TTs strategy should cohesively plan and co- ordinate elements in an integrated fashion. It is vital that
these factors are blended together to ensure that TTs products satisfy (or exceed) the benefits
demanded by its customers.
Realistic costing
The strategy should be realistic in terms of the finance available. TTs marketing strategy needs to be
costed to produce a revenue budget and a statement of any capital requirements.
Organisationally consistent
The strategy should be consistent with other organisational planning processes because decisions
made about marketing will impact on all other functional areas, for instance:

Finance: Cash flow implications, finance for marketing campaigns, etc.


Human Resourcing: Training requirements, specialist recruitment, etc.
Operations: Cost and volume implications of switching production, etc.

TTs Director of Marketing has announced that an effective strategic marketing plan will be developed 'in
conjunction with key stakeholders'. The fact that the strategy will be developed in conjunction with a body
of individuals and groups will help coordinate marketing with other aspects of the organisation and
ground strategies within local realities.

b) Explain how the marketing models and frameworks identified by the new director might help
TT manage its product portfolio.
(10 marks)

Requirement (b)
The new Director believes that TT should use a more strategic approach to product investment
utilising models and frameworks such as the product life cycle and the Boston Consulting Group
(BCG) matrix.
Portfolio Management Issues
A product portfolio is a collection of products or services an organisation provides to its customers.
There are three dimensions of TTs product mix to consider, namely:

Portfolio length or overall number of individual products offered, (in this case tea or fruit

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flavoured drinks, etc.)


Portfolio breadth of product lines (for instance loose tea, tea bags, catering packs, etc,)
Portfolio depth: the products in each product line, so for instance within TTs tea line
there might be Indian, Chinese, Earl Grey, Morning, etc.

TT will need to determine how much funding it allocates to each product within its overall portfolio of
products. Decisions over which products to discontinue, promote more, conduct further research into,
etc. are all essential considerations. The marketing models and frameworks identified might be helpful
in TT achieving a more strategic approach to planning investment and disinvestment decisions over
products within its portfolio. In short, both should help TT manage its product portfolio as explained
below.
Market/Product lifecycle
The value of the product life cycle is that it can be used to help TT determine appropriate strategies and
inform decisions over investment in products. Classically, marketing explains products as passing through a
cycle of life. The marketing mix will change over time as the product goes into different stages of its life.
When a product is in its growth stages, the marketing mix might emphasise the development of sales
outlets and advertising. In its mature phase, there might need to be more concern for product quality. To
postpone the eventual decline, it may be necessary to reduce prices and spend more on advertising. A
brief description of the life cycle and its distinct stages now follows.

Introduction. When a company starts to produce and sell a new product, initially demand is low
and heavy advertising or other selling costs are needed to make customers aware of the
product ('product recognition'). High prices are normally charged, because the product is new
and supply is limited. TT needs to identify the products that correspond with this stage of
development and act accordingly.

Growth. When demand for the product builds, product design improves as production and
marketing experience is gained. Advertising and sales promotion are still important as the
distribution network expands. Competition between rival producers intensifies. The most
significant feature of this stage is increasing complexity as rivals enter the market and the range
of products widens as producers seek to attract customers with novel features. The marketing
focus switches to seeking to differentiate the firms product and brand. Prices fall, but profits
improve because of the higher sales volumes. For any of TTs products that correspond with
this stage, clear strategic and marketing actions are implied.

Some marketers consider that an additional phase (shakeout) occurs when sales growth begins
to dip because the market is saturated by providers. The weakest providers are shaken out and
exit the business.

Maturity. This is the longest and most successful stage in the life cycle. Purchases settle down
into a pattern of repeat or replacement purchasing. Demand has reached its limit and in general,
prices fall. A good distribution network has built up, and advertising costs are much lower. If TT
has any products at this stage it should consider further advertising, product design changes, and
segmentation in order to extend the maturity phase of an individual products life.

Decline. The product declines into obsolescence as technically superior alternatives replace
it. Many competitors will have already found alternative industries, while those remaining will
be looking for an orderly way to exit due to a lack of profitability as demand falls. For TT, any
products believed to be in declining markets will require immediate strategic attention.

The practical problems associated with the model include the fact that it is difficult to determine where
the product is on the cycle with any accuracy. Most relevant for TT is that the model considers a
product singly and not as part of an overall portfolio and radical strategic decisions cannot be made in

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isolation. It is preferable for TT to use more than one framework for analysis including the BCG matrix.
Boston Consulting Group (BCG) matrix
The Boston Consulting Group (BCG) diagram plots all products in a portfolio in a 2 x 2 cell matrix
according to the growth rate of the market served and the market share held. In this way TTs products
and the portfolio as a whole may be considered in a strategic fashion. The principal benefits of the BCG
matrix are that it provides a convenient way for TTs management to visualise a diverse range of products
together and prompt management to pay attention to cash-flow balances within its overall product
portfolio.
According to the BCG products may be classified as being:

Problem children or Question marks when they are in a high growth market but with as yet few
sales. For these products investment is needed to improve market share and for them to
succeed. If insufficient funds are available, choices will need to be made over which to invest in
and which to let go. Strategically, if TT has any products in this category management must
decide between investing considerably more in the product to build its market share or ceasing
production quickly before it absorbs any further investment which it will never repay. If TT decides
to invest this might take the form of price reductions, additional promotion, securing of distribution
channels or product modification.

Cash cows are characterised by relatively high market share but market growth for them is
low. The function of such a product is to generate cash for use elsewhere in the portfolio. For
TTs cash cow products, investment should be kept under review and the priority will be to
maximise 'harvesting' so that cash can be used to support the question mark products as well
as satisfy demands for dividends and interest.

Stars are characterised by relatively high market share and high market growth. Although
investment may be needed to maintain market share, it is worthwhile as the market size is
growing. Stars will become tomorrows cash cows. If TT has star products the strategy
suggested by the framework is to hold market share by investing sufficiently to match the
commitment of rivals and the requirements of the marketplace.

Dogs are characterised by relatively low market share and low market growth. There may
be little or no justification for continuing to invest in these products and TT must divest
itself of dog products completely as swiftly as it is able.

C) Explain the potential benefits of sustainability to TT.


(5 marks)

Requirement (c)
The new director obviously supports the concept of sustainability believing it to 'make good business
sense'. TT will need to develop a more cohesive long term practice involving several initiatives.
Sustainability is a long term programme involving a series of sustainable development practices which
offer a number of potential benefits to TT as explained below.
Improving operational efficiency
Practices associated with sustainability include reducing waste, improved energy and water
consumption and the sale of by-products that were previously a cost of disposal. Such practices
aimed at improving operational efficiency ultimately contribute to improved long term financial
performance. Currently TT is paying contractors to dispose of waste products from the production
process and if this situation can be avoided, this represents an easy gain. Apparently at least one

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competitor recycles such waste to make a soil enrichment treatment, which is much in excess of what
the company itself needs. Rather than pay to have the fruit waste taken to a landfill site, TT could
reuse the soil enhancer. This is an environmentally sound practice and if more enhancer than it
requires is generated, new income streams may be identified for sales. Even if it is just given away to
local farmers, this will help create value for someone else. Sustainable practices will benefit TT in
terms of efficiency.
By gaining external stakeholder support
Sustainability can result in enhancing relationships with external stakeholders. If local farmers were
'gifted' the soil enhancer as indicated above then relationships with the local community would be
strengthened. Similarly local communities might view TT and its operations more positively if it
convinces them through sustainable practice that it is no 'rip and burn' organisation. If TT were to
achieve sustainability as part of wider policy, green measures such as reducing greenhouse gas
emissions would undoubtedly strengthen the relationship between the organisation and
environmentalists. Other practices could be aimed at addressing the agendas of other stakeholder
groups such as shareholders, customers and suppliers, etc.
By gaining internal stakeholder support
Sustainability can result in enhancing relationships with TTs workforce. It may be that TTs employees
have many valuable ideas to contribute as often it is those who are the closest to the front line that have
the best insights into sustainable ideas. By offering some rewards or by involving the whole workforce in
discussions, then this may provide a powerful source of motivation. If employees could be engaged by a
sustainability agenda this might provide a potential source of motivation, and help shape a positive
culture. In turn, this may lead to less sickness, greater productivity, improved industrial relations and less
disruptive staff turnover.
By achieving a market edge over competitors
Ultimately sustainable practices will help an organisation gain a competitive advantage by exploiting new
business opportunities, so increasing market share and profitability. If customers share TTs aspirations or
are impressed by its efforts, sustainability may breed brand loyalty.

Question Four
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 comparitively lower absence and staff turnover levels.)

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Required:

a)

Explain the ways in which managers with responsibility for teams might meet the
challenges of teams being geographically dispersed.
(10 marks)

Requirement (a)
There a number of challenges for TBs managers when managing teams that are geographically
dispersed and every manager will need to determine the best means of overcoming these challenges.
Redefining their own role
Challenge: 'face-to-face' contact and the concept of 'management by walk around' will need to be
replaced by different mechanisms that build relationships and monitor progress of projects.
Overcome by: managers viewing their own role differently and redefining it in a way that adds value to
TBs operations. Rather than emphasising leadership, managers might have to accept that instead they
need to work hard at coordination.
Instilling the correct attitude in employees
Challenge: subordinates who may not have a line manager close by must have the right mental
attitude and be able to use their own initiative, resolving local difficulties. They will need to be
prepared to work in isolation on occasion, show initiative and be a 'self starter'.
Overcome by: managers will need to ensure that appropriate recruitment and then training is in place
and that 'at risk' employees are supported to deal with these requirements.
Maintaining communication
Challenge: TB is apparently working hard to improve communication through its own social networking
sites with blogs, wikis, podcasts, RSS feeds and the use of instant messaging software. Despite this
wealth of communication devices which also include e-mail, videoconferencing and Voip, it does not
follow that communication is automatically good. A challenge for managers is ensuring that team
members are communicating with each other frequently and effectively in order to build team cohesion
and avoid misunderstandings and unnecessary duplication of effort.
Overcome by: maximising the benefits of the technology to get feedback and share intelligence within the
team. When face-to-face conversations do take place, summaries of key points need to be confirmed by
email. Managers should guard against 'information overload' by focusing communication on what is
relevant to individuals, their team and their job.
Breeding and maintaining trust
Challenge: when managers are not physically present with a team member, then trust is important. In a
remote relationship, even with videoconferencing and webcam equipment, managers will not have the
same visual stimulus between individuals and will not be able to build the same sort of personal
connection with their staff.
Overcome by: managers being open and honest with employees about the limitations of virtual contact
in order to help establish a strong relationship. Managers also need to accept that in terms of
accessibility a failure to get hold of somebody, does not automatically imply that they are 'skiving'.
Retention of valued staff
Challenge: it is hard to prevent valuable employees from being poached by competitors if they are on the
other side of the world where local labour laws and employees' expectations may be very different.
Overcome by: managers being prepared for such a situation and accept different cultural norms. To this
end, the most valued staff must be made to feel wanted and a sense of loyalty to TB needs to be

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nurtured by such managers.


Collaborating across time zones
Challenge: collaborating across time zones has inevitable challenges that managers must come to terms
with. For instance, a request by a manager to a virtual team may not receive a response until much later
on the same day or even the next day
Overcome by: managers being flexible and moderating expectations. Managers need to accept that
decision making will often be ambiguous and that communication is less spontaneous.
Establishing performance expectations
Challenge: ensuring that employees who may be physically very distant are clear about what they are
supposed to be doing. It is important that these staff understand what is expected of them, what they
need to do, when they need to do it, and to what standard.
Overcome by: managers giving briefings more carefully and putting in place progress monitoring and
control mechanisms, (most probably using the range of technology available within TB to best effect).
Overcoming a lack of personal contact
Challenge: it is clear that the way in which TB has responded to globalisation means that managers who
want to stay in touch with their team now need to cover vast distances either using technology or through
air travel (which if overused can be both expensive and time hungry). One challenge is a potential loss of
team cohesion and a lack of a true sense of belonging. Virtual contact is not a total replacement for faceto-face interaction.
Overcome by: managers working out how to make physical contact cheaply and efficiently, possibly by
arranging a series of trips to reinforce virtual relationships. Mangers need to identify what individuals
value most whether a simple email or a blog to stay in touch and feel as if they 'belong'.
Coping with cultural differences
Challenge: cultural differences can be a challenge to those managing dispersed teams. Cultural
diversity has implications for building relationships, motivating staff, structuring projects, and
developing strategy. What works in one location may or may not work somewhere else principally
because of cultural differences. (This point was confirmed by psychologist Geert Hofstede through
detailed research in order to develop a model of cultural dimensions).
Overcome by: managers arranging training in cross cultural appreciation to mitigate the problem in
conjunction with the HR department.
Developing and sharing a compelling shared vision
Challenge: a need to develop team goals compatible with individual's aspirations, which may be more
difficult in a virtual environment.
Overcome by: managers ensuring that everyone is kept updated with information coming from higher up
the organisation in order that they can be better informed and feel part of TB.

b)

Describe the advantages AND disadvantages of home-working for TB's


headquarters staff.
(10 marks)

Requirement (b)
Apparently large numbers of TBs headquarters employees work from home rather than being based in
an office. By utilising a combination of communications technology staff have the ability to communicate
with colleagues, customers and suppliers from their own homes. There are a number of clear

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advantages and disadvantages of home-working (or teleworking).


Advantages

Reduced travel time (and consequently individual cost savings). This is the most obvious benefit and
is likely to be the most persuasive argument for changing working arrangements as far as TBs staff
are concerned. Annual commuting costs may represent a significant proportion of an individuals
income. The move to home working would therefore produce tangible savings for the individual. (A
spin-off benefit is that this means that less fuel is consumed and the environment is subject to less
vehicle pollution. For socially conscious employees this may be an important factor in terms of
retention and job satisfaction).

Reduction in stress and consequent ill health. The opportunity now exists to work in a less stressful
pattern with fewer distractions associated with a traditional office setting. The potential pressure
experienced through a busy commute to work daily may cause anxiety, stress and ill health and loss of
time from work. Travelling into a busy capital city (possibly like Utopia) with potential driving,
transportation and parking problems may be highly stressful and the removal of this burden may be

seen as positive. Teleworking means that employees are now at liberty to move out of a city
dwelling or suburban environment and relocate somewhere more peaceful.

More rewarding working arrangements. The scheme offers improved opportunities to work
creatively and in ways that are consistent with an individuals desired work/life balance.

More stable family life. The elimination of a need to relocate in the countrys capital can lead to a
better balance of work and an enhanced family life. There is potential to spend more time with the
family or a partner as well as contributing more fully to home and parenting responsibilities. The
additional time freed by these arrangements may, conceivably, lead to greater participation in a
persons local community (e.g. acting as school governor or helping in the running of local clubs
and societies), so strengthening rural communities and enhancing a personal sense of worth.

Control. The opportunity to control a work/life balance arising from the individual autonomy over
hours worked is a clear advantage. This flexibility means that individual preferences for work
patterns can be adopted. Traditional commuting patterns and fixed office hours condemn
everyone to work roughly the same hours. The more flexible home working implies a degree of
individual control over working times and arrangements. Workers who feel in control are less
likely to suffer from stress.

Employment and promotion opportunities for the disadvantaged. Sections of the population
with specific difficulties, problems and disabilities may have difficulty with travel and working in
a traditional manner (e.g. nine-until-five working day in the same location). Single parents who
need to be at home for the children at certain times and carers with family responsibilities, etc.
will now be able to form part of TBs workforce.

Disadvantages
The scheme however may present certain difficulties for the workforce, including:

Motivational issues. Home working may not be appropriate for some employees. Those who have
poor personal motivation and are not self starters may miss the structure and discipline offered
by fixed hours and a managed environment. Those switching to home-working 'give back' 50%
per of the time they previously spent commuting in the form of extra working hours. This may lead
to feelings of exploitation, resentment and a lack of personal motivation.

Working distractions. Staff productivity may be improved by interruptions in a traditional office


environment (particularly if the office is open plan and has crowded workstations where
conversations can be easily overheard). Far from improving matters, home working may offer

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more distractions. The distractions of the home may mean that even the most highly self
motivated staff could be distracted by family members (e.g. demanding children).

c)

The loss of learning from individual human contact. Although TB offers fast communication and
saving some travel costs thanks to its use of cutting edge technology, those new to work or
returning after a career break would miss the support offered by a physical rather than virtual
environment. Similarly, opportunities for mentoring the vulnerable or those undertaking personal
development may be lost in a virtual environment.

A loss of social interaction and stimulation. The traditional office setting offers a number of
distinct advantages including opportunities for casual interaction and mutual learning, being
part of a group including camaraderie, effective team working and friendships. (A point
emphasised by the Hawthorne studies long ago). Although technically it may be feasible to
replicate this social experience at a distance it is not always achievable.

An erosion of work and own time which may be harmful to the individual and could potentially
lead to burnout or damaged personal relationships.

Homes may not be suitable for teleworking. The physical space required (e.g. a spare room
converted to a home office) or the need to secure office equipment may make home working
difficult.

Describe the role that the HR department of TB can play given TB's current working
practices.
(5 marks)

Requirement (c)
TBs current working practices mean that there are potentially three categories of worker at least:
Office based staff
Home-workers: employees who work in physical isolation of others
Team members in a globally dispersed environment sometimes in physical isolation of others
TBs HR department can play an important role in terms of all three categories, that role is likely to be
distinctive in respect of the latter two categories of staff.
Establish corporate policies and practices
The department should support the organisation by establishing corporate policies and practices.
Providing training and written guidelines on HR procedures (e.g. how people should be appraised)
should ensure that processes are transparent and consistent across continents.
Developing mechanisms for knowledge sharing, etc
The HR department could usefully ensure that knowledge is shared throughout virtual teams. This is
something that happens naturally in an office environment, but it must be worked at in a virtual team
even when there is technological support. The department should attempt to involve these workers in
discussions and information sharing. In the same way home-workers should be encouraged to
knowledge share.
Personal development planning
The HR department could usefully create a clear personal development plan for each member of TBs
workforce which is particularly important so that individuals do not feel isolated by geographical distance.

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To this end HR might design counselling, mentoring or 'buddying' programmes which could usefully
support individuals in their roles.
Induction
TBs HR department can design structured training programmes for new employees, which is
important in organisations such as TB with non- traditional working practices, high instances of
technology usage, distance learning and global operations.
Provide training programmes
The HR department is in the best position to provide support in key areas and develop training
programmes to make the workforce more effective. Most likely this will centre on the areas of
technological awareness and cultural awareness.

Technological awareness. Advances in technology and the variety of applications within the
organisation mean that employees will need knowledge refreshment and updating training and
support.

Cultural awareness. It may be that HR has to arrange training to mitigate problems associated
with different national orientations, cultures and practices. Workers in some countries can be
more process-orientated than those in others, leading to frustrations during project work. It may
be that training is required to ensure that everyone understands socially acceptable behaviour in
particular countries.

Recruitment, selection and support of staff who work in isolation


HR in conjunction with managers will need to ensure that appropriate recruitment and then training is in
place and that 'at risk' employees are supported. As a line manager may not be physically close, TBs
employees must have the right mental attitude, use their own initiative, resolve local difficulties and make
their own decisions. They will need to be 'self starters', be prepared to work in isolation and show
initiative.

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E1 Enterprise Operations
September- 2011
SECTION A 20 MARKS
Question One
1.1
Small groups of employees that meet to identify work problems and their solution are
known as
A
quality circles.
B
peer counsellors.
C
cellular production teams.
D
teleworkers.
1.2
A
B
C
D

The extended marketing mix does NOT include which ONE of the following:
People
Processes
Physical evidence
Positioning

1.3
as
A
B
C
D

According to Hertzberg's dual factor theory of motivation, one set of factors is known

1.4
A
B
C
D

Porter's value system shows the organisation in terms of


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.

1.5
A
B
C
D

Which ONE of the following is NOT associated with quality management?


5-S practice
180 degree feedback
Six Sigma methodology
Five-why process

1.6
A
B
C
D

Intrinsic satisfaction is said to be derived from which ONE of the following issues:
Perks of the job
Job content
Job rewards
Group cohesiveness and belongingness

demotivation factors.
disposition factors.
self actualisation factors.
hygiene factors.

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1.7
A
B
C
D

Which ONE of the following is an example of direct marketing?


Writing an article for a trade journal
Targeting individual customers with promotional material
Posting 'blogs' to draw attention to the organisation
Public relations activities

1.8
Motivation theories and reward systems derived from F W Taylor's thinking are by
nature best described as
A
behavioural.
B
human relations.
C
content.
D
scientific.
1.9

Service Level Agreements are normally associated with

A
B
C
D

job reductions negotiated with staff groups.


deskilling.
agreed appraisal outcomes.
outsourcing.

1.10 Which ONE of the following is NOT associated with a government's fiscal policy?
A
Levels of taxation
B
Level of spending by the government
C
Revenue raising
D
Interest rates

Answer to Question One


1.1 A
1.2

1.3

1.4

1.5

1.6

1.7

1.8

1.9

1.10

SECTION B 30 MARKS

Question Two
a) Explain why 'Supply' has been described as being more significant than 'Purchasing' for
an organisation.
(5 marks)

Requirement (a)
Reck & Long (1988) pictured an organisation's purchasing function as progressing through a
development continuum. Supply would be seen under such thinking as a developed strategic function

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whilst purchasing would be seen as more reactive and less developed. On this basis organisational
supply might be seen as more significant than purchasing.
Purchasing
Purchasing deals with the day-to-day buying of goods. Purchasing concentrates on the goods themselves
including whether they conform to the quality demanded, if they are priced appropriately, and ensuring that
they are delivered at the time required to the correct location.
Supply
Supply concentrates on the strategy of relationships. Supply deals with important
considerations beyond the day-to-day including:
planning and implementing a supply strategy;
managing the overall supply process;
considering suitability, feasibility and acceptability of outsourcing activities;
investigating whether strategic partnerships could be established, and
the number of suppliers it should use.
In Reck & Long's terms supply is strategic by nature.

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)

Requirement (b)
Profits made by Multi National Enterprises (MNEs) through activities in these economies are exported
back to head offices abroad. The two main forms of FDI and their benefits to a host economy are given
below:
Acquisitions
The MNE acquires a local company and so gains control of its assets and markets. The acquired
company becomes a division of the new parent organisation. The local economy only benefits if the
company was in danger of imminent collapse and had been 'saved' or was facing other significant
difficulties that were subsequently solved through the buy-out. Under these circumstances the MNE will
be providing continued employment.
Greenfield investment
Under this form of FDI, the MNE creates new facilities in the host country to take advantage of local
conditions. The host country benefits through new employment opportunities and acquires improved
skills and knowhow from the MNE as well as access to the global economy. The domestic economy
should benefit from any infrastructure improvements made by the MNE, new jobs and income earned by
any local suppliers.
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)

Requirement (c)
A direct approach to changeover means that at a predetermined time an old system ceases completely
and a new system starts. The reason for an organisation choosing a direct approach includes:
Low risk
The system may be already widely used elsewhere in competitor or comparator organisations (it may be
an 'off the shelf' package). Under these conditions, management may have complete confidence in the
system.

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Low cost
Management may have weighed the options (such as phased, parallel running or pilot schemes) and
concluded that a direct approach is more cost efficient in terms of time and resource usage.
Symbolic gesture
Management may wish to communicate to the workforce its commitment to a particular system and the
direct approach represents a symbolic act confirming its faith in it.
Ready opportunity to use direct approach
A specific time for system changeover may have been identified when there is reduced system usage.
A direct changeover at this time would represent an ideal opportunity when there is a low volume of
transactions and limited risk of disruptions.
Existing system too problematic
If the existing system is presenting so many problems that it is not worth continuing with it any further,
then a direct system changeover might be viewed as wholly appropriate whatever difficulties are
encountered as a result.
d) Explain FIVE main disadvantages of outsourcing for an organisation.
(5 marks)

Requirement (d)
There are several disadvantages of outsourcing including the following:
Surrender of core competence
The services may represent (or contribute to) a core competence for the organisation. If this is the case,
outsourcing would be inadvisable as the basis of the organisation's competitive advantage could be
threatened unnecessarily.
Lack of understanding
There may be a potential lack of understanding of the ethos of the business by the contractors of the
outsourced service. There may be resistance from staff groups and unions representing in-house
workers whose jobs may be threatened. This may harm industrial relations and possibly lead to
disruption in performance. Under these conditions the initiative may be counter-productive. Outsourcing
and a threat of job losses could undermine the psychological contract and lead to a lack of motivation
within the workforce.
Damage to culture
The move to outsourcing may detract from a positive organisational culture by eroding shared values and
goodwill.
Transaction costs
Additional costs will be incurred associated with determining service specifications and ultimately
monitoring performance (so-called transaction costs).
Finality of decision
Once a service has been contracted out it may be very difficult to take back in-house at a later date if
things do not work out.
e) Explain FIVE main disadvantages of an organisational policy of HR succession planning.
(5 marks)

Requirement (e)
A policy of organisational succession planning has a number of disadvantages:
Organisational size

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Succession planning is unrealistic for most organisations and only feasible for those large enough to
offer the opportunities for staff movement and extended career ladders.
Operational issues
The positive motivational impact of the policy may not be realised if rewards seem distant and staff movement
is slow or reliant on staff turnover elsewhere in the organisation. Alternatively, staff vacancies may arise at
inconvenient times which do not fit individual career needs.
Negative culture reinforcement
The policy helps reinforce an existing organisational culture which may be unhealthy and could lead
to a lack of exposure to outside thinking and experiences.
'Too' rational
Succession planning is in some ways too rational an approach and centralised in philosophy and, as
such, can be counter-productive in an organisation that wishes to stress responsibility being taken by
employees themselves and emergent approaches.
Insularity
The policy concentrates only on developing the existing workforce and ignores the possibility of more
capable candidates existing outside the organisation.
Career trends
Succession planning is in many ways an outdated concept, given a more contemporary trend for
movement between organisations and individuals taking personal responsibility for their own career
development by building personal portfolios of experience.
Management demands
The policy may be very expensive to operate. It almost guarantees or implies promotion and requires
the detailed input of specialist managers (both HR and in technical) to be involved to make it work.

f) Briefly explain the main arguments for a country wishing to restrict free trade.
(5 marks)

Requirement (f)
The main reasons for a country wishing to restrict free trade include the following:
Protection
There may be a need to protect fledgling industries which would not be able to compete on an equal
footing with foreign competitors. These industries typically have yet to achieve economies of scale in
production and possibly do not yet enjoy the factors of production that foreign competitors do. (e.g. a well
trained labour force , ease of finance etc.)
Prevent 'dumping'
Protection may help avoid a 'dumping' of excess goods at unrealistically low prices by foreign companies
which would impact unfairly on home producers.
Overcoming spoiling tactics of foreign competitors
Protection may help prevent 'loss leader' pricing of goods by foreign competitors in order to unfairly
damage local suppliers and gain market share.
Protect national cultural identity
A government may feel the need to protect its national cultural identity against what it views as
undesirable values and influences. As a result it may restrict free trade. (For example, certain
multinational operations may be discouraged if it is feared that there would be suppression by (say)

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undue American values being imposed on a proud indigenous culture founded on local, historical and
religious heritages).
Ethical or moral grounds
A government may feel a need to safeguard home consumers against harmful or distasteful imports (e.g.
objects made of ivory, rare bird egg collections, 'date rape' drugs etc.)
Independence from others
A government may feel a need to breed self sufficiency and less reliance on nations who could be political
adversaries (e.g. in situations where national wars are threatened).
Sanctions to bring about change
A government may restrict trade with another nation on the grounds that either it is an enemy state or
that it engages in practices that the government disapproves of. Sanctions could be seen as a weapon
to exert pressure and bring about change in another country.

SECTION C 50 MARKS

Question Three
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:

Explain how effective brand management can assist iB4e's 'sharpening the focus'
initiative.
(10 marks)

Requirement (a)
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The Chief Executive is launching a new initiative called 'sharpening the focus' which is centred on:
Improved corporate performance,
Connecting more closely with customers, and
Improving marketing practices.
Effective brand management can assist iB4e's 'sharpening the focus' initiative in a number of ways:

Improved performance

Improved profitability. Over the past year iB4e has suffered from a difficult economic climate
more keenly than its competitors who enjoy stronger brand recognition. The new director
promises 'revitalisation of the iB4e brand'. Evidence indicates that effective brand management
will translate into improved profit potential and long term equity growth for the brand.
Brands can be a key asset for the business. Although intangible, brands can be of substantial
value. Indeed, brands are often the most valuable asset an organisation owns. All assets require
careful management and the brand is no different.
Strong brands can positively influence share performance. The brand is an important
driver of business value and success.
Brands can command higher prices. Branded products command a higher price than
unbranded goods (even if the other features are similar). It follows that the stronger the brand, the
better the opportunity to charge higher prices than competitors and hence gain higher levels of
profitability.
Differentiate itself from its competitors. Brands help communicate the essence of the
company and its products and so help distinguish iB4e from its competitors. Effective brand
management can therefore contribute to competitive advantage.

Connecting with customers

Brands as an emotional conduit. Brands that take their time to listen to their target segment
and incorporate their ideas into their products will be more successful. Brands can be invaluable
where marketing communications may be otherwise lost amongst the noise of competing
messages. Brands can connect with consumers in a deep way. Successful brands develop
special relationships with customers by conveying intangible qualities that evoke strong
emotional responses. The features of a brand might include a logo, a general image, look, feel,
even smell which may seem to be of minor significance on their own but in combination should
be much greater than the sum of the constituent parts.
Good brand management can breed brand loyalty. Effective brand management can lead to
brand loyalty which simplifies choice for the consumer. The value of brands exists in the minds
of those who use them. Brands are the reason consumers choose one product over another.
Products that have a positive strong brand image enjoy a significant source of competitive
advantage.

Improve marketing practices

Provide a focus for customer relationship management. Customer relationships should


involve a restatement and reinforcement of a brand whilst addressing customer requirements
directly.
Base for other marketing practices. People use brands to both make statements about themselves
and reduce the risk of poor product choice. A revitalisation of the iB4e brand should assist wider
marketing practices (e.g. advertising) by establishing a bond of trust that can be built upon.
Brands are at the heart of the marketing mix. The basic 'marketing mix' of product, place,
promotion and price explains the set of marketing decisions that must be balanced to achieve
maximum impact on a target market segment. Branding and brands go to the heart of the
marketing mix. Important features of a product include brand name in addition to quality,
durability, design etc. Place includes distribution channels and coverage and obviously products

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with recognisable brands are more likely to be stocked by retailers. A focus on promoting the
brand in general will lead to sales of products associated with that brand. Price levels are
important and products with the strongest brands can command the highest prices.

Describe the advantages and disadvantages of iB4e developing a 'total reward


package' approach.
(10 marks)

Requirement (b)
Advantages
There are several clear advantages to iB4e developing a 'total reward package' (TRP):

Retention and motivation. In return for maintaining the package, the organisation will receive
greater staff continuity and engagement. If properly developed, a TRP approach will help iB4e
retain and motivate high quality staff. The TRP approach can strengthen and maintain staff
retention and employee motivation.
Attract talented staff. A major issue for iB4e appears to be difficulty in recruiting staff. This
suggests that although genuine benefits exist, prospective employees do not know about them. It
is important that iB4e continues to attract talented staff and so must compete with its competitors
in the labour market and must maximise its attractiveness. It seems that presently iB4e is failing
to make the most of the overall reward package available (e.g. pensions, training and
development, flexible working). To improve its recruitment, this needs addressing.
Non-pay motivators. A 'total reward package' approach is consistent with contemporary
enlightened management thinking. Pay is often a primary focus of HR policy but successive
motivation theories indicate that a concentration on financial rewards alone is an inadequate
motivator of staff.
Confirmation of organisational/individual match. A TRP approach offers staff an opportunity
to consider what they value most from their employer and then compare it with the investment
iB4e is making on their behalf.
Project a positive image. The initiative would have the advantage of making positive statements
to stakeholders about iB4e and could reinforce its vision and culture. In terms of what iB4e
values, the initiative represents an investment in the company's most important resource; its
people.

Disadvantages
There are also several potential disadvantages to iB4e developing a TRP:

Other poor recruitment processes. The difficulty in recruiting new staff may be caused by
some other factor such as use of inappropriate advertising media, poor advertising copy,
response deadlines too tight etc.
Additional costs. If the benefits involve additional costs. The Director believes that additional
bonuses for good performance could be given and this will add to organisational overheads.
There will also be a cost associated with monitoring, managing, communicating and keeping
the scheme under review.
Projects wrong image. Rather than enhance iB4e's image, the package might lead the
organisation to be viewed as a 'soft touch' with a negative impact on share price. The package
itself may create an artificial comfort zone for existing staff leading to complacency and
organisational stagnation.
Suspicion of motives. Staff may view the package with suspicion, feeling that management's
intentions are not honourable and that it may be a ploy to keep pay rates down.

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Workers only want improved pay. Staff motivation theories are not unified and it may be
possible that some staff are only interested in improved pay. (For instance, 'Taylorism' suggests
workers are motivated by maximising their earnings. Similarly, Theory X workers according to

McGregor motivation theory are motivated by 'carrots and sticks' namely economic rewards
and punishments.)

Costly failure if design flaws. If the TRP approach is not properly developed or contains
design flaws, it will not achieve the potential benefits and could represent an additional cost to
the company.
Explain the value of internal marketing for iB4e. (5 marks)

Requirement (c)
iB4e's new Director of Branding has been asked by the Chief Executive to review a number of issues that
are felt to be significant including internal marketing.
When an organisation like iB4e wants to implement a new strategy or corporate programme, it needs to
align employees' attitudes and behaviours to correspond with the overall vision underpinning the
initiative. If successful, this should lead to enhanced service levels which, in turn, will strengthen
customer loyalty.
Internal marketing influences behaviour allowing organisations such as iB4e to communicate the actions and
attitudes that lead to improved corporate performance. Internal marketing is particularly important to iB4e as
some of its employees have been empowered to take on customer relationships. With more of iB4e's workers
assuming responsibility for interacting directly with customers, it is important that the right corporate
messages are conveyed.

Internal marketing is the process of engaging with employees through training and motivating them so as
to support the organisation's external corporate activities. Motivating staff to change their behaviours and
considering ways to achieve organisational goals is very important. In the case of iB4e, a new emphasis
has been placed on connecting more closely with customers and improving marketing practices through
more effective brand management. Employees need to know this, understand what the iB4e brand
means and buy into it. Effectively iB4e is using the same persuasive methods of communication that it
employs to market products and services externally, so synchronizing internal and external brands.
There is a need to recognize and reward employees who achieve against these marketing goals and the
new total reward package that is being pioneered may help in this respect. It has been suggested that
bonuses for good performance could be given that involve an employee choosing from a range of
benefits to a maximum value from a 'menu' offered by the company.
If carefully designed and delivered, internal marketing should ensure everyone within iB4e not only
understands why the organisation exists but also its key outputs and metrics. Most importantly, there
should then be an understanding of how every individual within the company can effectively contribute
towards corporate goals

Question Four
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;

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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)

Requirement (a)
The proposed People and Payroll system could offer a number of benefits to LD2 including:
Improved system quality
LD2 wants to simplify and improve the quality of its operations, including presumably data and
information. The People and Payroll software should offer a simplified system that would overcome some
of the existing deficiencies which are leading to poor quality operations.
Systems integration.
At the moment there is incompatibility of software and complex reconciliation processes being performed
within LD2. The solution will provide a single common integrated technology for both centralised HR and
payroll processing. It is wasteful to operate separate systems and common data can be used for both
applications. The unification of the systems will make reconciliation of separate data sources
unnecessary.
Ability to reduce costs and increase efficiency
Current systems are both outdated and various. As such, the integrated solution offered by the People
and Payroll system will simplify and rationalise operations. The maintenance costs of the several systems
that LD2 operates presently are likely to be costly. There is now potential for economies of scale. These
savings could be applied to the costs associated with new hardware, software, staff training etc.
Improved accuracy
A single system will help eliminate errors and inaccuracies arising from the existing duplication of
data sources. Currently, there are payroll errors due to faulty data entry and calculation.
Better management control
The information from accessible diaries, overtime patterns and holiday and sickness levels will enable
managers to exercise tighter control over staff activities and possibly reduce costs as a result.
Improved management reporting

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A feature of LD2's operation at the moment includes management reports being late. The new system
should speed up and improve managerial information for decision making.
Improved communication
Within the People and Payroll system, there is a facility to allow managers to have immediate access to
information on diaries and holidays etc. This will improve communication by making the arranging of
meetings and work scheduling easier.
Speed of entry and processing
This advanced technology will involve a direct entry facility and which should reduce entry and
processing times. This may help overcome the current problem of late management reports.
Relative competitive advantage
Instead of being a source of strategic weakness, LD2's systems, including the People and Payroll
system, could become a relative strength. LD2's technology currently lags behind that of its competitors
and the commitment to replace it with the most advanced available may provide LD2 with some
competitive advantage over its rivals.
Improved security features
Presently, payroll and invoicing errors are arising due to human error and, worryingly, this implies that a
potential for fraudulent activity also exists. As current systems are outdated they may not be as secure as
they could be, meaning that there is also risk of improper use of sensitive information and data loss.
These problems have doubtlessly contributed to the poor quality and operational errors that LD2 is
currently experiencing. Modern systems tend to have inbuilt designed security features which should
overcome these concerns.
b) Describe the main approaches to quality that are available to LD2.
(10 marks)
LD2 wants to consolidate its business by simplifying and improving the quality of its operations by
implementing a group wide quality programme. The group has a number of distinct alternative
approaches to quality that it may wish to consider.
Quality control
Quality control is an approach involving:
establishing quality standards for a service or product,
designing a process to deliver the service or product to the required quality,
measuring the quality of the service or product,
comparing actual quality with planned quality
taking remedial action where quality does not meet standard,
reviewing the standard originally set and making adjustment if necessary.
A quality control mechanism would be used mainly in technical production processes. It would involve
identifying an aspect of the production process that is critical to the quality of production, then
establishing warning limits and tolerances. Close monitoring (possibly using advanced technology)
followed by immediate action to remedy any breach of the tolerance would be needed. The quality control
system can be organisation-wide and could include the design process, quality assurance of suppliers of
raw materials, production, warehousing, distribution, or after-sales service, etc.
Quality assurance system
Quality assurance (QA) systems are in certain ways superior to quality control systems in that they
attempt to create rather than control quality. The system will need to account for all operations and the
way in which they are planned, managed and carried out, including:
production design,
materials of a consistently appropriate standard,

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a reliable and consistent supply of materials,


reliable plant and machinery, and
staff training in order to reduce the potential for human error.
The main forms of QA systems are given below:
International accreditation of standards
The key feature of the ISO 9000:2000 series quality award is the underlying assurance that customer
satisfaction and fulfilment of customer requirements are achieved. To qualify for accreditation LD2 must
define a quality standard and the process needed to achieve it and this is regularly verified by external
inspectors. Registration under the standard requires the submission and approval of documentation
(e.g. a quality manual, procedure manual, work instructions, etc.). The main benefits include being
recognised as having a certified standard of quality which hopefully will lead to customer confidence
and increased competitiveness, sales and profitability. In addition, accreditation could prove an
excellent marketing tool for LD2.
Total quality management
Total Quality Management (TQM) is a comprehensive organisational philosophy that encourages and
fosters continuous improvement. The fundamental features of TQM are prevention of errors before they
occur and the importance of total quality in the design of products and systems. TQM focuses on quality
from a customer perspective using a systematic, integrated, organisation-wide approach. There are
several approaches to developing a TQM philosophy often embracing a number of quality techniques
such as quality circles, Kaizen, etc.
Common TQM features include:
The involvement of everyone in satisfying the needs of external customers and internal
customers (users of departmental services within LD2).

Open, honest communication throughout the organisation.


Training and education to equip the workforce with the necessary skills to realise their own
potential.

Teamwork and collaboration.


Involvement of customers and suppliers as an integral part of the improvement.
Self assessment quality model
The European Quality Foundation model is one of the best known of several self-assessment models for
business improvement. This provides a structured methodology for organisations such as LD2 to
measure their own performance in areas that are critical to businesses. The model allows areas for
improvement to be identified through self -assessment. It is a non-prescriptive framework based on nine
criteria grouped into what the organisation achieves (results) and how results are achieved (enablers).
Results include customer results, people results, society results and key performance results. Enablers
involve leadership, strategy, people, partnerships, resources and processes.
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)

Requirement (c)
The likely features of the proposed corporate website will include:

Many of LD2's competitors are experimenting with online trading which is a main feature of
many contemporary commercial websites. As LD2's website should be comparable with the best
in the kitchen accessory, supply and fitting industry it should include this facility.
Accessibility by all browsers and IT platforms in order that the largest market audience
is able to access the site.
Credit and debit card security and privacy safeguards for customers as they would be able to
purchase kitchen accessories online and supply potentially sensitive information when
requests for kitchen supply and fitting are placed.

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In terms of features, the website needs to be comprehensive yet user friendly, formative and
easy to navigate. A site specific search facility might be a worthwhile feature.
The site should be customer friendly. It could have links to other information sources such
as details of LD2's showrooms, a listing of stockists of LD2 kitchen products, etc. Most likely
staff would need to visit potential customers to advise on kitchen fitting and an email link for
answering queries and diary for arranging visits would be features that the user would find
helpful.
The website would need to be visually appealing, so aesthetic and technical considerations
should help guide issues of screen layout, colour, graphics, etc.
A feature should be a potential to update quickly and easily. Ongoing maintenance of the site is
important to accommodate customer feedback, price alterations or additions to, or deletions from
the product range. The ease with which this can be carried out will be important.
Feedback from customers is important and a facility for customer reaction will be needed.
Possibilities include a facility to post customer reviews, an email link or the completion of an
online customer satisfaction questionnaire.

E1 Enterprise Operations
March- 2012

SECTION A 20 MARKS

Question One
1.1
Which ONE of the following is NOT a feature normally associated with a NonGovernmental Organisation (NGO)?
A

Government funded

Independent

Non-profit making

Explicit social mission

1.2

Gross National Product (GNP) represents

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.

1.3

Cattell's 16PF test is normally associated with which ONE of the following?

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IS feasibility studies

The process of market segmentation

Auditing existing supply arrangements

Employee selection

1.4
Supplier relationships in a supply network are categorised in which ONE of the following
ways?
A

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

1.5

Results and enablers are features of which ONE of the following?

Servqual

Total Quality Management (TQM)

The European Foundation for Quality Management (EFQM) excellence model

Competitive benchmarking

1.6
The desirable features of a candidate for a job are best contained in which ONE of the
following?
A

A person specification

A job description

A job advertisement

A verbal briefing at the interview

1.7
Enlargement, enrichment and rotation are terms associated with which ONE of the
following?
A

Adjustments to an individual's job content and role

Improvements brought about by competitive benchmarking

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Market and product development strategies

Customer approval ratings

1.8

Which ONE of the following is NOT associated with Maslow's Hierarchy of Needs?

Self-actualisation

Affiliation

Hygiene

Safety

1.9

Which ONE of the following is NOT a cost of quality?

Internal failure

Appraisal

Prevention

Transaction

1.10 Which ONE of the following is associated with recruitment rather than selection?
A

Assessment centres

Interviews

Advertising copy

Psychometric testing

Answer to Question One


1.1 A
1.2

1.3

1.4

1.5

1.6

1.7

1.8

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1.9

1.10

SECTION B 30 MARKS
Question Two
a) Describe briefly, FIVE main opportunities for an organisation operating in a modern
global business environment.
(5 marks)

Requirement (a)
There are several significant opportunities for an organisation operating in a modern global business
environment and five are highlighted here.
Reducing the manufacturing cost base
For many organisations there has been a strategy of off-shoring the manufacturing base to lower cost
countries. Relocation of organisations manufacturing base to countries with lower labour costs means
that an organisation can offer low or lower price products and remain competitive.
Taking advantage of specialist expertise
There has been an emergence of fast growth (BRIC) economies including India which has developed a
high quality expertise amongst its workforce in linguistics and IT. The effect is that organisations in more
established economies have outsourced back office and call centre activities knowing that costs will
reduce and service levels will be maintained and possibly enhanced.
Access to large new markets
The modern global environment offers access to new and potentially lucrative markets thanks to a
relaxation of trade barriers and changing attitudes to world trade. By way of example the substantial
emergence of a huge, largely untapped market in a growing economy such as China offers potentially
access to a large proportion of the worlds population for the first time in decades. This means that
although a market life for a product may be in decline in long established markets, potentially (at least),
the same products could sell strongly in new markets.
Opportunities to collaborate and gain expertise
The modern global environment has offered opportunities for cross -national business alliances and joint
ventures. This has led to organisations gaining new expertise, accessing markets that were at one time
thought impenetrable and achieving economies of scale in production and operation through
collaboration.
.
Take advantage of different tax jurisdictions
The modern environment stresses the importance of global economic policy over national sovereignty
and an organisation can expect financial opportunities if it operates across different tax jurisdictions. It
may be that certain developing countries actively encourage inward investment by offering attractive tax
and other incentives.

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b) Explain the relationship between 'Business Ethics' and 'Corporate Social Responsibility'.
(5 marks)

Requirement (b)
Ethics might be viewed as a set of moral principles that guide behaviour, based on what is felt to be
right. As opinions may vary over what is right and what is wrong ethics is in many ways a subjective
concept. Individuals have their opinions over right and wrong and ideas can vary enormously
between different national and even organisational cultures.
Business ethics comprises the principles and standards that govern behaviour in the world of business.
The factors that affect ethical obligations in business are the law, government regulations, social
pressures and tensions between personal standards and the goals of the organisation, and ethical
codes (e.g. the code developed by CIMA).
Ethical considerations underpin the concept of Corporate Social Responsibility (CSR). CSR refers to
the idea that an organisation should be sensitive to the needs and wants of all its stakeholders, not just
its shareholders/owners. CSR suggests that the organisation should consider the environmental impact
of production on for instance non-renewable resources or non-recyclable inputs, the health impact of for
instance tobacco on consumers, and fair treatment of employees, etc. CSR is perhaps wider in scope
than standard ethical concerns and might for instance include a commitment to a green environmental
agenda. Other examples include whether it is right to experiment on animals and the safety of products
or production processes. These judgements influence societys acceptance or rejection of the action
taken. CSR means that businesses therefore should schedule their economic and legal duties with their
wider responsibilities.
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)

Requirement (c)
When companies are considering Foreign Direct Investment (FDI) particular emphasis should be
placed on determining any potential political risk. Rugman and Hodgetts (2002) identified a number of
groups which may be potentially responsible for political risk. These are listed below along with
examples of such groups.
Current government/ruling regime of that country
This includes the governments various departments and agencies such as a countrys department for
trade. Risks arising from this group can take the form of industry regulation, taxes on specific types of
business activity, etc.
Political opposition groups
Opposition groups may not be in power at the present time but may have political influence, (e.g. the
Republican party in the USA which currently controls a chamber of government). It should be
remembered that such groups may gain further power after FDI takes place. The risk arising is
associated with changing policies and restrictions (for example, employment policies and product
manufacturing restrictions).
Organised interest groups
Organised interest groups such as religious groups, trade unions, etc. may impact upon a countrys
operations and could lead to a disruption of trade for a particular company. (One example may be
French transport drivers and farmers who have a history of taking direct action in response to
government policy that they see as harmful).

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Terrorist groups operating in that country


Terrorist or anarchist groups may operate in certain countries, (e.g. separatists in Spain, extremist
republican groups in Ireland, etc.). Risks include disruption of trade, damage to property and/or
personnel from social unrest, acts of armed conflict, terrorism, riots, etc.
International organisations
International organisations such as the World Bank or United Nations may bring influence to bear
upon the country in question which could change the nature of existing trading and operations and
represent a form of risk to trade.
International alliances
The country in which FDI takes place may subsequently enter into an alliance with another foreign
government and again the nature of existing trading and operations may change as a result. Examples of
trade agreements between governments are plentiful and include the current agreement between
Vietnam and USA.
d) Describe the 5-S practice for improving both the physical and thinking environment of an
organisation. (5 marks)

Requirement (d)
The 5-S practice is an approach to achieving an organised, clean and standardised work place and can
be seen as a part of the kaizen (continuous improvement) approach to quality. 5-S is based upon 5
Japanese terms 'seiri, seiton, seiso, seiktsu and shitsuke' but can be translated as sort, organise, clean,
standardise and discipline. These simple principles can encourage the standardisation of procedures and
clarification of management processes.
This can be explained with the following examples:
Sort - eliminate unnecessary items, get rid of old unwanted files. (Physical).
Organise - develop and use a structured filing system. (Physical).
Clean - clean work stations and work areas regularly. (Physical).
Standardise - introduce standardised processes and systems such as an alphabetical filing
system. (Thinking).
Discipline - exercise discipline daily, not slipping back to old habits and ways of working. (Thinking).
e) Describe briefly, FIVE ways in which an organisation might respond to variations in
demand for its products. (5 marks)

Requirement (e)
Various options exist by which an organisation might respond to variations in demand for its products. (An
organisation which constantly adjusts its productive activity levels to shadow fluctuations in demand from
customers is said to employ a 'chase' strategy.) These options might be classified in terms of:
Adjustments to workforce capacity to influence supply
Adjustments to stock levels
Adjustments to the marketing mix to influence demand
Workforce capacity
Hiring and lay-offs - By hiring additional workers when demand is high and laying them off when demand
reduces.

Use of overtime working - By asking or requiring employees to work extra hours,


organisations can create a temporary increase in capacity without the added expense of

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hiring additional workers.


Use of part-time or casual labour - By using temporary workers for a fixed period or casual
workers (who are considered permanent but operate on an on-call basis when needed)
capacity might be temporarily increased.
Shared employees - Rare and more novel ways of balancing supply and demand in certain
industries involve a 'sharing' of employees. This arrangement works best when companies with
counter-cyclical demand collaborate.
Developing a flexible workforce - An organisation might give its workforce experience in many
areas of the business or train them to become flexible and multi-skilled. With an ability to perform
tasks in several operations, these workers will create some flexibility when scheduling capacity.
Workers may alternatively be employed on flexible arrangements whereby they are required for
banded hours during a given period (e.g. between 25 and 50 hours in any given week).

Workforce capacity (outsourcing)


Subcontracting work - An organisation may choose instead to temporarily increase its
capacity by engaging another provider to help meet temporary increases in demand.
Flexible inventory levels
Stock levels - Stocks of finished goods can be built up in periods of slack demand and then
used to fill demand during periods of high demand.
Marketing mix to influence demand
Pricing and promotion - Adjustments to product pricing and promotional activity in particular
can help 'smooth' peaks and troughs in demand.

f)

Explain how operations management might contribute towards achieving an


organisation's sustainability targets. (5 marks)

Requirement (f)
Operations management might contribute to achieving an organisation's sustainability targets in a
number of ways.
Through process design - Production processes can be designed and improved upon so that they
minimise wasted material and labour, lessen energy usage and reduce carbon and other emissions
arising from the processes. (CAM and CAD technology might be utilised to assist this process.)
Through product design:
Products can be designed so that consideration is given to the amount of raw materials used
and wastage from off-cuts etc.
Products can be designed so that once they are used they can be disposed of in a way that is not
harmful to the environment. (Better still spent products should be recyclable.)
Products can be designed in a way that packaging is both minimised and/or made from
biodegradable or recyclable material.
Through purchasing strategies - An organisation may decide to source products ethically. This might
include the use of biodegradable or recycled materials or manufacture using raw materials from
sustainable sources.
Through supplier selection - When choosing suppliers consideration may be given to those
organisations that adopt sustainable development policies.
Through logistics - Unnecessary transport and the physical distance between supplier, factory and
sales outlets could be considered in order to best meet an organisation's sustainability targets.

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Through lean policies/quality initiatives - The adoption of a lean and/or quality orientated philosophy in
operations should lead to an elimination or reduction of waste whilst achieving at the same time greater
efficiency.

SECTION C 50 MARKS

Question Three
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)

Requirement (a)
It is clear that CXC faces a number of challenges and must overcome its weaknesses and counter the
threats it faces. The weaknesses and threats it needs to consider and address are summarised below:
Weaknesses

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Organisational structure. CXC has an old fashioned structure. The scenario suggests a tall
hierarchical structure with a General Manager, Regional Managers, right down to the Sales
Associates who interface with the customers. This can lead to poor communications and to
regions and Sales Associates 'doing their own thing'. There is little evidence of team working or
'bottom-up' feedback from the Sales Associates who work within the framework of policies and
procedures coming from headquarters. Undoubtedly this represents a strategic weakness. The
company should review this and initiate a change to a 'lean-flat' structure based on team work.

High overheads. With many layers of management and a large office in the capital city this
suggests that CXC has high central overheads and operating costs which could make it
uncompetitive.

Limited market awareness. CXC appears to have limited strategic direction and market
awareness. Its headquarters may appear distant to its workforce in the regions. The emphasis
appears to be upon monitoring and policy making rather than strategic leadership and market
acumen. The working party charged with strategy making is drawn from CXCs Regional and
Assistant Managers - all senior staff and none in touch with customers in the way that Sales
Associates are.

Lack of sales incentives. Currently there is no incentive pay for the Sales Associates who
are paid a flat-rate monthly salary. The General Manager has obviously acknowledged this
weakness and is considering the idea of incentivising these key workers by implementing a
bonus scheme.

Reputation and repeat sales. Customer feedback from direct telephone sales 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. This can lead to a loss of
confidence and goodwill meaning that CXC risks its reputation and is unlikely to gain repeat
sales.

Unattractive marketing mix. It is evident that CXC has adjusted its marketing mix for the home
business over the past two years. However the faltering performance indicates that the mix is still
not sufficient to maintain market share and past success. CXC needs to consider more carefully
the mix of product features and fitness of products for their purpose, promotion and the way in
which it communicate with its target market, place, whether on the road sales, cyberspace or the
telephone line and price reflecting those costs, competition and customers ability to pay in a
challenging market. The outcome could be a range of actions that review price, promotion and
products for the market.

Over-dependence on Sales Associates. Sales Associates deal directly with the customers and
receive referrals from CXCs headquarters. The majority of the business they generate however
is down to their own endeavours whether getting further business from existing customers or
developing links with local private medical companies, automobile traders, and travel companies,
etc. This implies little information sharing and over dependence on this
group of staff who do not as yet receive bonus payments. Unless addressed this leaves CXC
vulnerable to Sales Associates leaving and working for competitor organisations.

Threats
Competitors in the home market. CXC's competitors clearly offer an on-going threat particularly
in the home market. It is clear that CXC faces a number of challenges including declining sales
market share with associated loss of business to competitors. The poor performance in the home
market has been masked by its success in new ventures abroad and through phone sales. The
effect of a recent loss of a major customer has been somewhat off-set by the success of sales in

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countries A, B and C. It would not be desirable for this foreign business to support the home
market in the longer term.

Inexperience in telephone sales. It is encouraging that CXC has considered different ways of
accessing the market for insurance. It is, however, likely to experience aggressive competition
from direct telephone sales possibly by competitors who have superior after sale and follow up
services.

Ignoring the benefits of e-business. The company does not feel that online trading is the way
forward but this is ignoring the potential available. It may be that the loss of home market share
is because it has not embraced this modern way of trading. If it is not careful, less well
established companies which have lower overheads may continue to grow at its expense as
consumers become more comfortable with online trading. A second issue is that the
opportunities of increasing sales in other countries could be more easily achieved through online
trading.

b) Describe how the working party should go about developing a new strategic marketing plan.
(10 marks)
Requirement (b)
Identifying important detail to be included in the plan
The working party will need to identify important detail for inclusion in the plan, for instance, the plan will
need to reflect:
Training requirements
Budgets, targets and standards
Responsibilities for implementation and control
Reporting procedures that will enable achievements to be monitored against the plan
The plan itself will need to meet certain key criteria: It will need to be realistic, accurate, suitable,
consistent, etc.
Clarify CXC's objectives
A useful method that can be used to develop a marketing strategic plan is to articulate and capture
CXC's corporate objectives which, from the scenario at the moment, do not appear clear. For
instance, although it is known that two years ago CXC had 12% of the home market in insurances and
this has fallen to 10%, it is unclear what market share CXC aspires to. Clearly the General Manager
will need to be involved in this process.
Establish marketing targets
In the context of developing a marketing strategic plan, the working party will need to concentrate on the
part that marketing can play in the implementation of CXC's corporate objectives. The plan will need to
take account of and support the main corporate objectives and initiatives. Once there is agreement on
new corporate objectives and manageable targets in a SMART (specific, measurable, achievable,
realistic and time bound) format, their translation into marketing targets (such as sales) will be needed. At
a managerial level, objectives will need to be developed into agreed achievable key performance
indicators (KPIs).
Audit of external environment
The General Manager knows that CXC faces some difficult challenges and that strategic threats
must be addressed. In the same way, strategic opportunities must be seized. The working party
has been examining CXC's current situation and a position statement is obviously an important
part of the overall process. Part of this will need to include a complete review of the external

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market in which CXC operates. This will involve much analysis and discussion. Specific areas
that should be considered include:
Trends in the macro environment, possibly using a PEST (Political, Environmental, Social and
Technological) analysis.
Competitor analysis including their relative market share, portfolio of products and strategic
activities.
Industry analysis, including the future potential of the insurance industry and products. If a
market lifecycle could be developed, then CXC would be in a better position to make
decisions over investment and product pricing.
From this analysis the working party should ascertain marketing opportunities and threats.
Conduct an internal review
The working party has been examining CXC's current situation and part of this will need to include a
complete internal review. Effectively the task will involve identifying the factors that make up CXC's
strengths and weaknesses. This will include a review of CXC's portfolio of products (e.g. life insurance,
mortgage protection insurance, other mortgage linked insurances, etc.) including their profitability and
position in the market as determined by a BCG (Boston Consulting Group) matrix analysis which
indicates relative market share and market growth.
Analysis and discussion
Factors internal to CXC might be categorised as either strategic strengths or strategic weaknesses and factors
external to CXC represent a source of either strategic opportunity or strategic threat. In combination, these
factors may represent a simple snap-shot or position statement of where the organisation is situated (a SWOT
analysis). From this detail of where CXC is, strategic marketing strategies and approaches might be usefully
determined. It is important for the working party to involve a wide body of internal stakeholders in this process
in order to ensure buy-in and commitment to the new strategic marketing plan. Discussions should centre on
ways of building on strengths to seize opportunities, overcoming weaknesses and negating threats in order to
meet marketing targets.
Communication
Communication and co- ordination of the plan is important. The new plan should be co-ordinated
across the organisation and, after drafting and approval, should be communicated to all employees
involved in the marketing activities of the company.
Establish a system for effective monitoring and evaluation
By establishing a system for effective performance and attainment, monitoring and evaluation, CXC should
be able to measure how successfully the company is performing against its initial objectives.
Ensuring workforce buy-in
Throughout this process it is important that the working party is mindful of the need to involve others in
the strategy formulation process. In particular, sales associates will be crucial to successful
implementation of the plan and their full cooperation and buy-in is vital.
Developing an integrated planning approach
It must be acknowledged that in practice the strategic process is rarely as linear and sequential as a
logical phased approach suggests and many aspects progress together. The working party should
develop an integrated approach to developing the marketing strategy and be prepared to show
flexibility.

c) Explain the factors that CXC should take account of when devising a bonus scheme for its
Sales Associates.
(5 marks)

Requirement (c)
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The working party is tasked with giving some guidance following the General Manager's idea to increase
the sales by implementing a bonus scheme for CXC's sales associates. The guidance given by the
Working Party might include:

'Fit' with Corporate Goals. The scheme should support the corporate goals of CXC and
contribute to its main objectives. The scheme should be designed in such a way that there is
congruence between the scheme's outcomes and the overall organisational needs.

Reward sales associates appropriately. It is commonplace in this type of organisation to reward


sales associates with a range of items including pay, payment by results, sick pay, car, pension,
medical benefits, etc. Much depends on what the associates themselves value (and are likely to be
seen as positive motivators). A further consideration is the industry 'norm' for this sort of reward.
Investigation of systems used by competitor and comparator organisations may be helpful in this
respect.
Simplicity. There is a need to ensure that the bonus scheme is simple and uncomplicated. Not only
will this allow for an easy means of calculation but it will also be straightforward to explain and apply
and achieve transparency.
Fairness and consistency. It is important that the workforce sees that the bonus scheme is fair,
achievable and consistently applied with no suspicion of favouritism or discrimination against any
individuals or groups.
Total cost and flexibility. It is essential that the overall cost be controlled to ensure
appropriate financial returns are achieved.
Individual or team award. It is worth considering whether this bonus scheme should be based on
an individual sales associate's efforts or whether it should be team based. If it is team based, this
may encourage more sharing and team development.
Impact on other groups. If a bonus scheme is introduced for this group of workers, the impact
upon other groups should be considered including pay differentials and motivation.

Question Four
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.

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Required:
a) Discuss the ways in which CQ4's operations might be transformed through the
implementation of the EPoS system.
(10 marks)

Requirement (a)
The Managing Director is looking to consolidate operations of the company through standardisation of
equipment and procedures. CQ4's operations might be transformed through the implementation of the
EPoS system in a number of ways:
Greater organisational control
Greater control of the entire CQ4 stores is possible with data being received directly in head office. Data
received centrally would also provide the basis for common detailed reporting for marketing and
management accounting purposes.
Alignment to corporate aims
Reporting through the EPoS system may be tailored to the particular business needs of the individual
organisation (which in CQ4s case seem to be concerned with centralisation, efficiency and control).
Stock management
EPoS software can simplify stock and product ordering locally. Currently staff spends several hours
every day checking stock and placing orders for the next days trading. EPoS eliminates staff errors on
counting and so overcomes the risk of over ordering or product 'stock-outs'. EPoS also simplifies
stocktaking and reduces the need for laborious paper work to be maintained in stores.
Cost savings and improved profitability
Significant cost savings may be possible through the system. Costs associated with staff daily
cashing up, checking stock and placing orders for the next days trading could potentially be
eliminated. In addition improved stock control, better informed decisions of choice of product lines
should make a greater contribution to CQ4s overall financial bottom line.
More efficient use of management time
CQ4s store managers report weekly on the performance of certain product lines. EPoS can instead
provide detailed reporting in real time, freeing managers from this burden and allowing them to redirect
their time more productively.
Financial management
With improved reporting efficiency CQ4 should feel a real benefit as management accounting will be
strengthened and reporting will be more accurate (possibly) and timely. Profitability forecasts might
easily be constructed from this data against which monitoring of actual performance can occur. This
functionality will increase the effective management of CQ4s chain of stores.
Control of pricing
All of CQ4s stores are situated in the same geographical area and EPoS can keep pricing consistent
amongst all its stores. It is also possible to change pricing quickly and easily to account for stock about
to go out of date or reflect special offers and deals (such as 'two for one offers).
Product management
EPoS can contribute to improved product management. Data received through transactions in CQ4s
stores can help inform matters such as promotional campaigns and the future range of products that
should be stocked.
Customer management
EPoS systems help to integrate a number of business systems by providing information quickly and

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efficiently. Many stores offer loyalty cards to their customers. If transaction data is linked to customer
loyalty card information customer buying habits can be identified and promotional activities targeted.
Buyer behaviour can be more easily determined and greater management of the product mix can be
achieved.
Operational efficiency
Contemporary EPoS systems involve user friendly touch screen terminals meaning that transactions
can be processed quicker than under other systems. The system means that:

customers will in future spend less time queueing and waiting at checkouts
the accuracy of billing should also improve meaning that nothing is left off a customer's bill and
all discounts are taken.

This improved efficiency should enhance customer satisfaction and improve staff morale and
productivity.
Effective management of staff and transactions
EPoS will offer a potential for closer control of staff and improved security of cash. As most EPoS
systems normally use individual staff ID buttons, stock shrinkage and theft will be curtailed as sales
and transaction patterns can be analysed and monitored more closely. Data produced from the system
may also mean that the monitoring of efficiency of staff performance is also possible e.g. transactions
per checkout operator per hour.
Improved reporting
CQ4 has in the past adopted a policy of continuing to operate existing systems and equipment in
stores. Difficulties include inconsistency of systems and variable quality of reporting through these
systems. EPoS collects data and potentially can produce helpful reports on stock movements, the
impact of marketing campaigns, store by store benchmarking ratios and financial analysis in a way
that may not be possible under the existing arrangements.
Attainment of industry standard
Contemporary developments have seen older cash registers being superseded by EPoS systems in
hospitality and retail sectors and even small scale businesses now find it extremely affordable and
beneficial to have such a system. An investment in the EPoS system will ensure that CQ4 has equipment
at least comparable with its rivals.
b) Discuss the ways by which the Managing Director might overcome potential staff
resistance to the introduction of the EPoS system.
(10 marks)

Requirement (b)
CQ4 has a policy of re-employing staff and continuing to operate existing systems and equipment in
stores wherever possible. This means that staff may in some cases be very long serving and entrenched
in past ways of working. CQ4s Managing Director has however been warned that staff in some stores
might offer some resistance to the changes he wishes to make. There are several ways by which the
Managing Director might overcome potential staff resistance to the change.
Addressing the issues 'head-on'
It has been speculated that a combination of reasons for potential resistance by CQ4's workforce is
because some are set in their ways and/or fearful of new technology, and/or suspicious about the
motives for the initiative. To overcome these issues the Managing Director could:
make clear why old ways of working are no longer appropriate;
offer support to cope with new technology appropriate to individual needs;
provide a rationale for the change and tackle unfounded fears

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In this way, the main issues might be addressed head-on.


Develop an open atmosphere/culture
One of the problems of bringing about change is that people will not always openly admit the real reasons
for opposing the changes. In particular, those reasons relating to self-interest are likely to be disguised as
technical objections, such as arguing that the proposed system will not work. Attempts to deal with these
technical objections will not get to the root cause of the resistance to change. Only in a climate in which
individuals feel free to discuss their fears openly will it be possible for the change agent to deal with the
underlying reasons for resistance.
Keep staff focused
Inevitably people feel vulnerable during periods of organisational change. The Managing Director would
do well to ensure that employees focus on the right issues arising from change. For instance, store
managers may believe that the most effective way to protect their future employment is to be more
conscientious and work longer hours, etc. All this may be true but the real goal is to justify ones existence
through adding value.
Combine approaches
There are a number of ways by which the Managing Director might overcome potential staff resistance
to the change. Kotter and Schlesinger (1979) identified six main methods of dealing with resistance:
Education and communication
Participation and involvement
Facilitation and support
Negotiation and agreement
Manipulation and co-optation
Explicit and implicit coercion
These six approaches are not mutually exclusive and those responsible for introducing the system
may find it effective to use a combination of them. The most appropriate approach in each instance will
depend on a variety of factors, including the goals of the initiative and the likely reactions of the people
involved.
Education and communication
Education and communication is useful when the basic problem is a lack of information about the need
for, or the nature of, the planned change. In CQ4s case potential resistance by employees may be
because they are suspicious about the motives for the initiative. The scenario makes clear that CQ4s
Managing Director wants to consolidate operations through greater centralisation and standardisation of
equipment and procedures. The electronic point of sale (EPoS) system is apparently a first step. There is
no indication that the Managing Director has communicated this thinking to staff. It seems wholly
appropriate to educate staff as to why these changes are taking place and the reasons for them. Some
may believe the changes threaten job satisfaction or job security. If such anxieties are unfounded then
the Managing Director needs to allay these fears. This may effectively head off a degree of resistance to
the changes that are to occur.
Participation and involvement
Participation and involvement increases the probability that people will be committed to implementing the
change. This approach to dealing with resistance to change (like education and communication) can be
time consuming but the benefit may be that if their views are taken into account, this may enhance the
effectiveness of the change initiative. The Managing Director may wish to involve stores in implementing
the systems themselves without disrupting business rather than imposing EPoS on them.
Facilitation and support
Facilitation and support involves the use of techniques such as training, counselling and group
discussions to reduce fear and anxiety. This is particularly appropriate where the principal reason for

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resistance is based on insecurity and adjustment problems. In the case of CQ4 some employees are set
in their ways and/or fearful of new technology. A promise of full training for all staff in a non-threatening
way would undoubtedly allay many anxieties and fears and prevent resistance.
Negotiation and agreement
It is said that people do not naturally resist change per se-they resist loss. Negotiation and agreement
may be necessary where a group clearly stands to lose out in some way because of the change. If
applied effectively this method of dealing with resistance to change may help to avoid major problems,
but it can be expensive. In this case CQ4 staff currently spends several hours after the close of trading
every day cashing up, checking stock and placing orders for the next days trading. As the system
effectively does this job staff will not be required to work as many hours per day which could result in
either a loss of pay or a redirection into more value adding activities. The Managing Director needs to
consider the implications and then decide whether or not the impact of reduced pay might be softened in
some way for individuals affected.
Manipulation and co-optation
Manipulation is an approach that relies on presenting partial or misleading information to those resisting
the change. Co-optation involves identifying key individuals resisting changes and buying them off by
giving them positions of authority to help implement the changes. Although this may be a quick and
relatively inexpensive approach, it will probably result in future problems if the peopleinvolved realise they
have been manipulated. These methods raise ethical and legal problems as well as involving
considerable risk of making the situation worse and are not recommended in this case. CQ4 has
maintained a policy of reemploying existing staff in stores it takes over. One can speculate that this has
led to loyalty to the company and it would be a pity to jeopardise this with such dubious tactics to
overcome resistance.
Explicit and implicit coercion
Explicit and implicit coercion involves the use of force, or the threat of force, to enforce the
implementation of change. In this case it could be to threaten store managers whose staff do not comply
with the initiative. As with the previous method such an approach raises ethical and legal problems and is
not recommended. Store managers might be given responsibility for ensuring the smooth operation of
EPoS within their stores but the issuing of threats attached to this is unacceptable.

c) Describe the human resource management issues associated with the Managing
Director's new policy. (5 marks)

Requirement (c)
A number of HR issues need to be considered as a result of the Managing Director's new policy.
Reducing overall headcount painlessly
The new EPoS system will do away with the need for staff spending time cashing up, checking inventory
and placing orders for the next days trading, similarly store managers will be relieved of the need to
report weekly to head office on performance. These time savings may be translated into a potential
workforce reduction. How this might be achieved easily, quickly and as painlessly as possible is an area
for consideration for HR.
A new round of recruitment and selection
Some staff may decide having considered the nature of planned changes that they are not prepared to
work for CQ4 any longer and may find alternative employment. If those posts need to replaced then a
new round of recruitment and selection may be needed.

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Job content
Currently staff spends time daily cashing up, checking stock and placing orders. Store managers
report weekly on the performance of certain product lines. It seems that the new system will negate
these requirements, and hence job content and possibly job roles will alter.
Organising appropriate training
Staff members in some stores are fearful of new technology. Education and training in IT skills and IS will
be vital components of successful implementation of EPoS. This might be achieved by facilitating
workshops and ongoing support mechanisms such as mentoring, 'buddying' systems and/or local
facilitators. In addition potential changes to job roles as a result of the new system may potentially also
require training at various levels, particularly for checkout staff.
Developing a training needs analysis
It is good practice to undertake a training needs analysis of the workforce and shape the strategy
accordingly. Specific skills required for checkout staff in the future will for instance include computer
literacy, listening and customer care. These should be compared with the skills currently possessed by
these staff. Store managers may need training in project management, facilitation and leadership skills
in successfully bringing about the necessary changes. Skill gaps in these areas should be identified and
remedied.
Reward systems
The Managing Director now wishes to consolidate the company by introducing greater
centralisation of control and decision making and standardisation of equipment and procedures.
Reward systems represent the ways in which staff are recognised and rewarded for their
endeavours. Such systems may need to alter to ensure that they support and encourage CQ4s
initiatives. Typical organisational rewards usually include pay and promotion. Other rewards need
not have financial implications and might for instance include greater empowerment and job
fulfillment. It is a good idea to communicate these points widely and reward publicly, creating role
models of those who achieve smooth implantation and operation of the EPoS system. In this way
positive performance standards might be signalled to the whole workforce.
Target setting and appraisals
Major revisions to existing targets will be needed in the light of CQ4s organisational initiatives and a
mechanism for review and target setting will need to be considered. New personal plans, targets and key
performance indicators (KPIs) will need to be created for every store manager and then cascaded down
through subordinates and work groups so that the whole organisations performance is assessed having
regards to the initiative. Once overall review mechanisms are established, annual appraisal and monthly
target setting might reasonably be employed.
Communication systems
The scenario makes clear that CQ4s Managing Director wants to consolidate operations through
greater centralisation and standardisation of equipment and procedures, including the use of EPoS but
there is no indication that he has communicated this to staff. This highlights a possible need for more
effective communication systems within CQ4 and HR may take the lead in this respect.

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E1 Enterprise Operations
May- 2012
SECTION A 20 MARKS

Question One
1.1

A transition economy is one that is

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.

1.2

Corporate governance is best described as

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.

1.3

Which ONE of the following is a program that impairs data and software?

A virus

Corrective maintenance

Electronic Data Interchange (EDI)

Cyber bullying

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1.4
Background and circumstances, special attributes and disposition are all factors often
identified in which ONE of the following?
A

Service level agreements

Key performance indicators

Person specifications

Job descriptions

1.5

IS client-vendor relationship is a feature of which ONE of the following?

An outsourced IS function

Enterprise-wide systems

Social networking

Virtual team working

1.6
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

Co-optation

Career planning

Succession planning

Networking

1.7

Contrived, volume and realistic are examples of which ONE of the following?

System testing methods

Supply relationship categories

Ways of classifying inventory

Ways of estimating market potential

1.8

A psychological contract refers to which ONE of the following?

Intangible costs arising from outsourcing

The mutual expectations of an employer and employee

The responsibilities of citizens to their nation

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The use of contracted experts in psychometric staff testing

1.9

According to Douglas McGregor, managers believe Theory X people

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.

1.10
Which ONE of the following is most likely to lead to an organisation accessing a larger
market for its goods or services?
A

Electronic Data Interchange (EDI)

Teleworking

e-trading

Penetration marketing

The correct answers are:


1.1 C
1.2

1.3

1.4

1.5

1.6

1.7

1.8

1.9

1.10

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SECTION B 30 MARKS

Question Two
a) Explain FIVE ways in which businesses might try to influence government policy in a way that
might benefit them.
(5 marks)

Requirement (a)
In the light of government regulation, businesses may become involved in the political process with the
aim of securing particular policy preferences. This is referred to as Corporate Political Activity (CPA).
The most explicit forms of CPA involve arguing a business case by:

Using political lobbyists who are professionals with access to key ministers and civil
servants.
Creating non-executive directorships for current members of a parliament and retired
senior civil servants.
Making campaign contributions to certain political parties.

Businesses will hope that they can influence government policy in a way that favours them and takes
account of their problems and circumstances.
CPA can be an important element in any business's efforts to gain competitive advantage, particularly
where domestic producers encourage their government to disadvantage foreign competitors in the home
market.
Sometimes CPA is distinguished in terms of:

'Buffering': proactive political actions such as informing government decision makers about
the impact of possible legislation and actively trying to reduce government regulation of the
firm, etc.
'Bridging': reactive behaviour such as tracking the development of legislation so that the
business is fully prepared when legislation is enacted.

A less direct means in which businesses might try to influence government policies is by influencing
public opinion through promotional techniques. The hope is that the public will be sympathetic and that
the government will take account of public opinion when determining policy.
Businesses may belong to a trade association or professional body which represents the interest of
businesses within the same sector or industry. Such bodies may be a key stakeholder group as far as
the government is concerned.
Bribery, 'bungs', payments and favours, etc. to key government individuals of course raise both ethical
and legal questions but are nevertheless apparent in certain countries and political regimes.

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)

Inputs
Inputs are intangible. Unlike a traditional product, a service does not rely on a stock of
physical raw materials but is more reliant on the interpersonal skills and abilities of its

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workforce.
Processes
For a product the process of transformation is normally unseen by the customer. By
comparison, customers participate in the delivery process of a service by interacting with
an employee or representative of the organisation.
Service processes tend to be more labour intensive than most manufacturing processes
which can rely heavily on plant and equipment.
Greater customisation of the service is required to meet customer needs meaning that
standardisation of process is difficult to achieve.
Outputs
Outputs are intangible. A service does not exist in a physical form and therefore cannot be
stored in the same way that products can. The failure to sell a product today may leave an
opportunity for a sale another day; an unsold service (e.g. a travel fare) today is 'lost' forever.
A service does not exist in a physical form and therefore cannot be inspected in advance.
Greater dependence upon the skills of staff in making a sale is involved.

Inseparability of the service and the person providing it. Face to face contact is more
important for a service than for most products. In the eyes of customers, an organisation's
people may be inseparable from the total service that they receive.

c) Explain the main features of organisations that do NOT adopt a market or marketing
orientation.
Marketing-orientated organisations have a main focus of the customers and their demands. In this
way the products they offer for sale are determined by the consumers themselves. Alternative
approaches might be classified as product-orientated, production-orientated or sales-orientated.
The main features of organisations that adopt these alternative approaches are shown below:

Approach

Features
Little or no prior research to identify a demand for the product being
produced.

Product-orientated

The organisation runs the risk of products being unattractive and not selling
in sufficient numbers.
As the main focus is the product features, this could result in the production
of goods with high quality features which may or may not be valued by the
customer.
Production levels and processes have little regard to customer demands
which means that too many units may be produced (and left unsold).

Production-orientated

As the main focus is production efficiency, the aim is low product costs
which might in turn result in lower selling prices. This may not lead to greater
sales however, as customers might associate low price with low quality.

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A great deal of attention is given to the sales strategies applied and the
enthusiasm of the sales force.
Sales-orientated

d)

Ethically questionable: high-pressure sales techniques might not be


sustainable longer term as there may be adverse publicity for the company
and past customers may be left feeling dissatisfied.

Describe FIVE factors that can influence an individual when deciding whether or not to
purchase a product. (5 marks)

There are many factors that influence an individual's purchasing decision and five are highlighted
below:
The degree to which the product satisfies a need or a want. As implied by the definition of
marketing, goods are not an end in themselves but the means to satisfying a need. The
individual will be influenced by the extent to which the product satisfies their underlying needs
or wants.

The social influence of others impacts upon an individual's buying habits. The
individual's reference group (e.g. his/her family) and his or her own role and status within
these groups can be important influencing factors. So-called social interaction theory states
that an individual's buying behaviour may depend upon what he or she perceives others in
society to be doing. Perceived social stigma associated with purchasing a particular product
or service may deter consumption. Conversely, a feeling that others are acquiring a particular
good might create a 'me too' attitude within the individual.

The relevance of the purchase. If a product is being purchased for the first time and is costly,
the individual consumer will be highly involved. He or she may take time and effort to research
the product features and evaluate alternatives in order to make the 'right' choice.

The influence of frequency of purchase. In the case of low cost fast moving goods (FMCG)
the individual may make purchases frequently and out of habit. If so, the consumer will give
the purchase little conscious attention.

The influence of new product features. Issues of fashion and new product features, etc.
may influence an individual when purchasing durable goods in particular. The reason for the
purchase of durable goods is generally because of a need to replace existing products that
are worn out or do not have the features of newer models.

(Other factors include culture, personality, social class, the consumer's motives, perceptions, beliefs
and attitudes, the balance of the marketing mix including price, availability and aesthetics of the product,
etc.)

e) Explain the relationship between Frederick Herzberg's dual (two) factor motivation theory and
job enrichment.
(5 marks)
Frederick Herzberg's dual factor motivation theory explains two distinct dimensions that contribute to the
behaviour of most employees:

Hygiene factors include pay, status, working conditions, rules and levels of supervision. If these are
absent or poor (e.g. low pay, poor working conditions, restrictive regulations, high levels of
supervision, etc.) dissatisfaction sets in and employees become demotivated.

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Positive hygiene factors by comparison may prevent dissatisfaction but do not in themselves
bring about motivation.

Motivators are factors that satisfy (in Maslow's terms) mainly higher level needs such as
recognition for doing a good job, a sense of achievement and opportunities for career
advancement and/or responsibility, etc. Strong motivators can increase job satisfaction and, in
turn, work place performance.

Job enrichment (sometimes called vertical job enlargement) involves deliberately delegating
responsibility for tasks normally associated with someone of a higher grade or level. This action can
produce job variety and a sense of challenge and opportunity for individual development. Job
enrichment therefore has nothing to do with Herzberg's hygiene factors but represents a potentially
powerful motivator.
f)

Describe the marketing processes that are necessary before an organisation can
properly target the most lucrative part of a market.
(5 marks)

Targeting is the process of selecting the most lucrative part of the market for a product and leads to the
development of a marketing 'mix' in order to position the organisation to appeal to that target. The key
processes that are necessary before an organisation can properly target the most lucrative part of the
market are market research and market segmentation. Organisations should also be aware of the
activities of their competitors in the market.
Market research
Market research involved finding out about the market. There are two main forms of research that
could be undertaken:

Primary research involves generating new information about the market. This can take a
number of forms but popularly includes questionnaires and telephone surveys. Specialist
research companies can be employed to carry out such work using sometimes sophisticated
methods such as focus group surveys and the use of observational equipment and specialist
software. Due to the costs associated with data collection, primary research is normally only
undertaken if secondary research is lacking or not readily available

Secondary research involves accessing data that already exists and here web-based searches
might produce a wealth of potentially relevant detail (some produced by government departments
and trade associations). Many universities also typically have effective databases allowing for
research and analysis of customer behaviour.

From the information gathered, market forecasts of demand for products and services might be made
including total market potential, geographical potential, total industry sales and relative market share
between main competitors, etc.
Market segmentation
Market segmentation is the process of dividing the market into similar groups with common
characteristics. This thinking recognises that every market consists of potential buyers with different
needs and different buying behaviour. Market segmentation may therefore involve subdividing a market
into distinct sub- groups of customers, where any sub-group can be selected as a target market to be met
with a distinct marketing mix. Although, within the total market, widely different groups of consumers may
exist, each group consists of consumers with common or similar needs and preferences who will perhaps
react to a particular market mix in a similar way.
Competitor analysis
Before an organisation can properly target the most lucrative part of the market some competitor
analysis is also advisable. This will ensure that the organisation is aware of the competitors in relevant

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market segments and the strategies and marketing mix that they are adopting. The viability of each
segment and the approach to adopt should become clearer as a result.

SECTION C 50 MARKS

Question Three
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.
a) Discuss the potential advantages for WV8 of decentralising the CIS function. (10 marks)

Requirement (a)
Decentralisation involves a systematic attempt to delegate functions and responsibility to the lowest
practical levels of authority within an organisation. Inevitably, there are both advantages and
disadvantages associated with decentralisation of central services such as CIS. The advantages are
reflected here.
A positive response to user feedback
Decentralisation offers a positive response to criticisms made by WV8's service users. Service users
are, in reality, internal customers of providers of central services such as CIS. A move to decentralisation
might be seen as a positive response to the claims that organisations such as WV8 have a lack of
understanding of the customers it is meant to serve.
Symbolic response to external forces
Decentralisation might be seen as a proactive response to the challenges WV8 currently faces. WV8, like
many public sector organisations, is under pressure to deliver value for money in the provision of
services. With funding cuts, WV8 is under pressure to operate more cost effectively. WV8 will also want
to meet the challenge of the government spokesperson who claims that organisations such as WV8 are
'expensive'.
Reduced central costs
A complete delegation of CIS functions and responsibility to the lowest practical levels of authority would
involve a much reduced function or no central function at all. If permanent financial savings can be made
then there is an obvious advantage particularly in the light of public funding cuts.
Reduced 'red tape'
Public sector organisations such as WV8 are often accused of being bureaucratic, top-heavy and tied in 'red
tape'. Decentralisation would provide an environment for speedier decision making. Decentralisation of WV8
will not only reduce levels of management and expensive central overheads, but should also reduce the

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bureaucracy of decision making by handing responsibility to users.

Empowerment
Decentralisation is consistent with an enlightened management philosophy of empowering the
workforce. Users are closest to the problems and best able to understand their own needs. Those users
who are delegated responsibility for providing their own CIS will be empowered to develop a service that
meets their needs more effectively. (This might be viewed as a form of job enrichment for those newly
liberated workers.) Empowerment should encourage innovation, improved user involvement in CIS
design and reduce the potential resistance to implementation.
Source of morale and job satisfaction
At a time when schools may feel threatened by government cuts, it is important that staff morale is
maintained. Decentralisation could lead to enhanced job satisfaction and morale amongst workers in
schools. Decentralisation increases autonomy, so empowering employees to make decisions that matter
to them. By offering this autonomy to make local decisions, employees can develop and apply their
talents locally, potentially leading to improved job satisfaction.
Improve managerial capacity
Decentralisation can enhance managerial capability within WV8. Employees in units away from central
services will, possibly for the first time, have the opportunity to acquire skills of decision making, project
management, directing skills, etc., strengthening leadership at all levels of the organisation.
Decentralisation enables the workforce to be innovative and creative due to the authority and freedom it
provides. The enhancement of managerial capability will, in some way, offer a response to the
government spokesperson's claim that organisations such as WV8 lack business acumen and basic
skills.
Act as a pilot scheme
By decentralising the CIS function, decisions over CIS can be made closer to the point of customer
delivery and the outcomes of this initiative are worth monitoring. CIS therefore may form a suitable
pilot project for further decentralisation and, if successful, might lead to further decentralisation of
services to users within WV8.
Overcoming staffing difficulties
In the past there have been difficulties in recruiting IS specialists and this may have influenced the
standard of service that users have received. The deficiencies of central provision will disappear as
responsibility will now fall on service users to articulate and then fulfil their services requirements. The IS
specialists that WV8 has, in the past, been unable to attract may be considered unnecessary by the users
themselves (or alternatively contractors could be used to bring this expertise).

b) Discuss the issues associated with a total outsourcing of CIS for WV8.
(10 marks)
Several issues should be taken into account when deciding whether or not to totally outsource the
CIS function as a means of overcoming some of the problems facing WV8.
Relative attractiveness of alternative means of provision
Currently CIS services are provided centrally and the policy review team is obviously looking to both
improve the service and overcome the difficulties that WV8 faces. Centralised provision through a
wholly outsourced CIS function is apparently one of the various options being discussed. Such a move
would involve a total outsourcing of all aspects of IT including system development, maintenance,
training, etc., to a single supplier. Before WV8 decides to outsource the function other alternatives
should be carefully considered including an improved central service or decentralisation. If the decision
is to totally outsource the CIS function to a single provider, there will be finality to the decision. The
contract would normally be for 3 to 5 years and after this it would be very difficult for WV8 to bring
provision back in-house.

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Outsourcing alternatives
Total outsourcing may be seen as a radical and potentially high risk solution which may not
necessarily alleviate the problems WV8 is facing. Alternatives to total sourcing that might be
considered might include:

Multiple sourcing whereby WV8 would negotiate with a range of suppliers and retain a core of
central or main IS/IT staff.
Developing a strategic joint venture with an external partner to use its particular expertise to
help remedy the specific difficulties and deficiencies in areas of existing provision.

Much depends upon how WV8 views the function. If CIS is seen strategically as a complementary
competence, outsourcing should only be to trusted key suppliers with the necessary expertise and a
strong relationship should be fostered between both parties. Alternatively if CIS is viewed as a residual
competence, WV8 could outsource adopting a simple arms-length relationship with the supplier; a
simple buy decision.
Cost implications
WV8 is wholly funded by government grants, but with funding cuts is under pressure to maintain existing
services whilst operating more cost effectively. Outsourced alternatives tend to be highly competitive in
terms of pay, terms and conditions of service and, after total outsourcing, WV8 may initially reduce
central costs. One clear advantage of outsourcing for WV8 would be a more accurate prediction of costs
and, hopefully, improved budgetary control; something crucial in the current environment.
Gaining expertise and IS specialism
In the past, there have been difficulties in recruiting IS specialists and the service quality may have
deteriorated as a result. Outsourcing would, of course, represent an easy means of overcoming IS staff
resourcing difficulties. Under Coxs classification of organisational competences it is clear that IS is not a
core competence. As such, it is appropriate to consider outsourcing. Often the contracting out of non-core
services to a specialist provider not only improves service quality but also leaves the service in the hands
of genuine experts.
Strategic fit and flexibility
Outsourcing involves contracting out non-core services to specialist providers rather than attempting to
provide them in- house. WV8 would, in effect, be relieved of the burden of managing specialist staff in an
area that the organisation does not understand well. Rather than attempting to provide services in-house,
outsourcing would help WV8 achieve strategic focus (being consistent with the so- called stick-to-yourknitting concept). It also supports the concept of the flexible firm championed by writers such as
Atkinson and Handy.
Risk involved
Consistent with Quinn and Hilmers tests for whether non- core activity should be outsourced or not, WV8
should carefully consider the level of risk associated with total outsourcing. The potential vulnerability of
WV8 to market failure is higher if the whole service is outsourced. WV8 should consider what can be
done to reduce these risks and should structure arrangements with suppliers in such a way as to protect
itself best.
Impact on existing IS staff
WV8 may conclude that outsourcing is counterproductive and an unwelcome problem if there is likely to
be strong staff and union resistance. Presently, there are centrally employed IS staff whose jobs will be
threatened by total outsourcing. This could possibly lead to resistance from unions and staff groups
representing these workers. Also the impact on other groups and fellow trade unionists within WV8 might
be negative in terms of morale and motivation.
Contractual complications
Outsourcing will involve WV8 in contractual issues and certainly additional (transaction) costs associated
with determining service specifications and then monitoring performance will be incurred. There will be a

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requirement to retain intelligence user expertise in-house in order to monitor outsourced provision. There
may be difficulties in agreeing and managing a service level agreement (SLA) particularly if WV8 has
little experience in this area.
Service quality and understanding
It might be argued that the quality of CIS service under an outsourced option could be of a higher
standard due to the specialist nature of the external provider. However, the provider concerned may
have little empathy and understanding of a public service ethos and needs of schools if the service is
outsourced. As such, the service provided might not meet user needs.

c) Describe the lessons WV8 could learn from marketing principles and practices.
(5 marks)

Requirement (c)
The recent criticism of public sector organisations like WV8 includes the claim that they lack 'basic skills
in areas such as marketing' and have a 'lack of understanding' of the customers it is meant to serve.
This criticism may or may not be fair but clearly WV8 can learn from marketing principles and practices,
despite the fact that this thinking was developed with the private sector in mind.
Customer focus
The Chartered Institute of Marketing defines marketing as 'the management process responsible for
identifying, anticipating and satisfying customer requirements profitably'. Although WV8 is by definition
a non-profit making organisation, a key aspect of the definition is the acknowledgement of the
importance of the customer, their requirements and the careful planning processes needed to achieve
the organisation's goals. It follows that marketing is a business activity that should be at the core of any
organisation, including WV8.
Identification of user needs and wants
This marketing definition stresses the need to identify user needs and wants as a first step. This is
particularly relevant to WV8 as a spokesperson has claimed that organisations such as WV8 have a
'lack of understanding' of the customers it is meant to serve. To re-engage and identify customer needs
and wants, WV8 needs to listen to what users say. This includes internal as well as external customers,
and clearly there has been dissatisfaction expressed in the past which will need to be addressed in the
future.
A shared philosophy
The basis of the marketing philosophy is that marketing is a managerial imperative not a simple
functional requirement and, as such, the whole organisation needs to share the marketing vision.
WV8 would do well to adopt this thinking.
Effective communication with customers
The promotional mix whereby the organisation communicates with its customers is a lesson WV8 can
take on board. In WV8s case effective communication will need to involve several groups, not least the
government and general public (through taxation) which represent contributors of money and the
customers it is meant to serve. Customers, in WV8s case, might be referred to in a different way such as
student, client, etc.
Market research
Sophisticated market research techniques exist and WV8 could adopt and use some of these
practices. Market research is commonplace amongst private sector organisations. Social problems
concerning (say) the disabled student may call for information and investigation using such
techniques.
Public relations

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It seems from the scenario that WV8 has a poor image amongst service users and better public
relations as part of its promotional mix is called for. The techniques adopted by private sector
organisations wishing to improve their PR might be considered by WV8.
A focus on the marketing mix
Developing an effective marketing mix involves blending an appropriate combination of factors
associated with the product, price, place (including location) and promotion: the way it communicates
with its customers. WV8 might usefully focus on these areas in order to determine priorities and future
actions.

Question Four
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'.

a) Explain the requirements for achieving a Total Quality Management (TQM) approach within
2JN.
(10 marks)

Requirement (a)
Total Quality Management (TQM) is one of many approaches to achieving quality. TQM gained
popularity in Japanese industry in the 1950's and later in the west from the early 1980's onwards.
CIMAs Official Terminology describes it as follows:
'An integrated and comprehensive system of planning and controlling all business functions so that
products or services are produced which meet or exceed customer expectations. TQM is a
philosophy of business behaviour, embracing principles such as employee involvement, continuous
improvement at all levels and customer focus, as well as being a collection of related techniques
aimed at improving quality such as full documentation of activities, clear goal setting and
performance measurement from the customer perspective'.
The MD has announced a commitment to TQM training for all 2JNs staff and the establishment of a
Quality Committee and Quality Circles.
Effective Communication
The importance of quality must be effectively communicated throughout the organisation in order to improve
understanding of its purpose and benefits. At the recent senior management meeting the MD announced the
establishment of a Quality Committee and Quality Circles to underpin the initiative. 2JN now needs to develop
an effective communication strategy that includes briefings, written reminders and visible symbols. There

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needs to be a clear willingness to discuss and measure quality.

Leadership: Senior management commitment


Commitment from the top is crucial. If management is not fully committed, it is unlikely that customer
requirements of quality will be met. (In 2JNs case the commitment is not guaranteed at this stage.
Clearly the MD believes in TQM and although he announced the initiative at a recent senior
management meeting their commitment still needs to be assured).
Workforce commitment
Commitment from the workforce is also vital and might be achieved by management support for
quality rather than dictat to get quality right. A philosophy of self-checking and preventing quality
failures (Quality Assurance) rather than correction of quality following independent quality control
(QC) are important.
Funds for skills and competence development
Quality is achieved through competence in whatever activity is undertaken. Competence can only be gained
through continuous training, skill development and experience. The MD has identified training in TQM for all
staff as a priority. He will, however, need to commit funds to training, recruitment and people
development, etc. Training will be needed in areas where the company is felt to be weak and the TQM
programme should identify these. Resources will need to be committed by 2JN to make this possible.
Continuous improvement
As CIMAs definition makes clear, continuous improvement (Kaizen) underpins TQM. This involves the
constant analysis of work processes and practices to allow continued improvement in performance and
quality. In the past, 2JN has implemented a series of initiatives aimed at reducing product defects and
the number of customer complaints. 2JN needs to concentrate more on continuous improvement with a
valuing of small improvements rather than instigating new practices as if they were one-off events.
Improvements need to be aimed at all areas including production flow, product specification and
manufacturing methods.
Positive culture of quality improvement
Quality is increasingly being recognised as the critical issue for modern organisations operating in
sometimes hostile environments with intense competition and demanding customers. Ultimately, 2JNs
objective must be complete customer satisfaction through quality. This renewed focus needs to be
accepted and then reinforced throughout the organisation. 2JN will need to develop a non-threatening
culture to achieve this and the commitment to Quality Circles and training will be crucial in breeding the
Kaizen philosophy.
Scope of TQM
There needs to be widespread commitment to improvement in quality to all customers. All those involved
in the company are part of the TQM environment: from top management to the shop floor. As its name
suggests, TQM applies to the total organisation and even includes external stakeholders (such as
suppliers and customers). Within 2JN, all sections may see themselves as potential customers of other
sections and potential suppliers to other sections.
Developing team working
TQM is about designing quality into the product and production processes. This means there needs to be
a close working relationship between sales, production, distribution and research. The establishment of
Quality Circles within 2JN should help break down departmentalism and help with this process.
Developing new measures
CIMAs Official Terminology definition of TQM mentions clear goal setting and performance measurement
from a customer perspective. 2JN will need to establish a system of regular reporting of key indicators of
quality. This will involve 2JN setting standards and gathering information that perhaps had previously
been ignored. Performance feedback itself should be both quick and intelligible.

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Alignment of reward systems


Reward systems need to be revised to encourage a new quality orientation. Incentive reward and
remuneration schemes based on (for instance) improvement suggestions and attaining quality targets
would be a very rapid way of improving quality and changing working attitudes and behaviour.
A focus on customers quality requirements
The CIMA definition of TQM stresses products that 'exceed customer expectations' and a need for
'customer focus'. It therefore follows that 2JNs workforce have a vital requirement to focus on
customers quality requirements possibly in a way in which it never has before.

b) Identify the important issues and work groups that need to be considered when
organising the TQM training in 2JN.
(10 marks)

Requirement (b)
2JNs Managing Director has rightly identified training in TQM for all staff as a priority. This training
should be organised in a coherent fashion.
Agree key elements of TQM for 2JN
For successful implementation of TQM, an organisation must concentrate on the several key elements
such as:
shared values (including ethics, integrity, trust),
skills (including teamwork and leadership),
effective communication.
It is important that the MD and the senior managers agree the key elements for 2JN so that these
might be incorporated into effective training programmes. From these key elements, targets and
methods of assessing the effectiveness of training might be determined in advance.
Identify different training needs
A range of TQM training will be necessary within 2JN. The differing needs of distinct groups of workers
might be identified and a programme for each drawn up and agreed. These groups might for instance
include:
Senior managers
The workforce as a whole
Supervisors
Members of the Quality Committee
Quality Circle members
Training facilitators and venue(s)
One issue to be addressed is who should provide the training and where it should take place. Analysis
of organisations that have successfully introduced TQM suggests that it is preferable for an external
consultant with TQM experience to conduct this training. If this is the decision of 2JN, then a suitable
budget will need to be established for the purpose.
Training senior managers
It is a good idea to start training with senior managers as they operate at a strategic level within the
organisation. It is they that will need to display leadership and drive the quality agenda, so their
commitment is crucial. It is likely that consultancy led executive style training (possibly off site) will be the
most effective form of training for this group.
Training the workforce
So far the workforce has received no briefing on the initiative, its aims and why it is important. This needs

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to be done as some priority, and this basic message needs to be reinforced on a regular basis.
Meaningful training is needed so that the workforce understands the processes and benefits arising from
the TQM approach. 2JNs objectives for introducing TQM need to be explained through presentations
and training sessions that allow some time for 'questions and answers'. To be effective there will have to
be more than one event arranged and, if facilities are suitable, this should be onsite to maximise uptake.
At the first event there should be a general introduction to the quality philosophy and its long-term
benefits. Successive sessions can then deal with more specific aspects covering procedures, next
steps, and progress so far, etc.
Training supervisors
Under most TQM schemes, supervisors and first line managers assume responsibility for
implementing TQM within their departments, sections and work teams. It is important therefore that
supervisors get effective training and support in order to perform their vital role.
In order for supervisors to teach and mentor subordinates in TQM they will need training in areas
such as:
Interpersonal skills development, team working skills, etc.;
Problem solving techniques, decision making, performance analysis and improvement, etc.;
Effective mentoring practice.
Training Quality Committee members
Within 2JN the TQM programme will be supported by a Quality Committee which has responsibility for
overseeing the initiative. Members are likely to be drawn from all levels of the organisation and all work
areas. This group must be trained in the TQM philosophy in a more detailed way than the rest of the
workforce. Training will also include how an individual can effectively contribute to the committees
operations. As such, a constitution and standard agenda for meetings needs to be discussed and
agreed upon. A training facilitator could show members of the committee examples of good practice in
other organisations and try to stimulate areas for attention. Quality targets need to be set and actual
results monitored against these standards on a regular basis. It would seem appropriate that this group
be responsible for target setting with appropriate training aimed at assisting this process.
Training in supporting processes and documentation
Those reporting to the Quality Committee will need training in data collection and analysis.
Experience of introducing TQM programmes in other organisations has indicated the need for
processes, procedures and activities to be undertaken thoroughly with clear documentation. There
are several good reasons for this:

It helps ensure continuity as the programme develops


It represents a trail of evidence in future quality audits
It assists in communication of the quality procedures and successes
It provides feedback and monitoring information for 2JNs Quality Committee

Training quality circle participants


2JNs MD obviously sees a value in the use of quality circles and has identified these as a necessary part
of TQM. Quality circles are small groups of staff (typically eight to ten) drawn from all work areas which
meet on a regular basis to identify quality issues and attempt to formulate solutions. One of the outcomes
of quality circles is that it enables a devolution of authority and responsibility for quality down to a
practical working level. Their purpose is to work as a team to identify, investigate, analyse and solve
work- related problems or tasks. As such, members of quality circles will need training in the following
areas:
Team roles and team building
Effective chairing of meetings
Problem solving and quality-related data collection techniques.

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Material delivery and content


2JN will need to consider issues such as the robust design of appropriate training materials and their
subsequent updating of content. In addition, issues of delivery and measurements of effectiveness will
also be necessary.
(Note: alternative valid approaches to answering this question will also receive credit.)
c) Discuss the claim that high quality 'will both put costs down and revenue up'. (5 marks)

Requirement (c)
At a recent senior management meeting the MD made clear that TQM is vital to 2JN and that high
quality 'will put costs down and revenue up'.
High quality may bring costs down in a number of ways:
c) Quality is orientated towards the elimination or errors and, if successful, reworking costs and
scrapped items will be reduced. This will help drive down unit costs of products.
d) Under TQM internal inspection costs will be reduced. With an improvement in quality
inspection and testing, costs may be reduced or eliminated completely leading to reduced
operating costs. Currently, 2JN operates a system of quality control involving inspection of
product quality. High quality through TQM will eliminate these costs as everyone becomes his
own inspector and quality assurance replaces quality control.
e) External quality costs will be reduced. Complaints from customers and warranty costs will be
reduced as the number of products not meeting the appropriate standards will not be incurred.
f)

It is possible that, with the emphasis on continuous improvement as part of TQM, ways of
improving processing time will be found so contributing to reducing costs overall.

Evidence amongst competitors and elsewhere indicates that long-term quality improvement will, in itself,
lead to long-term profit improvement. High quality may lead to a growth in revenue in a number of ways:

Cost savings can be passed on to customers in the form of lower prices to generate
additional sales and revenue.

It is true to say that it is far more effective to retain existing customers rather than to attract new ones.
High quality is a good route to retention of existing customers and therefore repeat sales and
revenue growth.

As quality improves 2JNs image within the market place will be enhanced, so strengthening 2JNs brand
and position within the market which should translate into improved revenue.

With an improved reputation 2JNs sales volumes may increase; not only will existing customers
be retained but new customers will be attracted through word of mouth.

Despite past attempts product defects and customer complaints have harmed 2JN and it has
lost some of its major customers to its competitors and profits are declining. If TQM is
successful and high quality is achieved, 2JN might find itself in a better competitive
position relative to its competitors and so enjoy improved revenue as a result.

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E1 Enterprise Operations
November- 2012
SECTION A 20 MARKS

Question One
1.1
Organisations that move part of their activities to another country are said to do which
ONE of the following?
A

Downsize

Divest

Offshore

Outsource

1.2

The so called BRIC economies do NOT include which ONE of the following?

Britain

Russia

India

China

1.3

The advantages of a database management system (DBMS) include

end-user flexibility and power.

open communication and social networking.

data sources compiled by the user.

data integrity and elimination of duplication.

1.4
Certified approval of documented work procedures including procedure manuals and work
instructions are associated with which ONE of the following?
A

Workforce skills audits

Appraisal costs

Total Quality Management (TQM)

ISO 9000 accreditation

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1.5

Which ONE of the following is NOT associated with quality improvement?

Fishbone diagrams

Pareto analysis

Why/why analysis

Political lobbying

1.6

Which ONE of the following is NOT an inventory management system?

Periodic

EOQ

ABC

5S

1.7

Which ONE of the following should logically precede market segmentation?

Market research

Targeting

Positioning

Promotional activity

1.8

In marketing the concept of 'physical evidence' refers to

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.

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1.9

Which ONE of the following is an example of a durable good?

Hand made shoes

Long life milk

Long lasting deodorant

A jar of instant coffee

1.10
Computer to computer transmission of structured data using standardised documentation
is known as
A

electronic data interchange (EDI).

online networking.

systems compatibility testing.

a 'cookie'.

Answer to Question One


1.1 C
1.2

1.3

1.4

1.5

1.6

1.7

1.8

1.9

1.10

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SECTION B 30 MARKS
Question Two
a) Describe FIVE benefits of process mapping.
(5 marks)
Process mapping involves constructing a flowchart representation indicating processes that shows how
a product or transaction is processed and the flows of information or products across supply chains and
networks. Some benefits are given below:

Management understanding
Allows a better understanding of the basic processes that are undertaken, so providing management with a
convenient overview demonstrating responsibilities and key stages in the supply chain.
Role understanding
Allows workers to understand what their job is and how their work fits into the whole process (and
therefore the importance of undertaking their role effectively). Process mapping also allows
consideration of role reallocation.
Standardisation
Highlights where opportunities exist to standardise processes and strengthen practices through
simple depiction.
Highlights inefficiencies
Visually highlights areas where inefficiencies are present through analysis of queues, value and
location, so pinpointing areas of waste. This provides an agenda to tackle duplication of effort, the
requirement to complete unnecessary paperwork, and misdirected queries that hold up production, etc.
Supports corporate initiatives
Mapping can be used as a tool as part of a corporate initiative such as customer satisfaction
improvement programmes, lean operations, business process re-engineering, etc.
(Other factors might also be included such as acting as a trigger for critical examination,
corrective action, improved processes and organisational change, etc.)
b) Identify FIVE factors that should be taken into account when forecasting an
organisation's need for additional staff.
(5 marks)
In order to determine an organisations human resourcing need, certain factors need to be
considered, some of which are given below:
Future Operations/demand
Future planned levels of organisational activity and operations. This might be by reference to other
functional strategies and might be expressed as (for instance) output or sales projections.
IT and systems to be used to improve productivity
Likely future methods of operating and technology used, particularly where it reduces a need for
staffing levels.
Corporate initiatives
The organisations corporate strategy and its desire to (for instance) offshore and/or outsource,
introduce quality control measures, employ more flexible employment models, etc.
Historic trends of capacity
Past levels of staff retention, employee turnover, leave of absence, overtime working, etc. Also
projections of numbers of staff retiring based on age profiles of the existing workforce and historic

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trends.
Potential use of contractors, etc.
Current outsourcing options commercially available for some non-core activities and the likely
reduction in staffing as a result.
Other factors might be reasonably identified such as demand for this skill compared to current
capacity, HR developments in similar or competitor organisations, the likely effectiveness of HR
and other measures e.g. to reduce staff turnover and to enhance productivity trends, etc., likely
external influences such as government policies (e.g. legislation regarding employment law such
as maximum hourly weekly working week, etc.).
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)
There a number of reasons for the growth of business-to-consumer (B2C) trading (which has been
mainly online trading) including:
Adoption
The adoption and uptake of the World Wide Web has led to a growth in potential for online trading and
an exploitation of B2C trading.
Platform availability
The cost of personal and domestic computing has fallen dramatically since first being introduced and
this has led to widespread ownership and a consequent ability to buy directly from businesses.
Payment security
The development of secure transaction and payments systems has given customers confidence to
trade online.
Expanded marketplace
The development and popularity of search engines have offered new markets to businesses.
Conversely a wider choice of suppliers has opened up to buyers beyond the regular high street retail
outlets.
Reduced value chains and make cost savings
Sophisticated system developments have enabled streamlined value chains that have reduced the
number of intermediaries and their associated costs. Savings can be passed on to customers
reducing costs and so encouraging B2C trading.
Other factors might be reasonably identified such as global transport availability whereby low cost and
fast air transport assisting B2C trading over a broader market place, etc.
d) Describe the ways in which a furniture making firm could use IS and IT to transform its
manufacturing operations.
(5 marks)
A furniture making firm could transform its manufacturing operations through the use IS and IT by
adopting a number of different systems some of which are indicated below:
Computer aided design (CAD)
CAD can improve designs and so reduce the amount of raw materials used such as timber and
reduce the number of hours involved in assembly.

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Computer aided manufacturing (CAM)


CAM can reduce the number of human labour hours involved in manufacture, assembly and packing
through efficient manufacturing processes. (The use of assembly robots could increase productivity
further).
Material Requirement Planning (MRP) and Manufacturing Resource Planning (MRPII)
Computerised systems, such as MRP, for planning the requirement for raw materials, work-inprogress and finished items can lead to improved forecasting, flexibility and the avoidance of
production bottlenecks. MRPII represents a more complete system including all resources of a
manufacturing company to balance supply and demand.
Improved stock control
Sophisticated inventory systems and records can help safeguard against 'stock outs' and expensive delays
in the supply of raw materials (as well as allowing for less stock holding and staff handling).
Electronic Data Interchange (EDI)
Management of supplier relations can be improved through the use of common systems and
Electronic Data Interchange (EDI). The impact could be a speeding up of deliveries of timber and
other raw materials so improving the potential of lead times and stock holding.
Other factors might be reasonably identified such as ERP, integration with HR and Marketing
systems.
e) Explain, with examples, the idea of a variable pricing policy.
(5 marks)
Variable pricing involves adjusting prices to increase demand in off-peak periods in the hope of stimulating
demand and generating revenue. It is based upon the idea of marginal costing recognising that fixed costs also
have to be covered in off-peak times and any contribution is acceptable as long as variable costs are covered.
(Potential variable pricing could also include charging a premium price during peak periods in order to
discourage demand but this is not such a common practice).

Examples of variable pricing include:


off peak rail travel
matinee (afternoon) prices for movie theatres;
out of holiday periods (off-season) rates for hotels;
weekend rates for telephone services;
mid-week rates for hotel bookings;
out of season sporting equipment sales;
bar 'happy hour' drinks pricing;
airline bookings made very near the date and time of the flight.
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)

Various reasons might help explain why a department might continue to use manual records rather
than a new computer system. Some are listed below:
Resistance to change
There may be individual, group or cultural resistance to the change brought about by the new computer
system. The reasons for such resistance may be because of individuals lack confidence to cope with

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the new system or a feeling that jobs are threatened by the new technology, etc.
Reliability of the new systems
The department might lack confidence in the new system and may continue to use manual records
believing that these are more efficient or reliable. Fears of computer faults, internet failures and
insufficient controls can undermine confidence in the new system.
Ineffective management
There may have been failings of management either in the department itself or in terms of
project management that has led to inadequate, incomplete, or a total absence of
communication of system benefits, training in the new system and support, etc.
Complexity of new system
The organisational system may be unduly complex for the departments requirements and the need to
implement it may be seen as cumbersome and a distraction from 'business as normal'.
Efficiency of manual system
The existing system may be efficient and may deliver the departments needs so there is no incentive for
changing to the new system.

SECTION C 50 MARKS

Question Three
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)

Requirement (a)
When establishing a suitable tax regime there is, in the first place, a need to decide upon certain
broad policy decisions.

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Overall tax requirement


Fiscal policy relates to the level of taxation and spending that a government decides upon. What is
known from the scenario is that Changelands newly elected Government has pledged to improve
housing, healthcare and levels of education so these represent significant commitments to spending.
These commitments need to be costed in order to determine the overall level of taxation and revenue
that must be raised.
Overall taxation policies
Once the revenue requirement is calculated, overall taxation policies need to be determined. The
Government has promised a 'fair' system of taxation, but fairness is inevitably based upon subjective
judgements. There are a number of actors that the government needs to consider when deciding upon
an overall taxation policy.
One is the balance of tax liability between individuals and businesses. The Government will also
wish to encourage certain industries (e.g. based upon the scenario housing, healthcare and education).
For these particular industries it may introduce tax breaks and concessions to encourage continued
investment. In terms of personal taxation the Government must consider a number of issues including
the income below which no tax is paid by individuals, (so recognising the need to protect the low
waged).
Direct and indirect taxation
The previous military dictatorship is said to have used 'corrupt means' of raising Government revenue.
The newly elected Government has promised a fair system of taxation, and clearly revenue needs to
be raised to deliver improved housing, healthcare and education. The two main alternatives for the
Government involve levying a tax directly on income and indirect taxation levied on expenditure. The
balance of revenues raised between these alternatives is a matter of political judgement. Too much
income tax might act as a disincentive to work or make profits. Additionally, it is relatively expensive for
the Government to collect tax by this means.
Indirect taxation means that effectively the cost of an item is inflated to take account of the tax applied.
Normally this takes the form of a percentage of revenue collected. The tax element is paid to the
Government by the sellers of those products. A problem with this form of tax (also known as
consumption tax) is that it is regressive. The tax makes living costs more expensive. Those with the
lowest incomes will be most affected by the burden of taxation as they have no option but to spend a
large proportion of their income on living costs. (The cost of trading will also be more expensive for
businesses as they need to administer the system of revenue collection and then payment to the
Government). Indirect tax may also help drive up inflation in the country.
Once these decisions are made, the choice of which specific forms of taxation to be applied will need to
be determined. A number of distinct options exist:
Direct: individual income tax
A further political consideration for the Government is that if it does choose to use direct taxation there
needs to be a 'fair' balance between individuals and businesses. The most common form of direct
personal taxation is income tax, where normally the employer deducts a percentage of earned income
from wages and salaries and pays it over to the Government. By raising too great a sum, the incentive to
work might be lost, too little a sum and revenue would need to be raised from other sources.
Direct: business tax
The Government will have to be careful that it does not discourage enterprise and consequent
employment opportunities by charging too great a level of corporation tax. Obviously businesses will
consider local conditions more favourably if there is a low level of corporate tax. If businesses feel taxes
are too high they may decide to relocate to a country with lower tax regimes.

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Direct: other forms of tax


Beyond income tax and corporate (business) tax other forms of direct taxation might be considered by the
Government. For instance, a tax on individual unearned income such as a tax on dividends gained from
share holding, bank interest or on inheritance, etc. The Government will need to assess the feasibility of
these taxes including their fairness and potential for raising revenue.
Indirect: general
In terms of a general tax on the purchase of goods and services, the most straightforward method
would be to levy a flat rate percentage on goods and services (within the UK this is known as value
added tax (VAT)). One of the advantages of this type of tax is that revenues are collected from fewer
sources (there are fewer vendors in most economies than there are earners). The Government may
consider it unfair to apply this general tax where it impacts adversely on vulnerable groups (such as
the poor, sick or elderly) and may decide to exclude the tax on (for instance) rent, electricity and food,
etc.
Indirect: specific
Indirect taxation on certain specific items is, in the case of Changeland, a distinct option. The
Government is concerned by the impact and uptake of certain products. At the same time it has pledged
to improve housing, healthcare and levels of education. A heavy tax on these undesirable items might
be seen as a way of progressing Government policy, discouraging excess consumption and raising
revenue which can be redirected towards the priority areas the Government has pledged to improve.
Import duties levied on foreign goods or services
Since the revolution, several large multinational companies have aggressively introduced their products
into Changeland. This implies that their activities have either been restricted or banned in the past. It is
unclear whether the Government favours free trade with no import barriers or whether it wishes to
engage in protectionism (trying to protect the local market by restricting imports) . Traditionally,
protectionism meant the imposition of taxation on imported goods, much the same as a purchase tax.
This would have the effect of making such goods more expensive than locally produced goods, may
discourage their purchase. Alternatively, where these more expensive imported goods continue to be
purchased the tax would continue as a source of revenue.
Other factors might be reasonably identified such as cost of administration and policing, a scheme of
penalties will also be needed for tax evasion and these will need to be publicised, etc.

(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)

Requirement (b)
Indisputably, marketing techniques and thinking can influence individual buying habits and consumption
patterns. These techniques are used extensively within the private sector but increasingly their use is
being seen as having value in the public sector. Marketing could be used by Changeland's Government
to try to shape consumers buying behaviour in a way that it sees as more desirable.
Concentrate on customer benefits
The same principles adopted by private sector companies of understanding the consumer and
strategically building relationships based on emotional as well as rational benefits can be applied by the
Government. Social marketing focuses on human behaviour in order to understand the reasons for
lifestyle decisions such as behaviour that affects an individual's health.
Customer orientation
The Government could develop a strong customer orientation with importance attached to understanding

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the customer, the things that shape attitudes and beliefs, along with the social context in which they live
and work. It may be that the population has, in the past, been denied these products completely and this
might be impacting upon current consumption patterns. Alternatively consumers may believe that their
excessive consumption will not harm either themselves or society as a whole. This is something that the
Government must challenge with detail of days lost though excess consumption, etc.
Using a mix of approaches
A fundamental marketing technique is known as the marketing mix, a term used to explain the range of
marketing decisions and elements that must be mixed to achieve maximum impact. The apportionment
of effort, the precise combination, and the integration of all of the elements to achieve organisational
objectives represent an organisations own marketing programme or mix. Using this thinking the
Government should achieve a mix of different methods to achieve particular behavioural goals.
Engage in social marketing
The new Government can use social marketing to help achieve its policies. Social marketing involves the
application of commercial marketing techniques and thinking to the solution of non-commercial social and
health problems, such as high levels of both tobacco and alcohol consumption. According to Lazer and
Kelly, social marketing is also concerned with the analysis of the social consequences of marketing
policies, decisions and activities. Social marketing recognises that although businesses may bring many
benefits to both the economy and society generally, it can also have a harmful impact on both individual
and society. Tobacco, for instance, has been proven to damage the health of long term users and passive
smoking can affect others health. Social marketing's potential is to provide realistic appraisals and identify
workable solutions.
Promotion of merit goods
Merit goods are commodities that an individual or society think they should have on the basis that it is
'good' for them. Merit goods are often provided by a government 'free at the point of use' and then
financed through general taxation (e.g. in the UK access to health care through the National Health
Service). Changelands Government has pledged to improve housing, healthcare and levels of education
(it is unclear whether these will be provided directly by the Government or whether private sector
providers will be encouraged and subsidised). Once in place, marketing communication and promotional
techniques can encourage the uptake of healthcare and preventative medicine. Through the systematic
application of these marketing concepts and techniques the population will become more health
conscious and better educated and so will be able to contribute more to Changelands economy, so
benefiting society more widely.
Discouragement of demerit goods
Demerit goods are the opposite of merit goods and negative consequences for society as a whole can
arise from their consumption. It is human behaviour that causes many of societys problems (e.g. road
traffic accidents, unwanted pregnancies, etc.) . Advertising campaigns sponsored by the Government
may help achieve specific behavioural goals.
Adoption of the competition concept
The Government might adopt the competition concept, namely understanding factors that impact on
people and that compete for their attention and time. This might involve an investment in opportunities to
engage in recreational sport to enhance health.
Interventions into the marketing mix of producers of harmful goods
Kotler defines the marketing mix as: the set of controllable variables and their levels that the firm uses
to influence the target market. It appears that producers of potentially harmful goods have been
successful in getting an effective blend and have started building sales as a result. The dimensions of the
basic marketing mix are more commonly known as the Four Ps: Product, Price, Promotion and Place (or
distribution). The Government, whilst not wishing to ban sales, might, by understanding the marketing
mix, intervene into some or all of these variables to curtail consumption.

Adjusting the product mix. The product mix includes in its features, quality, design, brand

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name, packaging and range. One intervention might be to the packaging by requiring sales of
undesirable products in plain rather than attractive packaging or alternatively requiring products
to carry government health warnings.
Adjusting the price mix. The price mix includes price levels and discounts, etc. The
Government could either impose heavy taxes on these products or specify a minimum sales
price.

Adjusting the promotion mix. Promotion includes advertising, publicity and sales promotion.
One possibility for the Government is banning the advertising of these undesirable products
completely in Changeland.

Adjusting the place mix. Place includes distribution channels, coverage, locations of sales
outlets, etc. The Government could make the undesirable products less easily available by for
instance banning sales in supermarkets and refusing planning permission for the siting of
distribution centres.

Segmentation to target efforts more effectively


Market segmentation recognises that every market consists of potential buyers with different needs and
different buying behaviour. Segmentation may, therefore, involve subdividing a market into distinct
subgroups of customers, where any subgroup can be selected as a target market to be met with a
distinct marketing mix of efforts. It would be wasteful to spend effort and resource on addressing policies
on the entire population when a segment (e.g. the young) has the highest consumption patterns. From
this thinking, the Government might determine a range of solutions such as promoting policies through
the media accessed most by the market segmentation.

(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)

Requirement (c)
About corporate social responsibility
The basis of social responsibility is based upon the premise that an organisation enjoys certain benefits
from society and in return should engage in practices that supports rather than exploits that society.
Corporate Social Responsibility (CSR) has been defined as 'the continuing commitment by business to
behave ethically and contribute to economic development while improving the quality of life of the
workforce and their families as well as of the local community and society at large'. Put simply, CSR
means that businesses should continue to create wealth but should also recognise an obligation to
other stakeholders.
Impact on stakeholders
For those dealing in products, stakeholder responsibility includes the manufacture, transportation and
consumption in terms of their impact on the environment, health and safety of those products. In this case the
stakeholder groups that seem to be implicated include consumers and those particularly affected by
consumers, including the Government, society as a whole and the environment generally.
This is particularly relevant to the actions of companies selling potentially harmful with potentially
negative impacts on a number of stakeholder groups:
consumers,
those affected by consumers.
the Government.
society as a whole, and
the environment.
Some of the several large multinational companies that have begun to import goods to Changeland
have used aggressive marketing techniques.

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Ethical and unethical practices


Certain questions arise in relation to ethics in marketing that companies might do well to consider
including:

to whom do we sell?
are our products of an appropriate standard, safe and produced to acceptable environmental
standards?
how do we advertise: is it fair, balanced and truthful?
is our pricing or promotion exploitive of any vulnerable group in society, etc.?

If young people are particularly targeted and these are seen as a vulnerable group, then this could be
considered unethical. Similarly if the nature of advertising is unfair (e.g. it contains subliminal messages
or gives unrealistic illusions) or makes false claims (e.g. about the products health or other benefits)
then this too may be considered unethical. Finally, the penetration pricing methods could be considered
unethical if prices are artificially low in order to induce addiction before prices are subsequently raised.

Question Four
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. Multiskilled workers are formed into semi- autonomous 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)

Requirement (a)
Specific human resource practices vary depending upon the size and culture of the organisation and the
availability of specialist HR staff. CM8 now has a corporate Human Resource Department and the level of
central charges suggests that it might be significant. The move away from the previous hiring and firing'
policies might be seen as a sign of organisational growth and maturity.
General approach
Clearly both the department itself and line managers have a part to play in the management of people in
CM8. In terms of respective roles there will be a slightly different emphasis as follows.

Human Resource department: Human Resource Management (HRM) involves 'a strategic approach
to the acquisition, motivation, development and management of the organisations human resources'.
In terms of its general approach, the department will be strategic, longer term and corporate by
nature based on the perspective of the needs of CM8 as a whole.

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Line manager: in terms of general approach, line managers will be more operational and
immediately focused on a specific area of responsibility locally (in the case of X, the factory
where he has been appointed Operations Manager).

Strategic role. CM8 has apparently developed an HR strategy. Respective roles in the strategic
management of the workforce are indicated below:

Human Resource department: the main roles include leading the development of a robust
strategy and ensuring that HR activities are aligned to CM8s corporate strategy,
organisational aims and philosophy.
Line manager: in order to gain ownership and buy-in, as well as enhancing the detail of the
strategy, line managers, such as X, should participate in the development process. The line
managers main strategic focus however will be more about the operational implementation of the
strategy at a local level.

Roles in the HR cycle. The activities, processes and systems of human resourcing are somewhat
cyclical involving recruitment, selection, induction, on-going HR processes of appraisal and training and
termination (whether promotion, resignation, retirement or redundancy, etc.) Respective roles are
indicated below:

Human Resource department: the department will want to ensure that there are standardised

documents (e.g. job descriptions, person specifications, etc.) and clear processes in order that
there is adherence to legal requirements and fair and consistent HR practices throughout SM8.

Line manager: line managers will be expected to follow established procedures, adhere to
systems and provide vital feedback to the HR department on corporate practices.

Expertise. Both the Human Resource department and line mangers, such as X, can offer specific
expertise in the management of CM8s workforce. Respective roles are suggested below:

Human Resource department: the department should be a source of specialist advice and
knowledge (e.g. employment law, health and safety requirements, etc.) The department is also
well placed to suggest new corporate initiatives and approaches based on best practices gained
by using contacts and professional associations to find out what happens elsewhere. The
department should possess detailed expertise in specialist areas such as industrial relations and
are likely to offer payroll services. The department should make available its expertise to
factories and departments in CM8 to help them operate effectively.
Line manager: individual managers have primarily been employed because of their specialist
expertise (in Xs case his knowledge of engineering and operations) rather than their HR
expertise. Line managers can advise on what does and does not work in practice, show
discernment and adapt basic systems accordingly at a local level.

Motivational roles. Crucial to the successful management of CM8s workforce is motivation.


Motivation influences both employee productivity and quality of work. Inevitably most organisations link
reward and remuneration strategies to motivation. Respective roles are suggested below:

Human Resource department: the role of developing organisation-wide corporate policies,


including reward strategies, remuneration packages and offering corporate opportunities for
worker participation and contribution.
Line manager: locally the manager has a role to play in progressing these corporate
measures, implementing agreed practices and looking for ways of providing non-financial
rewards to deserving subordinates.

Maintaining the psychological contract. The psychological contract represents the perceptions of both
employee and employer of their mutual obligations towards each other. Both the department and the
manager will have a role to play in preserving a healthy psychological contract.

Human Resource department: the department will want to ensure that the organisation keeps its

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side of the 'contract' by, for instance, making payments on time, providing promotion
opportunities, treating workers with dignity and respect, etc.
Line manager: line managers, such as X, are closer to workers and may need to remind
individuals of their obligations as well as providing feedback on performance, showing respect
and attempting to make the working environment pleasant and safe.

Supporting respective HR activities. Relationships should be good between the Human Resource
department and line managers.

Human Resource department: a key role of the department should be to help and support line
managers in carrying out their role correctly and effectively. The department should be accessible
to managers and should encourage communication and dissemination of good HR practice within
the organisation.
Line manager: the line manager has a role to play in ensuring adherence to corporate
policies, systems and practices and cooperating with the HR department.

Maintaining and developing CM8s human resource asset. The move to a new way of working
within CM8 must have presented challenges not least ensuring that the workforce is suitably skilled,
capable and confident.

Human Resource department: the department can offer cohesive, structured training and
development activities. In particular the department should put in place measures to remedy
skill gaps identified by managers such as X.
Line manager: the line manager has a key role to play when providing feedback on the
adequacy of corporate provision of training and development and providing opportunities for onthe-job training.

Performance management. A system of performance management is crucial to an organisation


such as CM8.

Human Resource department: the department should formulate key performance indicators
(KPIs) and other rubrics. Regular review and reporting mechanisms should also be formalised by
the department. A common system of staff performance appraisal should be established by the
department.
Line manager: line managers will be expected to meet factory productivity targets, set targets for
subordinates and adhere to corporate systems and practices.

Developing positive employee relations


The lean philosophy that CM8 is practicing is founded on a positive organisational culture and both
parties have a role to play in cultivating and maintaining such a culture amongst the workforce.

Human Resource department: the department can develop employee relations strategies which
deliver participation and improved industrial relations as well as encouraging a positive open and
collaborative atmosphere.
Line manager: line managers can look for practical ways of empowering staff as well as
publicly celebrating successes and achievements in making progress locally towards
achieving CM8s goals.

b) Explain what is meant by lean management and how CM8's modular teams might
contribute to its operation.
(10 marks)

Requirement (b)
Lean management
Henry Fords mass production and assembly line methods early in the twentieth century transformed the

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way goods were made. An alternative way of making things was more recently pioneered by the
Japanese involving bringing together the activities of managers, employees and suppliers into a tightly
integrated system capable of responding quickly to changing customer demands. The resulting lean
production methods ('lean') involve a consolidation of improvement systems into a single coherent
process for continuous improvement. Waste is any activity that absorbs resources but creates no value
and lean focuses on waste elimination in areas such as:

product defects that lead to scrap or reworking;


over-production of goods that are not currently needed;
stocks of goods awaiting further processing so that cash is tied up in work-in-progress (WIP);
over processing without adding value;
unnecessary movement of people and equipment;
unnecessary handling or transportation of goods;
idle time such as employees waiting for process equipment to finish its work, etc.

Flexibility and commitment


The main characteristics of lean are underpinned by flexible workforce practices and high-commitment
human resource policies. Lean also requires a commitment to continuous improvement in inventory
management, capacity management and performance enhancement methods, etc. CM8 moved from
mass production techniques ten years ago to lean operations and cellular manufacturing with a number
of key features including the use of multi-skilled workers in semi-autonomous work teams. Under cellular
manufacturing methods, teams form a cell that jointly make a substantial proportion of the finished
product rather than singly assemble one component of it and so can exercise flexibility and put in place
lean principles. Teams in effect stress working on more than one task, employee involvement and
adopting a quality circle type approach. The fact that cell workers in CM8 are multi-skilled means that the
team can rebalance activities in order to meet production requirements.
Modular teams as a core lean activity
It has been suggested that there are six core methods of achieving lean, namely JIT (just-in-time
stock holding and production), kaizen (continuous improvement), 5- S technique, total productive
maintenance on machines, six sigma technique and, finally, cellular manufacturing. These cellular
work units are arranged in a sequence to support a smooth flow of materials and components
through the production process with minimal transport or delay, so eliminating waste and
contributing to lean operations.
Value adding management
As the teams are semi- autonomous, CM8s managers will not have as great a burden of supervision and
direction, freeing them to engage in other value adding activities. Self-managed teams involve employees
being grouped into teams and given certain guidelines to follow, as well as goals to accomplish, and then
left alone to accomplish those goals. Cellular manufacturing reduces set-up costs and gives the teams
the tools to operate multiple processes whilst being responsible for their own quality improvements,
waste reduction, and basic machine maintenance. Collectively, teams can reduce lead times, resulting in
the ability to manufacture high quality products at a low cost and on time. This is obviously more flexible
and responsive than the previous traditional mass production methods that were adopted. In effect,
teams are managing complete processes whilst taking charge of defects, scheduling, equipment
maintenance and other manufacturing issues.
A focus for waste reduction and elimination
Lean focuses on a removal of all forms of waste from the system, whether parts, people or processes.
The workforce is 'closest to the action' and hence in the best position to identify areas of where
improvements can be made. As teams have the necessary autonomy they can do something about waste
when it occurs. The goal of lean manufacturing through minimising waste is to achieve maximum
efficiency of resources. Lean considers the expenditure of resources for any goal other than the creation
of value for the end customer to be wasteful, and therefore a target for elimination. Working from the
perspective of the customer who consumes a product or service, 'value' is defined as any action or

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process that a customer would be willing to pay for. The lean philosophy is centred on preserving value
with less work. Workers on the production line are in the best position to determine for themselves which
processes do not produce value and therefore need to be eliminated.
Increase in problem solving capability of CM8
Cross-functional teamwork involves active communication and problem solving by working together in the
same physical location on common problems. If, for instance, material flow can be significantly improved
through team collaboration and enhanced problem solving, this will ultimately lead to a reduction in
cumulative lead times and improved work flow, and can produce improved production scheduling.
Flexible manufacturing through economies of scope
CM8s factories are organised into semi-autonomous work teams to manufacture complete products or
complex components. This gives potential for flexible manufacturing to take place. This is based upon the
idea of economies of scope which is creating the conditions where it is cheaper to produce multiple
products together than to produce them separately. This allows flexible manufacturing to take place - a
stark contrast to the inflexibility of traditional mass production assembly lines with their emphasis on
economies of scale. This leads to small batch production in response to customer demands meaning
flexible and responsive processes and the manufacture of a larger variety of products at lower cost and
higher quality.
Positive employee attitudes towards the companys lean commitment
Long ago the Hawthorne studies famously underlined the emotional benefits of team work. At CM8
workers are multi-skilled and are formed into semi-autonomous work teams to manufacture complete
products or complex components. Autonomy is a very important part of job enrichment because it gives
employees power and a feeling of self worth and pride in the work they accomplish. The fact that teams
see complete products or complex components means that individuals connect with the products and
company aims more closely.
Improved efficiency
Working together, and having tools and machines located conveniently can improve efficiency. Efficiency
is the opposite of waste and hence at the heart of CM8s philosophy. Modular teams can help speed up
work processes by enabling the employee to make decisions without having to wait for line management
approval. In addition, effective team working can encourage team productivity and greater worker
participation through peer pressure.
Communication with suppliers and customers
Demand pull is key to lean. This means that the cell needs to minimise barriers in communication with
suppliers and customers and appreciate the relationship of processes both upstream and downstream.
The customer voice should in any case drive lean and so the cell along with marketing professions gain
an understanding of customer needs and demands.

c) Explain how the thinking of either Maslow or Herzberg relates to CM8's modular teams.
(5 marks

Requirement (c)
The study of motivation is complex, not least because it involves behaviours, individuals and internal
processes. As a consequence, there are several different, sometimes competing, theories associated
with motivation. So-called 'content theories' of motivation is a group of theories that attempts to describe
and categorise the needs that influence behaviour. Amongst these theories are, famously, Abraham
Maslows Hierarchy of Needs and Frederick Herzbergs Dual Factor theory.
Maslows Hierarchy of Needs
Maslows theory is based on the notion that an individual is a perpetually wanting animal and only

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relatively unsatisfied needs are capable of motivating behaviour. Under this theory, five levels of need can
be arranged into a hierarchy. This means that at any one time, the lowest level of relatively unsatisfied
need will be the one that motivates current behaviour, and as long as it is unsatisfied it will motivate. The
individual will act primarily in order to satisfy that need, before moving on to the next level of need and so
on. This hierarchy is traditionally depicted with stratified categories of need arranged into a pyramid
where, at the base, the lowest level is physiological need then safety and security, belongingness,
esteem and at the peak, self-actualisation.
Physiological needs include the literal requirements for human survival such as air, water, and food
clothing and shelter. Safety and security needs include personal security, financial security, health and
well-being. Many of these lower level needs can be satisfied through employment. At the other end of
the scale self-actualisation relates to a person's realisation of their full potential whatever that might be
(e.g. an ideal parent, a successful sportsperson, an accomplished artist, etc.) and may not be satisfied
through work alone.
Semi-autonomous work teams are most relevant in terms of the intermediary level needs identified by
Maslow of belongingness needs and esteem needs. CM8s use of semi-autonomous work teams offer
an opportunity for belongingness needs to be achieved. Belongingness needs include family and more
relevantly friendships. Humans need to feel a sense of belonging and acceptance. Semi-autonomous
work teams are likely to help satisfy these needs as they involve a number of people working as a team
to achieve a common goal. The next level of needs involve a need to have self-esteem and command
respect, to be accepted and valued by others. Status, recognition, prestige, attention, competence and a
degree of independence and freedom are all potentially attainable through successful semi-autonomous
work teams.
Herzbergs Dual Factor theory.
Herzbergs motivation-hygiene (dual factor) theory is based on the idea that the opposite of job
satisfaction is a lack of job satisfaction, not job dissatisfaction. Similarly, the opposite of job dissatisfaction
is an absence of dissatisfaction. It is not simply that satisfaction and dissatisfaction are different but, in
Herzbergs view, that they are affected and caused by different factors. Factors associated with job
satisfaction are called motivators and factors that cause dissatisfaction are called hygiene factors.
According to Herzberg, motivators only work if hygiene factors are present.
CM8s work teams make use of both job enlargement (horizontally expanding roles with tasks at a
similar level of difficulty) and job enrichment (adding tasks that might normally be carried out by
someone on a superior grade) . The effect is to produce multi-skilled workers with additional control,
responsibility and experience. The team is allowed the freedom to plan and make decisions for itself.
Herzberg suggested that the main motivators include recognition, achievement, the possibility of growth,
responsibility and work itself. All these motivators should be enhanced through the job enlargement
and job enrichment possibilities within the work teams.
Hygiene factors can be categorised as status, pay, interpersonal relations, company policies,
etc., job security and working conditions. Semi-autonomous work teams cannot in themselves
impact on most hygiene factors but can play a role in respect of encouraging interpersonal
relations.

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E1 Enterprise Operations
September- 2012
SECTION A 20 MARKS
Question One
1.1
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
Developed economies
B
BRIC economies
C
Northern hemisphere economies
D
G14 economies
1.2
According to Herzberg, pay, status and working conditions are examples of which ONE of
the following?
A
The preference of Theory Y workers
B
Self actualisation
C
Motivators
D
Hygiene factors
1.3
A
B
C
D

An assessment centre commonly refers to which ONE of the following?


A building where testing occurs
An approach to selection
An approach to recruitment
Online supplier vetting procedure

1.4
The system of policies by which an organisation is directed and controlled is known as
which ONE of the following?
A
Corporate governance
B
Corporate social responsibility
C
Corporate infrastructure
D
Corporate strategic apex
1.5
In social marketing, goods that society discourages because of their negative social
effects are known as which ONE of the following?
A
Demerit goods
B
Durable goods
C
International embargoes
D
Imports
1.6
Organisational costs associated with contracted out activities are known as which ONE of
the following?
A
Transaction costs
B
Offshoring costs
C
Transfer costs
D
Social costs

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1.7
For organisations failing to adopt the marketing philosophy, which ONE of the following is
NOT recognised as an alternative?
A
Sales orientation
B
Product orientation
C
Lean orientation
D
Production orientation
1.8
A
B
C
D

Corporate political activity often involves which ONE of the following?


Clarifying corporate social responsibility
Scanning the microenvironment
Lobbying and political campaign contributions
Internal marketing

1.9
A
B
C
D

The basis of a psychological contract is


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.

1.10 Which ONE of the following is the most complete measure of national economic growth?
A
Inflation levels
B
Unemployment levels
C
The overall level of the FTSE 100 index
D
Gross National Product

Answer to Question One


1.1 B
1.2

1.3

1.4

1.5

1.6

1.7

1.8

1.9

1.10

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SECTION B 30 MARKS

Question Two
a) Identify FIVE main advantages of keeping an in-house IS function.
(5 marks)
There are several significant advantages of maintaining an in-house IS function, five are listed below.

HR flexibility
If the service is kept in-house there will be potential to use the posts within the function as part of
human resource management policies such as career development across different business areas
and job rotation.
Sharing of overheads If the service is kept in-house there will be sharing of central overheads by the IS
function. If the service is contracted out then other services such as payroll and headquarters functions
would be relatively more expensive to service users.
Local knowledge
As part of the same organisation, the function should possess unique local knowledge; meaning that it
understands local difficulties and needs better and is well placed to tailor the service to those
requirements.
Commitment to the organisation
As part of the organisation the in-house provision should be mindful of the organisational culture and
ethos and have a greater affinity for and commitment to the organisation.
Avoids complex SLAs and transaction costs
Potentially there should be less difficulty in agreeing and managing a service level agreement (SLA)
between the IS function and service users than if an outside contractor were involved. Normally small
variations to service levels are likely to meet with a flexible response rather than a need to re-negotiate
terms and conditions. In addition expensive transaction costs and on-going monitoring associated with
using an outside provider will be avoided.
(Note: Mention could also be made of issues such as service continuity and potential to develop the
service as a source of strategic advantage, etc.)

b) Explain the benefits of Computer Aided Design (CAD) and Computer Aided
Manufacturing (CAM) to an organisation.
(5 marks)
Reduced material wastage
Through precise design and pattern making CAD can reduce the amount of raw materials used and the
incidence of off-cuts e.g. timber, metal, etc. This obviously also has beneficial effects environmentally
and is particularly important where materials are sourced from non-renewable sources.
Simplified processes
In addition to savings on materials, CAD can, through improved design, potentially simplify the processes
involved in assembling products from manufactured parts. CAD and CAM are the keys to flexible
manufacturing as they enable computerised machines to perform a variety of functions quickly and easily.
This makes the organisation more customer-orientated.
Reduce errors
CAD and CAM can eliminate human error in design and machining, so reducing costs of waste
associated with traditional design and manufacturing processes.

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Increased speed and labour cost savings


By automating previously manual operations CAM can reduce the number of human labour hours
involved in assembly, manufacture and packing, resulting in speedier operations and lowering labour
costs.
Help meet customer requirements
CAD and CAM provide flexibility to meet customer requirements more fully and eliminate mistakes and the
need to return faulty goods; so improving customer relations and customer loyalty.
c) Explain how Material Requirements Planning (MRP) might improve operations.
(5 marks)
Material Requirements Planning (MRP) is a planning and control system designed for organisations
engaged in mass production.
Basis of technology driven approach
MRP is a push-based system, pushing work through the system. Once in place, MRP can enable the
computer system Manufacturing Resource Planning II to be adopted so enabling inventory control to
match supply and demand.
Reduced stock holding
MRP can simplify inventory control and levels of stock holding might be reduced, thanks to precise
planning so potentially improving both cash flow and company liquidity.
Help meet customer requirements
MRP can contribute to increased customer service as there will be fewer delays through materials
shortage. Similarly MRP can give a base for providing swift, reliable quotations where delivery times are
important.
Enhance planning of operations
The systemised planning that MRP brings means that there will be improved facilities utilisation and
less time spent on hurrying emergency orders through (possibility of displacing other activities or
incurring overtime payments, etc.).
Enhance supplier relationships
Organisational relationships with suppliers should be enhanced through improved information sharing by
identifying clear lead times and by fewer panic orders.
(Note: Mention could also be made of issues such as improved administrative efficiency, improved
financial control and enhanced management decision making information, etc.)

d) Describe briefly the FIVE main stages involved in the (rational) process of consumer
behaviour when making a purchase.
(5 marks)
Problem/Need recognition
The purchasing process is a problem solving process of how to satisfy a need or want. Crucially
consumers do not so much buy goods or services as satisfy a demand or need through the purchase.
The first stage is that the consumer identifies that need or problem.
Information searching
The second stage involves the consumer performing a search of various options to satisfy the identified need.
This might be done informally through remembering past experience, talking to others or more formally by
consulting directories, 'window shopping' alternatives or internet search engines.

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Evaluation of alternatives
This stage involves the consumer in comparing various brands and products in order that a choice
might be made between the viable alternatives.
Purchasing decision
Next the customer actually makes a purchase choice. The choice is only normally altered if (for
instance) there is a temporary 'stock-out' or further information emerges about the alternatives which
were rejected initially.
Post purchase evaluation
Once the product or service has been purchased, the consumer assesses whether he/she is satisfied with the
purchase decision. Consumers might relate these opinions to others or make product rating entries on the
internet. This reflective process will help shape future purchasing behaviour.
e) Explain queuing theory and give examples of the ways in which it might benefit a hospital
providing services to the public.
(5 marks)
Queuing theory is the study of waiting times through mathematical analysis of related processes. The
theory enables a series of relevant performance measures to be calculated that can guide operations.
These measures might be converted into ratios.
Service organisations such as hospitals can benefit from the generation of these ratios in the following
ways:

The calculated average waiting times for a service once calculated can keep patients better
informed. One example might be how long a particular patient may have to wait for a particular
operation.

The expected number of patients waiting at a point in time can be determined. This can help
hospital managers determine staffing levels and opening times e.g. for accident and
emergency, drop in clinics, etc.

The probability of encountering the system that is either empty or full can be calculated, for
instance arriving at a hospital department at either a busy or 'slack' time. Using this
information demand can be smoothed by actively using appointment systems and
recommending times of attendance.

It is possible, through the ratios generated through queuing theory, to undertake inter-hospital
and intra-hospital benchmarking and ratio comparison so acting as a stimulus to improved
processes, greater productivity and organisational improvement. In the same way information
could be generated to aid policy decision making.

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)

Inefficient operations
Systems operations may initially be slower and less efficient due to a lack of user confidence and/or
unfamiliarity with the new system. This could impact negatively on customer service and hence
damage external relations and impact negatively on sales, etc.
Mistakes
This lack of confidence and unfamiliarity with the new system may lead to accidental errors in
processing leading to information generated by the system being incorrect or misleading.

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Staff anxiety and loss of morale


Without knowledge and information there may be a fear of the new systems effect on jobs. This could
lead to anxiety and stress and a lowering of motivation. This could be costly to the organisation in terms
of staff turnover or absence from the workplace (as a way of avoiding the new system).
Disruptive behaviour
If support and training are inadequate, staff may feel inadequate and be reluctant to use the new system,
possibly continuing with old ways of operating or being uncooperative or confrontational with
management. Conceivably deliberate errors in processing may occur and would represent the equivalent
of an employees 'cry for help'.
A failure to realise the benefits of the new system
Most systems are purchased or introduced only after some appraisal of the costs and the
benefits weighed against one another. If support and training is inadequate then the benefits of
the system may never be realised.

SECTION C 50 MARKS

Question Three
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)

Requirement (a)
Market segmentation allows an organisation to focus on the subset of a market that has the greatest
potential. There are clear advantages associated with the practice for BC4.

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Develop appropriate marketing mix


The idea of dividing a market into segments is to identify groups of potential consumers who have similar
needs and will respond to a particular marketing mix in broadly similar ways. Unsurprisingly, the
management consultant has identified this approach. Segmentation will allow BC4 to concentrate on the
right blend of the elements of the marketing mix that best meets the particular needs of its segment. The
overall aim is to deliver the right products to the right customers using the right delivery channel at the
right price and segmentation can assist this aspiration. A clear focus on a segment can lead Bc4 to
improve the suitability of the product in terms of design. It can also improve communication to the target
segment(s) using advertising and other promotional activities that are most relevant.
More focused promotion of BC4s products
BC4 currently uses an undifferentiated (mass) marketing approach whereby it makes a product
offering to the market as a whole. This approach is inefficient in many ways because much of the
marketing effort is wasted on consumers who have no interest in purchasing the product and are
unlikely to do so whatever the efforts put into promoting it. Instead the company can develop more
efficient and effective methods of promoting existing products.
Easier analysis of customers
Segmentation allows a company to gain a better understanding of customer needs, wants and other
characteristics. A sharper focus allows the personal, situational and behavioural factors that
characterise customers in a particular market segment to be better understood. This detailed
knowledge will, in future, allow BC4 to respond quickly to any changes in what the target customers
want and need.
Simplified operations
BC4 currently tries to sell its product range to all potential customers, even though it is geographically
difficult to fulfil obligations to customers in the north of the country. It may be that serving these customers
is unprofitable and runs the risk of failing to meet customer requirements so damaging its reputation.
Effective segmentation should lead BC4 to improve its operating efficiency, simplify what it does and
avoid possibly unprofitable markets.
More effective use of resources
Market segmentation offers the opportunity to an organisation to concentrate its limited resources on
meeting the needs of consumers. The greatest return will be achieved by concentrating effort and
resources in this way. By segmenting the market BC4 can focus on specific customer needs in the most
efficient and effective way. Activities can be redirected to better serve its most likely customers. The
targeting of particular customer segments of the market should produce more sales and lower costs (as
it may be possible to reduce overall expenditure on promotion and advertising). If properly managed,
BC4 will be able to achieve a higher return for an unchanged or reduced marketing and sales budget.
Improved product design
Segmentation offers the opportunity to design new products or redesign existing ones and work with
customers within the chosen segment to reflect the design features they are looking for. In this way it
may be possible to make product improvements, increase brand loyalty and decrease brand switching.
Better understanding of the competition
By building a detailed knowledge of a single market segment BC4 will also develop an improved
understanding of its competitors which serves this same segment group.
Better understanding of market
Market segmentation means that sales potential can be more clearly understood and market potential more
accurately estimated. Finding, understanding and focusing on the needs of customers can mean that BC4 has
the opportunity to become a market leader within a carefully chosen segment.
More effective market planning
Knowledge of market segments assists with marketing planning. The needs of the segment can

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be better understood and anticipated, leading to improved planning processes and more realistic
plans being developed.

b) Describe the advantages of quality standard ISO 9000 certification to BC4.


(10 marks)

Requirement (b)
The Managing Director feels that significant benefits to BC4 might arise through gaining the quality
standard ISO 9000 certification. The International Standards Organisation (ISO) issues standards that are
globally recognised, and that include the ISO 9000 series. ISO 9000 provides a systematic approach to
managing business processes to produce products that conform to customer expectations.
Improved efficiency through standardised practices
The management consultant has identified differing operating efficiencies both within and between BC4s
factories. By gaining ISO 9000 certification, BC4 will develop a system that should lead to standardised
practices, greater productivity and the maintenance of consistently dependable processes. A consistent
approach to policy documentation is a requirement including systems for control of products that do not
conform to the agreed standard. The standardisation that BC4 will gain through certification will improve the
efficiency of business processes and should reduce expenditure.
Elimination of inefficiencies
The need to agree upon common modes of operating and standards to be achieved will allow BC4 to
identify the most efficient processes so driving out bad practice and inefficient operations.
Mechanisms for Quality Control
The need for control of quality records (according to the standard 'at all locations where operations
essential to the effective functioning of the quality systems are performed') means that once a recognised
mechanism is in place an effective Quality Control (QC) mechanism can be established. Compliance can
readily be assessed by conformance of a particular operation to the agreed standard.
Improved management information
As part of QC the standard allows a company flexibility to use those statistical techniques that would be
most appropriate for its industry. This would force BC4 to adopt such techniques routinely in order to
both correct that which does not comply to standard and to prevent poor quality occurring. These
techniques and systems will improve business processes by improving decision making as managers
can now base decisions on reliable information rather than rely on instinct.
A stimulus to continual improvement
By seeking the international standard, BC4 will be constantly forced to focus on how it does business.
Unlike a training programme, this initiative is more than a one-off exercise or event. Periodic audits
conducted by external independent auditors are a requirement of certification. This will keep the issue of
quality permanently 'on the agenda'. The need to document every procedure and work instruction will
make the way in which BC4 operates visible and in future enhanced if an improved method is identified.
In this way, the system might stimulate continuous quality improvement leading to improved business
processes, reductions in waste, improved product quality and cost savings.
Customer satisfaction
The management consultant has identified a trend of increasing returned goods which require
replacement or reworking and significant numbers of products returned as part of extended guarantee
arrangements. This means that customers are not currently receiving products of the quality they expect.
The standardised practices guaranteed by a company complying with ISO 9000 will mean that
consistently dependable processes and products will help reverse this situation. Fewer returns and claims
under guarantee should result in improved customer satisfaction.

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Enhanced company reputation: loyalty and new sales


If BC4s customers are not currently receiving products of the quality they expect, this can be very
damaging to the companys reputation. Although customers are not demanding ISO 9000 certification,
the outcomes arising from the process will improve customer satisfaction and customer loyalty, leading to
repeat purchasing and improved sales. As the reputation of the company grows, new customers should
be attracted through the recommendation of existing customers. Similarly, large organisations may have
approved supplier lists that include only companies with ISO accreditation. New sources of business
might arise for BC4 once it has this accreditation.
Improved employee morale
As BC4s external reputation grows employees will be proud to be associated with the company. The
fact that the standard implies a need for the workforce to take control of its processes and document its
work processes will mean that it will feel valued. A key message for BC4 to emphasise is that quality is
not the responsibility of one person; it is everyones responsibility. This shared responsibility should
provoke a positive attitude throughout the organisation. Such an attitude should lead to an increase in
employee morale and a positive organisational culture.
Enhanced company reputation: improved employer branding
In addition, in a battle for talented workers, BC4 will be a more attractive organisation to join. So the
accreditation could effectively improve employer branding.

c) Discuss briefly how the Production Manager's suggestion could benefit BC4 as part of
an alternative Quality Control (QC) system.
(5 marks)

Requirement (c)
The MD appears to favour ISO 9000 accreditation but his production manager has advised him to employ
dedicated Quality Control (QC) staff. The use of Quality Control (QC) inspectors in itself would only be
effective as part of a full Quality Control (QC) system.
Potential for QC and subsequent ISO accreditation
The use of dedicated QC inspectors is an example of a QC mechanism traditionally found in technical
production processes. The QC inspectors task would be to compare the actual quality of the products
produced with the expected or previously planned quality standard. Such QC mechanisms could form the
basis of a later adoption of ISO 9000.
Sufficient for BC4s needs
ISO accreditation (like Total Quality Management and The European Quality Foundation model) is a
Quality Assurance (QA) system. it should, however, be acknowledged that QA systems are in certain
ways superior to quality control systems in that they attempt to create rather than control quality.
However, the use of QC inspectors and QC systems generally may suit BC4s immediate needs more
readily.
Speed and cost
Obtaining certification under international quality standard ISO 9000 may benefit BC4 but it could take a
great deal of time, effort and expense to introduce and then maintain it across the whole organisation. In
many ways QC would be a quicker and potentially cheaper approach for BC4 to adopt. The significant
trend of increasing returned goods would be readily picked up by the inspectors and savings made could
conceivable pay the inspectors salaries.
Critical consideration of appropriate quality standards for BC4s products
Introducing QC inspectors would necessitate a critical consideration of appropriate quality standards for
BC4s products which is healthy. It would also involve identifying an aspect of the production process
that is critical to the quality of production, then establishing warning limits and tolerances. There would

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then be ongoing review and adjustment of the standard originally set.


Direct address of an organisational weakness
The management consultant has confirmed that no systematic QC exists and differing operating
efficiencies exist both within and between BC4s factories. This should be seen as a strategic
weakness of the organisation. The Production Managers suggestion might be seen as a directly
addressing this matter.
Reduce external failure costs
Taking remedial action where quality does not meet standard followed by immediate action to remedy
any breach of the tolerance would reduce BC4's external failure costs.
A source of learning
In addition to the other benefits valuable data would also be produced as part of the QC system which
could act as a guide to preventing production errors in the future.

Question Four
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). 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)

Requirement (a)
For her next scheduled meeting with the Chief Executive, the Chief Operations Officer has agreed to
investigate the potential for offshoring part of T42s operations. Offshoring involves transferring some

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part of the organisations activities to another country.


Likely savings
T42s staffing costs as a proportion of turnover is higher than its competitors some of which are offshoring
part of their activities. Generally, the main driver behind the trend in offshoring is in order to exploit
differentials in wage rates. Such differentials in wage rates can be significant (often in the order of one
tenth the level of the home country). Even if the opportunity is offered, it is unlikely that all T42s existing
staff would wish to relocate to another country. This would therefore lead to the employment of new
employees from another country. Offshoring could therefore be cost effective to T42 in terms of reduced
wages. In addition, there may be potential to exploit low tax rates and other benefits in the host country.
Exchange rate effects
Exchange rates between the home country and host country can be notoriously difficult to predict and could
make financial projections of potential savings difficult. If the decision to offshore goes ahead there is a risk of
exchange rates impacting adversely on costs of operations eroding likely savings.
Impact on workforce
If the Chief Operations Officers investigation of the potential for offshoring part of T42s operations were
known by the workforce it could have a devastating effect on morale, motivation, goodwill and industrial
relations. Given that no choice has been made over which services will be considered for offshoring, then
damaging rumour and gossip would also occur. T42 needs to consider at what stage (if any) it
communicates with staff in a way that minimises possible damaging consequences.
Choice of function to outsource
What is known from the scenario is that T42 employs 'many' technicians who each have detailed
specialist knowledge of different systems. In Charles Handys terms these workers would
represent the 'operational core' of the organisation. This core is supported by sales personnel and
call centre staff. The least risky part of T42s operations to offshore would be its call centre
operations as a non-core activity and also because many call centres are already offshored in
other industries.
Level of training
T42 employs highly trained staff to ensure customers always receive the highest levels of reliability and
technology. This seems to be the basis of T42s competitive advantage and the company would not want
this to be compromised as a result of offshoring. Any new employees required, as a result of offshoring
(or outsourced offshore staff), would need to exhibit the same attributes.
Reliability
A distinctive feature of T42s operation is that its own technicians are available 24 hours a day, 7 days a
week under existing arrangements. Again this aspect should not be compromised as a result of
offshoring. (Time differences between the home and offshore partner countries in this case are not a
difficulty).
Choice of host country: Language barriers
T42s choice of country to offshore to is important as language may be an important consideration.
Several of the BRIC economies invest heavily in educating their workforce in different languages to
ensure that their workers have high levels of linguistic skills. If language becomes a barrier then
customer service could be compromised.
Choice of host country: Political risk
The likelihood of operations being disrupted by a change of foreign government or terrorist activity (for
instance) needs to be factored into the decision making. Reference has also been made earlier to the
volatile nature of some exchange rates. It is likely that these issues will help guide the choice of country to
offshore activities to.

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Choice of host country: Potential for new trade


By establishing a base in another country, T42 will have a better understanding of local conditions
and contacts and may lead to potentially new business from the host country.
Cultural differences
Geert Hofstede, amongst others, researched the role of national culture within the organisation and
identified five dimensions which he argued largely accounted for cross-cultural differences in peoples
belief systems and values. Irrespective of the country chosen by T42 to offshore to, there will be cultural
differences. These differences present a number of challenges for T42 including a need to understand
and respect other cultures, and act accordingly. Thus cross-cultural management involves recognising
behaviour which exists within both countries and cultures and understanding and improvement of the
interaction between T42 and partners from different countries and cultures.
A need to establish service level agreements, etc.
There will be a need to establish service levels, performance targets and ratios in order to ensure that
levels of service are maintained under offshored operations.
(Note: Mention could also be made of issues such as 24 hour enabled cover, a need to protect
intellectual property, and a need to invest in team building in order to develop team cohesion, etc.)

b) Explain the benefits of introducing job rotation amongst technicians for T42.
(10 marks)

Requirement (b)
Job rotation involves moving employees from job to job within the organisation. For their next
scheduled meeting T42s Chief Operations Officer has agreed to investigate the potential for
introducing job rotation amongst its technicians.
Overcome a strategic weakness
It is a strength of T42 that each of its technicians is highly skilled and knowledgeable but it is a source of
organisational weakness that an individual technicians skill and knowledge is in only a few business
systems. So although an individual technicians knowledge may be deep it is also narrow which is
unhealthy in a number of ways. It will mean, for instance, that technicians are restricted as to the number
of clients they can currently deal with. This may be part of the reason why T42s staffing costs as a
proportion of turnover are higher than its competitors.
Effective staffing policy
From a human resourcing perspective staffing policies should be designed to lead to a set of positive
outcomes including high staff commitment and quality, and highly flexible employees. It seems from the
scenario that T42 is quite 'flat' in terms of hierarchy and roles appear very specialised. It would
therefore be difficult to involve technicians in job enrichment or job enlargement schemes. The most
feasible mechanism to improve commitment, quality, and flexibility would be the use of job rotation.
Arranging for technicians to swap roles periodically will bring variety to their roles and increase their
capacity to deal with a greater breadth of clients.
Expanded skill variety
The number of different types of skills that are used by an employee to do a job (skill variety) enables
employees to undertake a variety of tasks in their work. For T42 the use of job rotation will certainly
enhance multi-skilling amongst technicians and lead to a more flexible workforce. This will give T42 more
options in covering tasks when there are absences and holidays. It may be that the workload of
technicians is currently uneven and the initiative could help distribute workload more fairly amongst all
technicians.

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Shape attitudes positively: readiness for change


Job rotation would certainly break any possible feelings of inertia and complacency amongst T42s
technicians so that in future they should be more receptive to organisational challenges and changes in
operation.
Shape attitudes positively: organisational commitment
Job rotation can also lead to positive feelings towards the organisation. In T42s case this might
involve aligning technicians attitudes to the organisation more closely and, hopefully, T42 should
obtain positive behavioural outcomes of increased effort, co-operation, involvement and
organisational citizenship.
Encouragement for workplace learning
T42 is a 'knowledge based' organisation and operates on the basis of having high quality employees.
Such organisations need processes of workplace learning in order that a capable and qualified workforce
continues to produce a high quality service. Job rotation is one such mechanism that helps T42 achieve
workplace learning.
Engagement and motivation
Job rotation may prove to be a stimulus to individual technicians leading to engagement. If employees are
more interested in the job as a result of the policy they will be more motivated and the organisation will
benefit from staff commitment and retention and possibly enhancing employee productivity.
Breadth of perspective
Job rotation gives each employee the opportunity to see how the different jobs within an organisation fit
together. The difficulty at the moment is that each of T42s technicians has individual knowledge that is deep
but also narrow. This can lead to a rather insular view of work. Task significance involves how important the
task is to others in the company, which is important in showing employees how the work they do fits in with
that done in the rest of the organisation. If employees can see how their work affects others, they will attempt
to do the best job they can whilst collaborating with others.
Breed healthy attitudes in the workforce
Currently technicians work in silos. Job rotation is known for breaking these feelings. T42 employs
many technicians who each have detailed specialist knowledge of different systems and a sales team which
stays up to date on the different solutions available. Job rotation means that technicians will have a broader

perspective. It will also encourage new approaches to be tried out in the workplace.
Potential to reduce the staff training budget

T42s Chief Executive has asked if economies could be made to the training budget. It may be that
technicians are receiving 'too much' formal detailed knowledge of too narrow a range of systems. If on the
job training (of which job rotation is one example) is introduced one benefit may be a reduction in the
current training budget. 'On the job' training will only be effective however if existing employees have time
to devote to the process, and are themselves competent and know how to impart the necessary skills.
(Note: Mention could also be made of issues such as improved team cohesion and a broader
appreciation of jobs performed by colleagues and skill requirement, etc.)

(c) Discuss briefly the factors that should be taken into account when deciding upon T42's
training provision and budget. (5 marks)

Requirement (c)
The Chief Executive asked if economies could be made to the training budget and the Chief
Operations Officer has agreed to review the current provision.
Outputs effectiveness
The explicit input to training may be expressed as a level of budget (or an input) but when determining

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training provision there should be a concentration on the outputs or outcomes of the process. If T42
already has stated the aims of its commitment to training then the outcomes of the current provision
should be measured against these aims. If no stated aims exist, senior management would do well to
consider what they hope to achieve as a result of future training provision.
Budget level and level of provision
Training can be seen as a formal, often short- term process. It can take place away from the workplace
or 'on the job', or be a combination of both. It is likely that T42s training budget, which the partner has
drawn reference to, reflects training away from the workplace and may involve costs such as facilities
hire and the use of training consultants. 'On the job' training by comparison is likely to have 'hidden costs'
and will not be obvious within the overall budget. If the decision were taken to reduce the training budget
then the lost training opportunities could potentially be compensated for to a degree by increased 'on the
job' training.
Strategic Alignment
T42s stated business approach involves a belief in the need for the best system and high commitment
through highly trained staff. T42s technicians are indeed highly skilled and knowledgeable. This suggests
that training is essential in order for the company to be competitive and meet its organisational goals.
When deciding upon the training budget this will clearly need to be taken into account.
Productivity levels as a result of training
Training is a process whereby the organisation attempts to increase an individuals ability to better
perform a particular set of tasks. In T42s case the effectiveness of its workforce is dependent upon the
competence it acquires. Well trained members of the sales force or technicians will be better placed to
respond to customer demands and generate income. Indeed call centre staff also need to be
competent, directing queries to the right personnel within the company.
Workforce commitment as a result of training
In some organisations training is seen as a form of reward and motivation for employees. If this is the
case within T42, then those staff engaging in training should be motivated, committed and therefore
more productive. When deciding upon T42s training budget, the level of workforce commitment derived
as a result of the budgetary provision needs to be considered.
Workforce competence as a result of training
If T42s training budget is used effectively, participants should become more competent and confident
employees. Not only should productivity levels improve as a result but, crucially, levels of workplace
stress should reduce. A consequence of a confident happy workforce is reduced absenteeism and lower
staff turnover (meaning less disruption and cost associated with recruitment and selection of replacement
staff).
Support for other initiatives and processes
Training adds cohesion to other organisational activities and these factors should be taken into account
by T42 when deciding upon the training provision. For instance, training can be a direct result of honest
collaborative staff appraisal processes or as part of an induction programme. Currently T42 is considering
both offshoring and job rotation and, as a consequence, it is likely that more not less training will be
required (e.g. in skills using other systems, cross-cultural appreciation skills, etc.)
(Note: Mention could also be made of issues such as the content of the existing training provision and its
impact on budget required and morale of staff, etc.)

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E1 Enterprise Operations
March- 2013
SECTION A 20 MARKS
Question One
1.1

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

1.2 Which ONE of the following is NOT normally associated with operations management?
A
B
C
D

Supply chain management


Enterprise Resource Planning systems
Liberalisation
Continuous inventory

1.3
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.

1.4
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

1.5
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

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1.6
A software management system combining all of a globally diverse organisation's
sales, marketing and customer support information is known as
A

distributed data processing (DDP).

customer relationship management (CRM).

a database management system (DBMS).

a wide area network (WAN).

1.7
be

Information that takes the form of a list of debtors and creditors is by nature said to

strategic.

tactical.

operational.

executive.

1.8
The building of a prototype model is normally associated with which ONE of the
following?
A

Process design

Reverse engineering

Concept screening

Positioning

1.9
The process of ensuring employees support an organisation's marketing activities is
known as
A

performance management marketing.

social marketing.

autocratic management.

internal marketing.

1.10 Which ONE of the following is NOT normally associated with an organisation's
pricing mix?
A

Payment terms

Credit policy

Discounts for bulk purchase

Commission for a sales team

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Answer to Question One


1.1 D
1.2

1.3

1.4

1.5

1.6

1.7

1.8

1.9

1.10

SECTION B 30 MARKS

Question Two
a) Explain the purpose of realistic and contrived tests as part of the installation of a new
system.
(5 marks)
Both of these tests contribute to a critical activity prior to the changeover to a new system within an
organisation. The aim is to ensure that the system is working correctly before going 'live'. Ideally
ultimate users should be involved in conducting these tests in order to build their confidence in the
new system and how to operate it.
Realistic tests
Realistic tests involve presenting the system with a realistic example of the environment in which it is to
operate. The purpose is to test both the system itself and the effectiveness of training and the
preparedness of future system users.
Contrived tests
Contrived tests involve presenting the system with unusual and unexpected events, (such as
incorrect codes, wrong amounts, inappropriate commands, and so on). The purpose is to see
how the system reacts, and whether all conceivable anomalies have been catered for in the
systems design.
b) Identify the ways in which Total Productive Maintenance (TPM) could be applied as part of a
manufacturing organisation's quality programme.
(5 marks)
Organisational quality programmes
A manufacturing organisations quality programme is likely to involve the continuous improvement of all
its operations including production time, quality and costs. Commonly used tools and techniques include
Kaizen, Six Sigma and Total Productive Maintenance (TPM).

Total Productive Maintenance


Total Productive Maintenance involves the planning and implementation of a systematic maintenance

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programme for all machines and equipment. This should contribute towards a manufacturing
organisations operations by maintaining (and hopefully increasing) productivity and quality through:

preventing unplanned machine breakdowns;


reducing downtime, speed reduction and defects arising from machine and equipment
malfunctioning.

This should lead to:

cost savings through reduced materials scrapped and the need for reworking faulty items;
improving the accuracy of production forecasting;
eliminating the frustration felt by workers when machines break down, so improving job
satisfaction and staff morale.

c) Describe how Electronic Data Interchange (EDI) has helped transform Business to
Business (B2B) operations.
(5 marks)
Business to business (B2B) operations refers to the way in which buyers and sellers trade with one
another in a supply chain without dealing with the ultimate consumer. It therefore includes
manufacturers, wholesalers and retailers but not end customers.

B2B operations have been transformed through technology and information systems including Electronic
Data Interchange (EDI). EDI is the structured transmission of data between organisations by electronic
means. The technology allows a transfer of electronic documents or business data from one system to
another and hence from one trading partner to another.
The adoption of EDI has led to the use of consistent documentation and a quicker exchange of
paperwork when transacting business such as purchase orders and invoices so saving time.

The commonality of paperwork and systems between different businesses has reduced the scope for
errors and the administrative need to query orders and invoices.
Full adoption of EDI has ultimately enabled paperless trading and cost reduction by avoiding paper
handling, administration and postal costs.
EDI has improved B2B communications and strengthened trading relationships through the use of
commonly understood and accepted technology.
EDI has improved trading efficiency; in some cases organisations have even replaced the need
for an exchange of cheques by using EDI.
d) Explain the concept of merit goods with reference to the formal provision of education in a
country.
(5 marks)
Merit goods are those goods and services that society values and the government (state) encourages in
order that positive social benefits are generated. It may be that individuals will need encouragement for
consumption of these goods and hence the government may subsidise or even provide such goods and
services free at the point of delivery. Merit goods may be provided by either the public or private sector
and include health services, work training programmes, public libraries and education.
Education
Education is considered a merit good because it:
provides a stimulus for research and problem solving which can add to the long term growth of
a national economy;
encourages a more enlightened society and social cohesion;

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is a driver to rising incomes and productivity for current and future generations.

A government may need to promote education, because:


parents with relatively poor educational qualifications themselves may be unaware of the full
longer-term benefits that their children might derive from a good education;
children may need to be persuaded that education is a long-term investment decision and
benefits will take time to emerge (e.g. university graduates tend to have higher earnings over a
working lifetime).
A government may be convinced that, unless this 'good' is both free and compulsory, it may not be taken
up so may (for instance) introduce free compulsory education for under 16s and possibly make further
and higher education accessible to a wide constituency of the population.

e) Explain the components of an organisation's place mix.


(5 marks)

The 'Marketing mix' describes the different kinds of choice organisations have to make in the whole
process of bringing a product or service to market. The 4 Ps is one way of defining the marketing mix in
terms of Product or service, Price, Promotion and Place.
The place mix represents one element in an organisation's overall marketing mix. Place refers to the
means by which customers acquire a companys goods or services. Place therefore includes:

The actual place the product is purchased. This might be a shop, a specialist store, a
supermarket, factory outlet, retail market, etc.);
Purchases made remotely either by telephone, or through cyberspace (in the case of on-line
purchases);
The use of sales personnel interacting with potential customers.

Place also includes the mechanism and logistics through which goods are moved from the
manufacturer to the consumer and so includes the actual route of distribution.
f)

Cost savings is often given as a reason for an organisation investing in new information
systems (IS) and information technology (IT). Identify another FIVE main reasons for
making such an investment.

Apart from cost reduction IS and IT can benefit an organisation in a number of ways including:

Forecasting: IS packages often act as an aid to forecasting and the preparation of various
budgets to serve the organisation;
Competitive advantage: an organisations IS and IT may represent a core competence and
hence a source of competitive advantage and a focus for strategy development;
Performance management: systems can generate a ratio analysis of departmental, unit and
individual performance and customer feedback. Ratios derived from data capture can also
provide a foundation for benchmarking and in turn a mechanism for organisational development
and/or cost reduction;
Customer service: technology can help speed up operations, reduce lead times and waiting
time and so meet customer requirements more fully;
Reward management: systems can provide payroll services as well as providing activity
information which could be a basis for awarding incentive pay and a means of calculation of
bonus payments;
Increased sales: an organisation's reputation can be enhanced through improved web
design and availability of information.

(Other relevant answers might also be included such as scenario planning).

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SECTION C 50 MARKS

Question Three
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:
a) Explain how the lean philosophy might help improve the operation of MM's HR
department.
(10 marks)

Requirement (a)
The lean philosophy
Leading Japanese companies first brought together the activities of managers, employees and suppliers
into a tightly integrated system capable of responding quickly to changing customer demands. The
resulting lean production methods consolidated existing systems into a single coherent process for

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continuous improvement.
The lean philosophy (referred to as 'lean' within these answers) is expressed in several different
statements such as achieving more with fewer people, slimming, etc. Although it is true that lean is often
associated with efficiency, there is an underlying desire for continuous improvement of products and
processes whilst reducing waste. Waste in this context creates no value but absorbs resources such as
materials. Lean, therefore, focuses on waste elimination in areas such as:

product defects that lead to scrap or reworking;


over-production of goods that are not currently needed;
stocks of goods awaiting further processing so that cash is tied up in work in progress;
over processing without adding value;
unnecessary movement of equipment;
unnecessary transportation of goods.

Crucially, for human resource management, waste can result in unproductive labour hours, so lean
could focus also on:

unnecessary movement of people,


unnecessary handling of goods,
'idle time' such as employees waiting for process equipment to finish its work, etc.

Lean operates best where there is a 'safe' working environment.


By using lean, manufacturers have made significant improvements to their operations. This has included
improved productivity, increased resource utilisation and a more accurate understanding of product costs. MM
is a market leader in a competitive field and its success might reasonably be attributed to its lean philosophy
which apparently it operates in all areas of the company (except HR).

Human Resource practices and lean


From the scenario, at least one manager believes that MMs Human Resource (HR) practices would do
well to learn from lean. The workforce is one area where manufacturers generally, and companies like
MM specifically, may not have thought to apply lean to managing its human resource. Clearly lean might
help inform the operation of the HR department in a number of ways, once the HR Director has become
familiar with the lean approach and its effects on MM.
Improved job design and human resource usage
Lean includes considering ways of improving productivity whilst reducing the resource base. In HR
terms this translates as achieving greater productivity with fewer people. Lean could therefore offer a
stimulus to MMs HR department to look critically at job design in order to make improvements (possibly
by using time and motion and work study methods). The aim would be to make the workforce more
productive and efficient.
Streamlining HR processes
MMs managers believe the organisations HR practices are inefficient, and the explanation of its
apprenticeship scheme appears to evidence as much. (See part (b) following). Lean involves reducing or,
hopefully, eliminating waste and, when applied to HR practice, current human resourcing systems could
be streamlined or made more effective. A critical review of all HR processes could be led by MMs HR
professionals in order to identify and eliminate non-value adding systems and effort. (HR could be
assisted by techniques such as process mapping as part of such a review.)
Reduction in wasted labour hours
Waste of any kind is an enemy of lean so efforts to reduce wasted labour hours need to be identified. The
HR department could work more closely with line managers in order to identify and then eliminate the
unnecessary movement of people, unnecessary handling of products, and (the frustrating) idle time

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caused by delays due to processes, people or equipment. In this way lean principles can focus on
ensuring that labour is aligned to demand more clearly and so achieve lower costs and shorter lead
times.
Cultural development
One aim of lean is to continuously improve a 'safe' working environment which includes an
organisations physical, emotional and professional environments. Here the HR department will have a
key role to play in shaping organisational culture and the working environment positively and in ways
that will support lean operations.
Workforce flexibility
A flexible, well-motivated workforce is a key component of successful lean programmes. MMs HR
department can instigate flexible working practices. By employing a more flexible sort of workforce MM
should be more able to respond to peaks and troughs in demand. There also appears to be plenty of
potential areas where greater flexibility could be encouraged, not least in the operation of the companys
apprenticeship scheme, where experience of more than one work area would enhance the learning
experience.
Developing meaningful performance metrics
The HR department can assist managers in developing work, performance and productivity ratios and
measures by site and work area in order to conduct reviews and identify areas of waste including those
areas in which to direct most attention.
Involvement in multidisciplinary teams
The HR department could participate in multidisciplinary teams similar to quality circles with a
brief to implement lean practices, identify waste and bring about continuous improvement.
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)

Requirement (b)
Failings of the apprenticeship scheme
MMs apprenticeship scheme has a number of shortcomings which can be expressed (consistent with
lean) as areas of waste.

Wasted costs of training apprentices. Capable apprentices are being released when their
training is completed because of a lack of suitable vacancies at a particular site.

Wasted cost and time in recruitment. It appears that, instead of simply advertising
opportunities for apprenticeships, MM operates a complicated process which, it could
reasonably be speculated, is time hungry and therefore costly.

The waste of ineffective open day events. For the last three years there have been fewer
potential apprentices attending company open days. Of those who have attended, a growing
number have declined the offer of an apprenticeship which suggests that they have been 'put off'
by the experience. Reasons for this might include a lack of preparedness by sites, a
disorganised programme or negativity shown by staff. In summary, events are less effective than
they could be.

Wasted potential. Existing apprentices may not be happy as they will be aware that there may be
no guarantee of employment after graduating through the scheme. As they speak to those
attending open days they may be presenting a negative image. If the apprentices are not
motivated then this could lead to a loss of productivity, a negative working environment and

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therefore wasted potential.

Wasted opportunity costs. The failings of the scheme may be preventing good candidates,
who may otherwise have been attracted to the company, from being employed by MM. In
addition graduating apprentices 'let go' may be very capable.

Process review
It should be a principle of recruitment that processes are cost-effective. Senior Site Managers will be
experienced in conducting cost effectiveness reviews and cost benefit analyses. A full review of the
entire scheme should be undertaken and the involvement of these managers would be extremely
helpful.
Budgetary decisions
Currently provision is made within the HR budget to finance the operation of the entire scheme and the
HR director decides the number of new apprentices taken on. If this budget is devolved to Senior Site
Managers along with responsibility for recruitment and selection, then sites will feel more empowered
and a better match between organisational requirements and apprenticeship availability might result. (An
alternative approach might be for Senior Site Managers to make bids for the funding of apprentices
against the HR budget.)
Recruitment teams
A recruitment team from the HR department currently tours schools with promotional literature
explaining the benefits of the scheme and those with potential are invited to open days. Senior Site
Managers involvement might improve this process in a number of ways:

Managers could be offered the option of participating to a far greater degree in the process so
strengthening the operation of the recruitment team and offering a more realistic perspective on
how the apprenticeship scheme works in practice.
The views of Senior Site Managers will be crucial in identifying improved or alternative
approaches to recruitment. The effectiveness of recruitment teams might be questioned. (For
instance, a more straightforward option would be to advertise open days for those who may be
interested or simply invite applications.)

Review of recruitment literature


Good public relations can 'sell' a company to potential recruits. In this respect there may be failings in
MMs promotional recruitment literature. The literature may be portraying an image of the company that
is either inaccurate or inappropriate. This literature should be reviewed based on feedback from pupils,
parents and teachers as well as taking account of the views of managers themselves. MMs literature
claims that the scheme is a route into the workforce and apprentices gain outstanding technical,
personal and employment skills. It also boasts that 'the facilities and talent apprentices encounter are
world-class'. It is important that MMs managers are comfortable with these claims. By involving
managers in the review there will also be a better 'buy in' to ensure that claims are realised.
Open days
At open days HR arranges tours of premises and encourages potential recruits to talk to current
apprentices. If open days are still viewed as appropriate, it is vital that Senior Site Managers are
involved to a far greater extent. Senior Site Managers are better able to ensure that these events are
pleasant and positive and that potential recruits do not encounter negativity from staff. These managers
and the subordinates they appoint for the task will also be better able to answer detailed queries from
visitors.
Interviews
Currently HR officers conduct interviews and draw a short list of interested candidates for the HR director
to make decisions upon. This is a highly centralised top-down process and one that is likely to leave

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Senior Site Managers feeling disempowered and alienated. These managers or their nominees should be
involved in the interview and selection process. It may be that, as HR professionals are involved in the
interview, it could be too elaborate and formal for those who have never been in full time employment
before. The involvement of site managers should add some moderation and balance to proceedings so
that they are not so off-putting.
Allocation to work areas
New recruits themselves identify the areas of the business they wish to work in. Under enlightened HR
(rather than personnel) approaches, the needs of the organisation provide the appropriate starting point,
and not the working preferences of individuals. Senior Site Managers can help articulate these needs and
the company should be more directive when identifying working areas for new apprentices. The key
would be to allocate recruits to areas where there are realistic possibilities of future employment.
Allocation of mentors
As managers currently have no say over the number of apprentices placed at their site, allocating suitable
workplace mentors is sometimes difficult. With greater involvement in the entire process, including the
number of apprentices taken on, Senior Site Managers can identify and train appropriate personnel in
order to carry out mentoring duties in a way that is better planned.
c) Identify the options available to MM to resolve the current problem of no suitable fulltime posts being available at the site when an apprentice completes his or her training.
(5 marks)

Requirement (c)
The new HR Directors discussions involve Senior Site Managers who are critical of the operation of the
apprenticeship scheme. One told her 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
vacancies for them to move into at his site. A number of potential solutions to this situation present
themselves:
Improved HR planning and scheme management
The instance cited in the scenario is a symptom of poor human resource planning and a lack of
involvement by managers in the complete HR process. As identified in part (b), there should be a
greater involvement of site managers in effective recruitment, training and ultimate employment of
apprentices within MM. Clearly this is a more medium to long term solution. In the interim, further
apprentices will complete their training and will be expecting to be placed into full time positions.
Transferable skills amongst apprentices
Rather than the current arrangements whereby apprentices gain expertise in a single work area, a
broader training in all areas would give apprentices the skill base to potentially be employed in any
part of MM in the future.
Place successful apprentices at other MM sites
The fact that apparently apprentices are placed into roles at the site in which they trained underlines a
parochial view. Instead, by taking a company-wide perspective involving managers (in conjunction with
HR officers), suitable positions could be identified at other sites for apprentices to occupy. There is an
argument that this broader perspective would break down departmentalism and benefit the individual
apprentice concerned in terms of experience.
Provide interim bridge funding
Provision is currently made within the HR budget to fund the entire apprenticeship scheme.
Graduating apprentices who are promising could be kept on in a supernumery position and funded
from this budget until a suitable vacancy within the company arises.
Make payroll 'space' for projected apprentices graduating
Managers should be able to project with some accuracy when individual apprentices are due to complete
their training and when they will need a position to be found for them. These managers could try to make

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'space' on the payroll by making projections of vacancies arising from historical information on natural
turnover and wastage and by freezing further recruitment in certain posts.

Delay taking on the apprentice


Managers should have flexibility to offer graduating apprentices either temporary contracts or part time
working until suitable full time vacancies arise. Alternatively, Senior Site Managers could suggest that the
individual apprentices concerned undertake full time education for a period or take a 'gap year' with a
promise of a post after this time.

Question Four
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)

Requirement (a)
Business leaders in a meeting with Cranmoors new Government expressed the view that there needs to
be less regulation and a greater concentration on dealing with a (failing) economy instead.
Regulation
The intention of regulation is to produce, prevent or modify a particular outcome. Examples of regulation
will impact upon a number of areas that affect businesses including prices, wages, market entry, the
size of firms in an industry and the control they can exercise, employment conditions, pollution, and
standards of production and quality. All markets are therefore regulated or controlled by government to
some extent.
There will always be a conflict between the interests of owners and shareholders who desire a
maximisation of financial return, the interests of those people using the products or services, and
society as a whole. Regulation by a government represents intervention it believes is necessary in
order to strike a balance it believes to be 'right'.
Effective regulation will ensure that safe products or services are delivered, whilst not inhibiting the
effective functioning and development of businesses and other organisations. Regulation can take a
number of forms, such as:

standards and statements of expectations and public statutes;


registration or licensing to permit and approve provision of the product or service;
inspection to ensure compliance with standards.

With respect to the first of these, often there are also schemes of voluntary regulation.
Business leaders in Cranmoor expressed the view that there needs to be less Government regulation
and their views may or may not be justified. Regulation and deregulation are terms that need to be fully

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understood. The term deregulation must be used carefully in this context since it is often, incorrectly,
used to describe the privatisation or liberalisation of some markets. For instance, whilst many countries
still have a national airline owned and operated by the Government, the USA, Europe, Australia and
Japan have liberalised their markets. Whereas the nationalised airlines are subject to a wealth of
regulation on safety, economic and political matters, in the countries where the airline market has been
liberalised only the political and economic control is removed. The airlines concerned are still regulated
in terms of safety, amongst other things, but they are free to negotiate their own arrangements with
airports, supply whatever routes they wish, and charge whatever fares they wish.
Economic matters
In terms of the economy, a government should have some overriding macroeconomic policy objectives
including growth, inflation, employment and balance of payments. Cranmoor is facing a 'substantial' balance of
trade deficit and a weakening economy set against a global recession. The new Government was elected on
promises to be financially prudent so the expectation is that it will try to deal seriously with these issues. The
new Governments concerns will include a number of areas:

The countrys balance of payments which refers to how a nation manages its relationships and
trade with other countries. Cranmoor has a substantial balance of trade deficit which is
unhealthy, reflecting excess imports over exports. The aim of the new Government should be to
reach an appropriate balance of imports against exports to other nations.

Economic growth is likely to be encouraged by the Government. Growth will mean more goods
and services being demanded and produced. This leads to increased earnings and an
invigoration of the economy.

The Government will want to maximise employment levels, ensuring everyone who wants a job
will be able to work. The reasons are straightforward: high levels of unemployment lead to
reduced income tax revenues, a loss of spending in the economy and increased state benefit
payments. Research has also indicated that unemployment can lead to poor health and a
breakdown of social relationships.

The Government will want to see that there are relatively low levels of inflation. The
Government will try to ensure that general price levels do not increase too rapidly. This is
because rapid inflation leads to business and investment uncertainty. In addition, a further
stakeholder group, the poor (those on no, limited or low fixed incomes), are hardest hit by
high inflation leading to ill-health, a loss of social harmony, alienation, etc.

b) Explain the benefits an organisation might derive from adhering to good Corporate Social
Responsibility (CSR) principles in its business activities.
(10 marks)

Requirement (b)
The new Government believes that businesses need to be more responsible and claim that good
Corporate Social Responsibility (CSR) is good for both society and the business itself.
The term Corporate Social Responsibility does not have a universally agreed definition. However, it is
commonly expressed as an organisation's response on environmental, ethical, social and economic
issues. This includes an organisations relationship with key 'stakeholders' such as its workforce,
customers, suppliers, legal owners, community and the environment. CSR can be understood as taking
more than just the immediate interests of the companys owners and shareholders into account when

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making a business decision. The Cranmoor Government feels that without businesses acting responsibly
a number of stakeholder groups may feel isolated and vulnerable.
In key business decisions a conflict may be encountered between what appears to further the
organisations interests and what satisfies society as a whole. The extent to which businesses meet
responsibilities placed on them by their various stakeholders will determine the degree of corporate
citizenship exhibited by them. CSR is therefore about the way an organisation can manage the impacts
of its decisions and operations in a responsible manner, to:

discharge its economic obligations;


discharge its legal duties;
fulfil its ethical duties;
meet its philanthropic responsibilities.

Issues commonly associated with CSR include:


attitudes to environmental pollution from production or consumption of products;
standards of factory and product safety;
avoidance of the use of non-renewable resources in production;
avoiding producing socially undesirable goods;
using non-degradable packaging and/or products.
Motives of individual businesses developing good CSR can vary. If the initiative is based on the belief
that CSR is a moral duty of companies towards society then this is more of a moral (intrinsic) argument.
Indeed a number of organisations have established themselves explicitly as 'ethical companies'. Policies
that further CSR are therefore integrated into all their business processes. By engaging in CSR these
companies, and others like them, are helping to achieve their fundamental organisational purpose
and aims.
Alternatively, some businesses may view CSR policies as simply an 'add-on' that serves as windowdressing to appease government and others.
A further, more strategic (extrinsic) motive holds that CSR contributes to the financial success of the
company in the long run. In other words there are tangible economic rewards associated with CSR.
However, certain by-products of engaging in CSR may benefit an individual organisation and these are
given below.
Proactive approach
CSR may anticipate likely or impending legislation and so may be a stimulus to a company becoming
more outward facing and proactive. By acting in advance of such legislation these actions, which are not
a legal requirement, may also help to project a good external image.
Product differentiation
Market places can be both hostile and competitive and consequently most companies look for ways of
distinguishing their products from those of their competitors. CSR might be seen as a source of
differentiating product ranges and services, so setting them apart. If the market values a difference arising
from CSR then this could prove a unique selling point for the company concerned.
Strengthen a companys marketing efforts
CSR may provide a helpful means of reinforcing, developing and/or strengthening an organisations
brand. Brand equity represents the financial benefit of a brand and a stronger brand could in turn
possibly enhance market opportunities. Good public relations (PR) could arise from CSR which could
potentially be an important element of an organisations overall promotional mix. If customers are better
able to connect with a business because of its CSR, then this offers some safeguard against declining
industry sales and the impact of competitor policies.

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Making cost savings


To fulfil its ethical duties an organisation may feel a need to help reduce an organisations carbon
footprint, become energy efficient and avoid excess packaging. These measures, primarily aimed at
respecting the environment, could lead to the company operating more economically and so may
reduce running costs.
Give flexibility in pricing policies
If a business is well known for its commitment to CSR policies, then customers may be prepared to
accept slightly higher prices in recognition of this. This gives the company some scope for increasing
prices and potentially overall revenues.
Increased profitability
The combination of potentially reduced operating costs and potentially higher revenues through CSR
articulated above represents a recipe for increased overall profitability.

c) Explain the relationship between Corporate Social Responsibility (CSR) and an


organisation's human resource policies. (5 marks)

Requirement (c)
'People' issues might be seen as being at the heart of effective Corporate Social Responsibility. CSR
policies have to be both formulated and also implemented by an organisations workforce. For many
organisations the HR function may be tasked with responsibility for coordinating an organisations CSR
strategy. HR policies relating to, for example, reward, recruitment, training, discipline, etc. may help
further CSR.
Motivation and productivity
If there is alignment between employee values and organisational CSR, then this will contribute to staff
motivation and productivity. A well-motivated and productive workforce can be a source of strategic
strength and give an organisation a competitive edge in the marketplace. This is particularly important
for organisations where customer service is a dominant feature. Conversely, demotivated employees
may damage an organisations reputation through, for example, inappropriate behaviour and decisionmaking.
Motivation and staff retention
Good CSR is a potential source of motivation and staff retention; something that could be critical for an
organisations human resourcing plans. Poor CSR could be damaging if it translates as high levels of
staff turnover and a loss of key employees at inconvenient times. Poor CSR could lead to organisational
underperformance and costs associated with staff recruitment and the training of new staff.
Communication and staff well-being
Effective communication and policies geared towards staff well-being (e.g. flexible working, maternity
leave, work -life balance programmes, employee training and development programmes, etc.) represent a
strand of HR policy and could in some cases be inseparable from CSR policies. Part of an organisations
ethical duties as part of its CSR obligations may also translate as non-discriminatory employment
practices.
Spin offs from philanthropic responsibilities
CSR may lead to initiatives such as employees volunteering in the community or fund-raising for a chosen
charity. Volunteering schemes may offer employees a chance to give something back to their local community
which may be good in terms of team building and giving a sense of achievement. Staff can also develop
essential qualities that are important in the workplace such as communication skills, time management, team
working and assuming responsibility when faced with a task.
Positive culture

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CSR can help build a positive organisational culture. Employee attitudes and behaviours will be
affected by the overall organisational culture and climate and whether or not CSR is taken seriously. As
a stakeholder, employees have certain expectations of their employer beyond pay leading to feelings
that they can identify with the organisation. This in turn can have positive outcomes in employee
dealings with others including suppliers and customers.
Employer branding
Employer branding is about making sure that existing employees feel good about the organisation they work
for and that the organisation appears attractive to potential recruits. CSR may strengthen employer branding
so improving the organisations ability to attract (and retain) high calibre staff.

E1 Enterprise Operations
May- 2013
SECTION A 20 MARKS
Question One
1.1

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

1.2

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

1.3

Transaction costs are associated with which ONE of the following?

A
B
C
D

Materials procurement
Flexible working arrangements
Outsourcing
Lobbying

1.4

The aim of total productive maintenance is which ONE of the following?


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A
B
C
D

Inclusivity and empowerment


Motivation and teamwork
Engagement and commitment
Prevention and continuity

1.5

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

1.6

Foreign earnings are included in which ONE of the following?

A
B
C
D

Gross Domestic Product


Gross National Product
Government fiscal policy
Consumption tax

1.7

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
Corporate social responsibility
Political activity

1.8
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

1.9

Which ONE of the following does NOT represent a spoke in Cousins' supply
wheel?

A
B

Cost benefit analysis


Portfolio of relationships
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C
D

Performance measures
A firm's infrastructure

1.10

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

The correct answers are:


1.1 A
1.2

1.3

1.4

1.5

1.6

1.7

1.8

1.9

1.10

SECTION B 30 MARKS

Question Two
a) Explain the disadvantages of a firm developing relationships with suppliers based on
price alone.
(5 marks)
Supply chain suffers: Enlightened thinking suggests that it is preferable to work with suppliers to add
value to the supply chain so that the overall benefits that accrue can be shared amongst all the parties
involved.
Loss of quality: Quality may be compromised in a quest for the lowest price.
Adversarial: The relationship between a firm and its suppliers may become quite adversarial when
discussions are centred on price alone.
Loss of goodwill: The potential loyalty, cooperation and goodwill of suppliers may be sacrificed
through harsh negotiation of prices. This may result in an unwillingness of suppliers to cooperate

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when there are changes and rush orders, etc. in the future.
Jeopardised supply: Harsh price negotiations may also destabilise suppliers financially making them
more vulnerable to going out of business, so potentially jeopardising future supply.
Administrative expense: Focusing on the lowest price available might lead to a need to frequently
change supplier causing increased administrative effort and a lack of coherence in external dealings.
b) Explain the benefits of sustainable practices to an individual firm.
(5 marks)

Public relations: If publicised, sustainable practices can be a good source of public relations which
can help promote a firm, its brand and its products.
Cost effective: Sustainable practices discourage waste and so can be a means of containing or even
reducing costs.
Good CSR: Sustainable practices are ways of demonstrating social responsibility and so might form
part of a firms Corporate Social Responsibility (CSR) agenda.
Employee motivation: If the workforce feels positively towards an organisation because of its
sustainability practices, then it may be better motivated and potentially more productive.
Consistent with lean: Sustainable practices are consistent with, and may contribute to, a wider
programme of waste elimination and reduction developed under a lean management approach.

Employer branding: Sustainable practices may make an organisation appear more attractive to
potential employees. This may be significant where there is a 'war' amongst employers for scarce
talent.

c) Explain how a just-in-time (JIT) approach might contribute to the competitiveness of a


firm.
(5 marks)
The objective of JIT is to buy or produce products or components only when they are required, and not
so that they simply go into inventory. This thinking recognises that inventory holding can be expensive
and adds no value to operations.
A just- intime (JIT) approach might contribute towards the competitiveness of a firm in a number of
ways:
Improved cash flow: Under a JIT approach all inventory whether raw materials, work-in-progress or
finished goods is kept to a minimum. This means that cash flow is improved and a firms working capital
requirement is reduced.
Operating efficiency: JIT can act as a driver to greater efficiency as it relies on speedy production in
response to customer demands.
Changed philosophy: JIT production is triggered by demand for a finished product so each
component on a production line is only produced when it is needed. This represents a market 'pull'
philosophy (as opposed to 'pushing' products to customers) . This is consistent with the superior
marketing philosophy (unlike a product, production or sales philosophy).
Improved quality: JIT is an integral part of, and contributor to, most organisational quality

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management programmes.
Simplified operations: JIT produces reduced inventory and can lead to a reduction in the need for
elaborate systems, large warehouses and fears of inventory wastage, etc. This means that operations
can become less costly and complicated.
d) Describe the main alternatives to a Free Trade policy.
(5 marks)
By adopting a Free Trade policy a government would refrain from interfering in the operation of supply
and demand in the trade of goods and services. The underlying thinking of this policy is that it permits
trading partners to gain mutually through the natural operation of the market.
There are two main alternatives to this approach:
Protectionism is an economic model that represents the exact opposite of Free Trade. The policy is
defensive by nature and involves restricting international trade in order to protect local businesses and
jobs from foreign competition. Typical methods include import tariffs, quotas or paying subsidies to local
businesses. The justification for the policy may be that a government may believe that its industries may
be damaged by (possibly unfair) foreign competition. Protectionism can have short term benefits but in
the longer term can be unhealthy by allowing a countrys industries to remain less efficient and
uncompetitive globally.
Balanced trade is a further alternative whereby trade nations are required to operate a fairly even
reciprocal trade pattern so that large scale trade deficits can be avoided. This represents a
straightforward concept involving an equalisation of imports with exports so that trade and money
flows are broadly 'in balance'.
A further contemporary alternative is the social movement known as Fairtrade which aims to help
producers in developing countries. The movement advocates richer trading partners paying higher
prices to producers in developing countries in return for higher social and environmental standards
and the promotion of sustainability in those countries.

e) Illustrate FOUR different types of test that might be used by an organisation when
installing a new information system.
(5 marks)
Several different types of test might be used by an organisation as part of the process of installing a
new system. Four are illustrated below:
Realistic test: Here the system is presented with a realistic example of the environment in which it is to
operate, including a typical volume of work and transaction types.
Contrived test: Here the system is presented with as many unusual events as possible to see how
the system reacts to the unexpected, (such as incorrect codes, costs that are unrealistically high,
inappropriate commands, etc.).
Volume test: Here the system is presented with a large volume of transactions to see how the
system operates, copes and reacts during challenging periods.
Acceptance tests: System users operate the new system and provide feedback. This testing is
normally undertaken after all other systems testing is complete.
f)

There are risks associated with investing in another country, yet many companies
continue to do so. Explain why this might be so.

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(5 marks)
For investors, political risk can be defined as the risk of financial and other losses due to changes that
might occur in a countrys government or regulatory environment. For instance, the mere threat of
expropriation of assets by a foreign government can have a devastating effect on share prices. Acts of
war, terrorism, and military coups are all extreme examples of political risk. Other risks include exchange
rate risk, economic risk and transfer risk (the risk of capital being locked up or frozen by government
action). A company may choose to invest in another country despite such risks for a number of reasons.

Potential: The potential returns may appear to outweigh the risks involved.

Ease: Investing internationally can be a quick and effective way of boosting the performance of
a corporate portfolio.

Country concerned: Country risk varies from one country to another and investment in those
seen as having a low country risk (e.g. USA) might appear attractive.

Encouragement: Some governments may try to minimise the risk factors and give
reassurances and incentives in order to attract inward investment.

Protection: Insurances can help reduce volatility and risk while attempting to protect capital
and returns. Insurances can be relatively inexpensive and certain risks can be protected
against.

Reassurance: Other factors such as pressures for increased shareholder return, competitor
actions, professional advice from analysts and experts, etc. may be enough to encourage
foreign investment in spite of the risks.

SECTION C 50 MARKS

Question Three
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:
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a) Discuss the advantages for CR7 of organising and managing its IS activities
centrally.
(10 marks)

Requirement (a)
CR7s management team has decided to establish its own central IS department. There are several
advantages to this approach.
Expectations and past service levels
M013s central services were recognised as being good quality. In order not to disappoint CR7s IS users
at a time when they are adjusting to many other changes, the provision through a central department of a
quality IS service makes sense, so long as overall costs are contained (the service in the past was
apparently considered to be relatively expensive).
Concentration of IS skills
A central IS department represents a visible source of expertise and reference for the whole of CR7.
CR7 would be guaranteed a critical mass of specialist knowledge and understanding of technology and
systems on the market. This in-house knowledge would be invaluable when identifying the most
appropriate solutions for the fledgling business as it attempts to 'go it alone' following its departure from
M013.
It is unclear whether, under the terms of the buy-out, the company would 'inherit' existing IT equipment
and systems or not. If a major purchasing programme is necessary, equipment requirements could be
coordinated centrally by the IS department. This would reduce the possibility of acquiring inappropriate
hardware and systems and there would be an opportunity to negotiate lower prices through coordinated
bulk purchasing.
Employment of specialists
A central department would be able to afford to employ specialists in particular aspects of IS who could
act as a resource for the benefit of all ten of CR7s operating units. This expertise would not be available
if each of CR7s operating units made its own arrangements for IS, as the costs of employing specialists
would be prohibitive.
Focus on corporate goals
A central IS department should gain a mature understanding of the ethos of CR7 as a whole and have
a soundly based view of corporate priorities. In terms of future IS development, there would be a
clearer focus on CR7s overall goals and strategic needs. If the IS service were outsourced then the
service provider may have little interest in these considerations. Alternatively, if the service was
devolved there may be harmful departmentalism amongst the ten units and a lack of organisational
goal congruence.
More effective management of units
Responsibility for some central services such as cleaning services and grounds maintenance has been
devolved to CR7s units to organise for themselves. If IS services were also devolved then these units
would also be required to take on the problem of effectively managing IT and IS provision. By centralising
the IS function CR7 has freed its managers to concentrate on managing their units so enabling them to
better cope with the role to which they were appointed. (This might be seen as consistent with the
management philosophy of 'sticking to your knitting').
Offers future flexibility
By establishing a central IS department, CR7 is keeping its options open. If the newly formed department
proves to be ineffective or uneconomic then CR7 can either devolve services to units or outsource them
to specialist IS providers. Had CR7 decided to contract out the service then in future it would prove very
difficult to take it back in-house.
Foster a corporate identity

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The strategic perspective and neutrality of an in-house IS department is important in helping reinforce a
corporate identity at a time when CR7 may not yet have fully developed a cohesive paradigm and shared
cultural identity. The IS department would contribute more directly than an outsourced or devolved
service towards establishing a positive organisational culture by strengthening shared values and
goodwill.
Improved communication and reporting
Central services such as IS can offer greater cohesion and consistency of approach in issues such as
management reporting and collation of organisation-wide data.
Sharing of best practice
The strategic perspective and neutrality of a central IS department is important in developing a fair and
consistent approach to IS across the whole of the organisation. Such a department could also ensure
that there is a compatibility of systems and synergies of approach between units. The IS department
could act as a conduit for a rapid sharing of best practice amongst all of CR7s users and disseminate
knowledge whilst fostering a consistent execution of processes and practices.
Cost
A centrally managed IS department within CR7 may prove a cheaper option than either service outsourcing
(with its associated transaction costs) or devolving services (with its inherent duplication and diseconomies of
scale). If CR7s new IS department can maintain past standards of service and at the same time reduce
costs then CR7 will obtain good value for money in its operations.
Maintain jobs and morale
IS specialists displaced from M013 following the buy-out arrangements could easily be employed in a
central IS department within CR7 with a minimum of disruption. Such employment could contribute
towards preserving the psychological contract between the individual IS worker and the employer
organisation and help encourage a well motivated workforce.
b) Explain the main issues CR7's new HR department should take into account when
developing a pay structure.
(10 marks)

Requirement (b)
CR7 needs to develop a new pay structure for its workforce and the HR department would be ideally
positioned to develop such a structure but will need to take into account a number of factors.
Aims of the scheme
First and foremost the HR department should discuss certain principles with the buy-out team and
formulate a clear view of the aims of the pay structure that is to be designed and developed. Likely
aims might include:
fairness,
a source of motivation,
allowing retention of valued staff,
control of overall costs,
allowing the workforce to contribute to the success of the organisation,
predictability in determining overall costs and budgets.
These factors will inevitably form a 'touchstone' when determining the detail of the pay structure.
Levels of remuneration
In terms of levels of remuneration paid to employees account should be taken of the following:

Pay rates under M013. Past remuneration levels within the pay structure operated by M013
are significant. Staff transferring from M013 to the newly formed separate company of CR7 will

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already enjoy certain levels of pay and terms of conditions and therefore already have certain
expectations. If the new structure is less favourable than that previously experienced then this
may result in dissatisfaction and staff choosing to work for another organisation rather than
transferring into the new company.

Rates paid to outside contractors. As part of CR7s desire to adopt flexible employment
practices there will be a greater use of casual labour and contractors. If payments made for
these services that are off the payroll are greatly in excess of the remuneration levels of the
established workforce then again this could become a source of dissatisfaction and
demotivation.

Market rates. The HR department should take into account industry and competitor pay rates
when developing a new pay structure for CR7. Such external comparisons could be made
through a market rate survey. There would then be a need for the buy-out team to decide how
CR7s pay levels should relate to these rates (e.g. greater, the same or lower). If, for example,
CR7 were to decide on pay rates comparable to those paid by competitors in the industry then
the departments HR professionals could benchmark a series of jobs and plot a median trend to
establish a pay rate.

Pay differentials
A further issue CR7s new HR department should take into account when developing a pay structure is
that of pay differentials:

Differentials between worker categories. Many organisations have separate pay structures for
office and manual workers while others have further grades specifically for managers,
professional staff and trainees. (In many cases, top management may be left out of the main
structure altogether in favour of individual negotiation). CR7 needs to determine whether it wants
different pay spines according to the level or category of employee or whether it would be
preferable to operate a single unified pay structure. Given CR7s desire for flexibility then a single
pay structure capable of accommodating all types of staff from the shop floor to senior
management would seem most appropriate.

Differentials for job responsibility differences. Relativities of pay between jobs can be
methodically established through a process of systematic job evaluation. The main purpose of a
job evaluation is to achieve a ranking of pay between different jobs. The expertise of HR staff in
comparing dissimilar jobs (e.g. production manager, HR manager and sales manager) will be
crucial.

Accounting for task/functional flexibility


With a contemporary trend resulting in a blurring and erosion of traditional job demarcations (often
facilitated by IT developments) workers are now more likely to be required to be more flexible and
undertake a wider range of tasks. In addition, the significant reduction in staff numbers in many
organisations inevitably leads to individual workers undertaking a broader range of tasks. Given CR7s
desire to operate more flexibly, the HR function should develop a pay structure that accounts for these
flexible arrangements.
Incentive payments
The new pay structure for CR7s workforce needs to reflect rewards that encourage staff motivation and
lead to improved productivity. It seems only fair that those responsible for productivity gains should be
rewarded with extra remuneration paid for out of improved trading performance. Whilst acknowledging
that a workforce may be rewarded and motivated by non-financial rewards, the Taylorist philosophy
and so-called 'wage-effort bargain' still dominates with pay incentives offered in return for improved
performance. The main forms of incentive payments for the HR function to take into account when
developing a pay structure are summarised below:

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Performance-related pay and bonus payments. Where data can be easily measured and
attributed to an individual (e.g. sales made per sales person) then straightforwardly CR7 could
introduce individual, quantitative, performance-based rewards. Where a high degree of team
working dominates, group incentive structures are more appropriate but these can be
problematic where there is 'free-riding' (shirking or skiving) by individuals.

Profit-related pay. Profit-related pay attempts to produce a sense of generic ownership and
commitment by a workforce as a whole. Difficulties can arise however not only with 'free-riders'
but also with the possible complication of tax implications particularly where share option
schemes are introduced.

Incremental progression and pay awards


Pay spines consist of a series of incremental points extending from the lowest to the highest paid jobs
covered by the structure. These spines allow pay progression to take place, independent of cost of living
pay rises. Decisions need to be made as to how or if individuals progress in these spines (e.g. by
satisfactory completion of an annual appraisal).
Total reward package
A total reward package approach involves gathering together all benefits an employer offers the
workforce. The concept underpinning a total reward package is that money is not the only motivator and
that employees, and prospective employees and other stakeholders might find the organisation more
attractive if all rewards are packaged together in this way. The package will extend basic pay to include a
full range of organisational compensation and benefits. CR7s HR department could consider what
benefits beyond pay are currently offered or will be offered in the future (e.g. a pension scheme, staff
discounts on CR7 products, flexi-time, subsidised canteen, etc.) and then gather these together so that
they are visible to existing and prospective employees.

c) Explain how flexible employment practices might contribute to the future success of
CR7.
(5 marks)

Requirement (c)
CR7 currently employs 250 people but has not replaced any workers that have left over the past six
months. The buy-out team believes the new company can operate profitably but wants to introduce
flexible employment practices such as using casual labour and contractors.
CR7s workforce would take on an operating model involving a combination of permanent and casual
labour. Charles Handy famously depicted such an organisation as a shamrock comprising a threefold
workforce of core workers (who possess key and scarce skills and enjoy relatively high status), periphery
workers (temporary or part-time workers) and a contractual fringe. Alternatively, workforce flexibility was
defined by Atkinson in terms of:

Task or functional flexibility both horizontally by undertaking a broader range of tasks at the
same level, and vertically when undertaking tasks that were previously carried out by others at
different levels.

Numerical flexibility through temporary, part-time and short-term contract working and the use of
sub-contractors and agency staff as a means of responding to demand fluctuations.

Financial flexibility based upon fewer flat rate wage payments in favour of payments for
completed tasks.

Its people are the companys most valuable resource and a new look workforce might contribute to the

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future success of CR7 in a number of ways.


Reduced operating costs
CR7 would experience lower payroll costs through operating smaller core fixed staffing levels. This
would allow the company to compete more effectively particularly internationally where markets are
potentially attractive but where competitors often aggressively drive wage costs down.
More efficient utilisation of premises and equipment
Flexible employment practices might lead to a reduced requirement for office space and lower
operating costs for CR7. So-called 'hot desking', shared computers and a pooling of equipment and
vehicles would be more easily achieved with casual workers, flexi-time, different shift patterns being
operated and home working, etc.
Organisational flexibility
If flexible employment practices are adopted it could be a stimulus to shaping a positive, adaptable
organisational culture. Periphery workers with temporary or part-time contracts could more easily act as
a buffer against changes in demand. A reliable contractual fringe could lead to improved adaptability
and proactive behaviour when faced with unexpected opportunities and challenges. In short, flexible
employment practices would allow CR7 the necessary freedom to adapt, innovate, diversify and
ultimately compete more effectively.
Improved control
There will be a feeling of greater control of labour processes and costs because reduced staffing levels
mean that budgets and costs can be more easily controlled. Decisions to 'infill' during busy periods
with casual labour can be made as and when the situation arises, possibly by using payments based
on day rates or spot rates (a set rate for a particular task).

Question Four
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:
a) Explain the reasons for the new Chief Executive attaching such importance to H345's brand.
(10 marks)

Requirement (a)
The Chief Executive attaches importance to H345s brand for a number of valid reasons.
Brand equity is linked to financial performance
The brand is an important driver of business value and success. Branded products command a higher
price than unbranded goods, even if product features are similar. It follows that the stronger the brand,
the better the opportunity to price products more highly than competitors. This potential additional

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revenue that can be generated because of a brand is known as brand equity or brand value. Although
brand equity is difficult to quantify precisely and there are no universally accepted ways to measure it, this
does not detract from its significance. H345s Chief Executive is convinced that the company has taken
its brand (and hence brand equity) for granted. H345s fortunes are tied to its brand because the brand
equity associated with it contributes directly to profit margins and market share. It can also influence
share performance; hence the importance of H345s brand.
Brands represent a company asset
H345s brand is important because, as previously indicated customers are willing to pay more for
branded rather than unbranded clothing. Additionally, branded products are less price sensitive in the
face of competitor actions such as price cuts. Although intangible, brands can be of substantial value.
Brands for a retail company such as H345 can therefore represent one of its most worthwhile and
important assets. All assets require careful management and investment; the brand is no different. It may
be that H345 had failed in this respect during the past few years. Building customer awareness,
communicating a brand message and cultivating customer loyalty takes time and investment and H345
may need to sacrifice short-term profitability in order to achieve this.
Brands can breed customer loyalty
It is a truism that it is more effective to satisfy customers who will make repeat purchases rather than
have to constantly attract new customers. One marketing analyst has commented that H345 needs to
reconnect with its traditional customers. Traditional customers are therefore important because brand
loyalty means repeat sales and habitual buying. H345 will be hoping to win back customer loyalty and reestablish market share and its brand can play a big role.
Brands help indirect marketing of products
As mentioned earlier, a brand is important because it leads to customer loyalty. A benefit of customer
loyalty is that it can contribute to H345s indirect marketing of its products. Satisfied customers can act as
a source of promotion and influence others possibly through both personal recommendation and by
displaying logos on bags and clothes worn, etc. For H345, therefore, the importance of a strong brand is
a means of reducing the overall promotional budget.
Brands can act as an emotional conduit for customers
Brands can connect with customers in a deep emotional way. The H345 brand represents the linkage
between the product, what it stands for and the customers beliefs. Successful brands create special
relationships with customers because of their intangible qualities that provoke strong emotional
responses. Brands represent something of a bridge between the company and the market because their
appeal is often on irrational, emotional grounds.
Brands can be recreated to achieve a better position in a market
The position a company occupies in a market can best be altered by adjusting its brand. Brand repositioning
is normally in response to an original market maturing, declining or simply a change in consumers tastes.
Examples of repositioning include the periodic change of image of the long time successful pop star
Madonna and the reinvigoration of the Lucozade brand from a sweet medicinal drink to a well known sports
drink brand. If H345 concludes that its brand has become tired then it may consider repositioning as part of
its re-launch to achieve an improved position in the market.
Brands help differentiate H345s product from competitor products
A strong brand can distinguish the company from its competitors by making it easily recognisable.
Brands help communicate the essence of the company and its products and so help distinguish H345
from its competitors. If a basis of an organisations competitive strategy is to be distinctive then effective
brand management can contribute directly to competitive advantage.
Brands offer reassurance over the purchase
If the H345 brand appears to be in tune with a customers needs and wants then choice is simplified
when making a purchase of clothing. Any customer inevitably considers whether they made the 'right'
product choice or not following a purchase and a brand can help offer such a reassurance.

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Brands represent a source of communication


Brands can be invaluable where other marketing communication efforts may be lost in the 'noise' of
competing messages. As well as communicating the unique product characteristics, brands assist image
creation and vision projection. For instance, a brand might be built around the image of a lifestyle (if that
appeals to a target audience). The features of a brand might include a logo, a general image, look or
feel, which may seem to be of minor significance on their own but in combination could be a powerful
means of influencing customers. Brands are a convenient means of communicating to the market place
what an organisation stands for and what it offers. When customers have a level of familiarity with the
H345 name and its associated aspects such as symbols and strap line, then the brand has succeeded in
communicating with its customers.
Brand image is important to customers
The popularity of a brand is something of a barometer for the health of a company. Brand image is the
overall impression in customers minds and represents a unique blend of associations in the mind of
target customers. It signifies what the brand stands for and the set of beliefs captured by a specific brand.
Products that have a positive strong brand image enjoy a significant source of competitive advantage. It
seems that previously H345s brand has been built on several features of its operation including its high
street presence and (until recently) its perceived quality at an affordable price. Ensuring that H345 has a
positive brand image is crucial to the company reconnecting with its lost customers.
Brand is linked to product quality
The appeal of branded products is the perception that they are in some way 'superior'. This superiority is
invariably associated with quality and hence quality is a key ingredient of a good brand. Traditionally,
H345s brand has been built on factors such as quality at affordable prices. It may be that H345s
products have appeared to either decline in quality or have become too expensive (or both). If H345s
products need to be returned because they are defective or do not last very long then this will damage
H345s brand. Re-establishing the reputation of the companys brand will intrinsically be linked to an
examination of the quality of its products and a remedying of poor quality.

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)

Requirement (b)
The new Chief Executive has promised to implement a fundamental review of operations based upon
'sound marketing principles'. There are various aspects of H345s marketing operations that might
usefully be considered. Five are identified here.
H345s philosophy
One marketing analyst has commented that H345 needs to reconnect with its traditional customers. This
suggests that H345 has 'lost touch' with its customers; something that would never happen to an organisation
that had truly adopted a marketing philosophy. It may be that H345 is concentrating too much on selling,
instead of finding out what the customer wants and being marketing orientated. If this is the case, H345 is
trying to sell whatever items it happens to have in stock. Sales orientated organisations are so-called because
of their aggressive selling, advertising and sales promotions. But selling is not marketing. Marketing involves a
company attempting to supply what the customer wants rather than getting the customer to accept what is
supplied. In order to become customer led, H345 needs to adopt a marketing philosophy. This will involve
several key changes to the way it conducts its business; the first and most important is for the company to
focus on the needs of its customers.
Marketing cannot be left just to H345s marketing department. It requires all employees and stakeholders
to adopt the same marketing philosophy if H345 is to succeed. This customer- led focus should, in fact,
permeate every part of H345s operation through production, packaging and merchandising so that at all

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times the needs of the customer are kept in focus. This means, for instance, that H345s designers must
take note of customer opinions and seek to design clothing that meets their needs, wants and
preferences. Similarly, H345s suppliers need to recognise the need to sell clothing at a price the
customer can afford to pay.
There is an interconnection between a number of marketing processes. Market research leads to
segmentation and targeting of a segment or segments using an appropriate marketing mix.
H345s understanding of its customers and currency of its market research. Market research
involves a systematic gathering, recording and analysing of information about a market including
existing and potential customers. Market research might involve a number of collection methods
including (possibly web- based) desk based research, focus groups and surveys of some kind (e.g.
telephone, face to face, or postal), etc. Nowadays there is relatively easy access to information on
demographic, socio-economic and geographic location factors. The use of lifestyle, motives and
personality are also seen as important factors.
The implications of the case are that H345 no longer understands its customers and hence has 'lost
touch'. H345 needs to understand age, income, gender profiles and educational level of those in the
target market as well as their preferences for product features and their attitudes towards competitors
products. In order for H345 to identify the needs of potential customers and how these needs can be
satisfied there is likely to be a need for reliable market research. Although there will be costs associated
with market research these should be outweighed by the advantages derived from the wealth of
information gained. Only when these insights into customers are known can H345 confidently develop
and sell an appropriate range of clothing.
H345s approach to segmentation and targeting. Market segmentation is the process of dividing the
market into similar groups with common characteristics. Targeting involves a further stage whereby
choices are made over segments that will be aimed for. The way in which H345 currently segments its
market is therefore of some significance. Although there is no single best way of segmenting a market,
it is worthwhile considering whether H345 is catering for the most appropriate and fruitful segment(s) of
the market or not.
Some of the most common bases for segmenting the market for clothing include gender (males and
females wear different styles and items of clothing), age (it is common to see clothing displayed
separately for children, young teenagers, older teenagers, mature adults, etc.) and income.
Segmentation leads naturally to targeting (selecting the most lucrative market segments) and
developing a marketing 'mix' for aligning products to that target market (positioning).
H345s marketing mix. The basic 'marketing mix' of product, place, promotion and price explains the set
of marketing decisions that must be balanced to achieve maximum impact on a target market segment.
H345 will need to make use of the marketing mix to develop a blend that precisely matches the needs of
the potential customers in the target market. Clearly H345s fundamental review should consider the
appropriateness of existing marketing mixes for the segments targeted.
The aim of the mix is to satisfy consumers' needs and wants in a precise fashion. The basic marketing
mix matches needs through variables of product, place, promotion and price. Increasingly, 'people' are
becoming the fifth component particularly for organisations such as H345 and the extended marketing
mix can also include physical evidence. These components are called marketing mix decision variables
because a marketing manager must decide how to create and maintain a marketing mix that satisfies
consumers needs.
Marketing mix variables are often viewed as controllable because they can be changed by the
organisations themselves. For H345 however there are practical limits to the degree to which these
variables can be altered because changes in sizes, colours, shapes and designs of most tangible
goods like clothing are expensive. Nevertheless, in a world of rapidly changing fashion, there is a need

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to make changes quickly to meet changing customer needs, wants and attitudes.
H345s understanding of its performance relative to its competitors
A great potential for any company to exploit lies in meeting customer needs that have not been met by
the competition. It follows that market intelligence should include competitors products so that H345
knows exactly what is on offer in the market place and what 'gaps' (if any) exist for possible exploitation.
The new Chief Executive will want to be confident that H345 understands all its competitors in order to
align its marketing strategies accordingly. Recently however, H345 has dramatically lost market share to
new competitors and it may be that H345 knows its traditional competitors but has been 'blind sighted' by
these new entrants to the market. These new competitors may be competing on a different basis to
other players including H345. In order for H345 to understand its performance in context it will need to
understand its opposition through robust market research and systematic competitor benchmarking.
H345 can then use this kind of information as a basis for possible improvements to the design of its
products, customer service, and means of display, etc.

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)

Requirement (c)
The new Chief Executive is critical of the attitude and abilities of some of H345s workforce and has
promised to 'get the people issues right'. Several Human Resource (HR) activities could be
strengthened in order to overcome apparent difficulties and develop the abilities of its employees.
HR policies, systems and documentation
The absence of consistent, well thought out HR policies, systems and documentation can contribute to
failings in the control and direction of a workforce. Worthwhile job descriptions, person specifications
and a need for effective forms and records supporting appraisal and performance management
systems are obvious areas for H345 to review and strengthen.
Inappropriate workforce attitude and abilities might in part be a product of faulty recruitment and
selection activities.
Recruitment. The likely outcome of faulty recruitment is that the pool of potential candidates
from which H345 makes a choice may be unduly limited or fails to capture potentially worthwhile
candidates. A more robust recruitment policy would involve a clear focus on the experience and
qualifications required of a H345 employee and a clear view of where potential candidates might
best be made aware of job opportunities.

Selection. Rather than the failings in recruitment, the HR difficulty may instead be down to
faulty selection processes. Ineffective interviewing processes and/or technique, and/or a failure
to check references may be at the heart of the issue. The likely outcomes of a faulty selection
process include rejecting applicants who would have been suitable and employing people who
turn out to be unsuitable. This could contribute to an organisation under performing overall, as
is the case with H345.

Performance management
Performance management is vital when considering workforce productivity and goal congruence.
If performance management within H345 is deficient then this can lead to the difficulties identified
by the Chief Executive. Performance management includes effective target setting, performance
appraisal and policies to address poor performance and achieve corrective behaviour.
Training
H345 should ensure that its workforce is given appropriate training and support. If training is inadequate then it
can manifest itself in skills gaps and poorly motivated staff, which in turn can lead to poor customer care and

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concerns such as the type expressed by the new Chief Executive. Two specific examples are given below as
areas of training that might be strengthened in the future:

Customer care training. Employees, particularly in the retail outlets, can influence buyer behavior
either positively or negatively. This is particularly important for H345 because a critical influence on
customer choice is the type and quality of service that a customer receives. H345 should invest in
staff training so that those who deal directly with customers such as sales assistants can help foster
and strengthen customer loyalty. Helpful sales assistants engender trust and are able to make
recommendations to customers.

Internal marketing. All employees need to understand what the H345 brand means, its
associated values, what it stands for, etc. and, importantly, buy into this philosophy. H345 should
ensure that a re-launched brand is marketed 'internally' as well as externally so that the whole
organisation shares this common understanding.

E1 Enterprise Operations
November- 2013
SECTION A 20 MARKS

Question One
1.1
Loss of goodwill and the expense of product recalls are known as
which ONE of the following?
A
B
C
D

External failure costs


Costs of lean
Excess production costs
Transaction costs

1.2
The psychological contract is an important factor when considering
which ONE of the following?
A
B
C
D

Staff retention
Supply networks
Buyer behaviour
Corporate political activity

1.3
Assessment centres are associated with which ONE of the following
activities?
A
B
C
D

Staff selection
Career counselling
Focus group market research
Societal marketing
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1.4

Most supply chains involve which ONE of the following?

A
A number of different companies
B
An organisations infrastructure
C
After sales service
D
A strategic apex
1.5
Regular reporting on stockholding of products (inventory) is an
example of which level of organisational information?
A
B
C
D

Strategic
Tactical
Integrative
Techno-structural

1.6
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

1.7
Which ONE of the following features is NOT normally a result of
gaining ISO9000?
A
B
C
D

Improved marketing
Improved quality
Work rationalisation
Improved industrial relations

1.8
The quality management thinker Philip Crosby is most closely
associated with which ONE of the following ideas?
A
B
C
D

Fitness for purpose


The fishbone diagram
Zero defects
Business process re-engineering

1.9
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

1.10

Personal characteristics, qualifications and necessary experience


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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

The correct answers are:


1.1 A
1.2

1.3

1.4

1.5

1.6

1.7

1.8

1.9

1.10

SECTION B 30 MARKS
Question Two
a) Describe FIVE different improvements a manufacturing organisation might experience as a
result of introducing Total Productive Maintenance (TPM). (5 marks)
Total Productive Maintenance (TPM) plans and implements the systematic maintenance of all
equipment and as such might achieve a number of different improvements within a manufacturing
organisation.

Continuity: TPM should help consistent production so increasing productivity through


prevention of unplanned equipment breakdowns.

Improve quality: TPM should help achieve a 'right first time' quality approach, and may
reduce scrap and rework of goods (so lowering organisational costs of quality).

Forecasting: TPM improves accuracy of forecasting requirements by reducing unplanned


down-time.

Motivation: staff morale should improve as quality increases and worker frustrations over
unexpected breakdowns are reduced.

Improve asset life: regular maintenance should improve the effectiveness and life span of
equipment.

(Other responses might include: TPM should contribute to lean operations by reducing equipment-related
losses such as down-time and speed reduction, TPM could be used as a vehicle to involve all staff and
encourage a pride in the work of individuals).

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b) Describe the different organisational benefits of Information Systems (IS) and Information
Technology (IT).
(5 marks)

Organisations use IS and IT to:

Achieve cost reduction through the automation of previously labour intensive tasks.

Improve performance through time saving, 'smarter' working, the enhanced design of products
and the elimination of human errors, etc

Improve communication in terms of speed and efficiency of document transfer and


messages both within an organisation and externally to customers and suppliers, etc.

Improve customer service and sales through the use of technology to stay in touch with
customers, identify their needs more precisely and possibly respond to those needs through
better use of technology.

Improve forecasting through technology assisted analysis of historical data and trends, etc.

(Other responses might include: improve quality, engage in scenario planning, significantly change or
transform the organisation itself, improve budgeting and control, enhance marketing campaigns)
c) 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)
Responsiveness to reward systems: an individual workers productivity level will depend upon the
degree to which he or she is influenced by financial incentives and pay for performance rewards offered
by the organisation.
Training: a workers productivity will vary according to how much successful relevant training has
been undertaken in the past.
Work ethic: an individuals personal work ethic and attitude to the organisation, managers and work
mates will impact on productivity.
Days at work: total productive days worked and the degree of absence through ill-health, etc. will
over a period have a bearing on productivity levels.
Ability and experience: inevitably past experience and innate ability will lead to varying levels of
productivity between workers. For instance, some may work harder but be less productive than a
colleague who instinctively works in smarter ways.
(Other answers might include performance and motivation in response to non-financial rewards offered
by the organisation).
d) Distinguish quality circles from quality control inspection.
(5 marks)

Quality circles

Quality control

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Traditional association

Japanese production and TQM


methods

Western production methods often


when mass production is involved

Involvement

Collaborative effort of a team of


employees who perform similar
duties often in conjunction with
management

Inspection of work by a third party


(Quality Control officer or
inspector)

Emphasis

Allows idea sharing and problem


solving to improve production
methods or quality

Rejection of defects or deviations


from manufacturers or industry
specifications.

Basis

Any work-related issue

Possibly all or some sampling of


products and materials

Outcome

Contributes to on-going quality


assurance and improvement

Contributes to control of quality

Responsibility

The worker involved

Quality Control officer or inspector

Quality cost classification

Prevention

Appraisal

e) The ideas and principles established by the well-known theorist F.W. Taylor have
implications for both operations and management even today. Describe briefly FIVE of
these ideas and principles.
(5 marks)
Frederick Winslow Taylor was an American mechanical engineer who expressed his theories over a
hundred years ago. He is often celebrated as the father of the scientific management movement and
his suggested practices are now simply called 'Taylorism'. Taylor believed that the management
exercised in industrial settings of his day was amateurish and ineffective. The basis of Taylors
thinking was a desire to improve industrial efficiency.

Efficiency through partnership: the best results would come from the partnership between trained,
qualified managers and a cooperative and innovative workforce.
Taylor's scientific management methods consisted of four principles to improve industrial efficiency.
Scientific job analysis. Work methods should be based on a scientific study of the task and
not on rule-of-thumb judgments. In this way productivity increases might be achieved.

Scientific selection of a worker followed by a progressive development of the workers


abilities. Managers should scientifically select, train, and develop each employee rather than
appointing them and leaving them to decide on their own training.

Scientific methods should be established by managers who should then provide detailed
operating
instructions
to
each
worker.

Clear responsibilities. There should be a clear distinction between the role played by an
individual worker and a manager. Managers should apply scientific management principles
to planning work and workers should perform the tasks set.

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f)

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)
Systems review forms a stage in a systems development lifecycle and involves a review of the
effectiveness of an often new system. There are a number of areas that should be considered.

Needs met. Establishing whether the new system satisfies user needs. Making recommendations for
improvement if necessary.
System performance. Evaluating the actual performance of the new system compared with
anticipated performance. Making recommendations for improvements to the systems development
procedures if necessary.
Project implementation review. Ascertaining the quality of project management of the system
implementation (examine project costs, deadlines, activities, etc.) and recommending improvements to
future project planning procedures.
Budget. Comparing the actual spent on the new system to the established budget and identifying
reasons for differences.
Costs and benefits. Reviewing the original cost benefit analysis to ascertain if costs are in line and if
perceived benefits have been achieved. Suggesting any other changes that might improve processes in
the future.

SECTION C 50 MARKS

Question Three
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:
a) Explain the benefits of good corporate governance for both OK4u and IPP.

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(10 marks)

Requirement (a)
According to the Cadbury report, corporate governance is the system by which companies are directed
and controlled. During the last twenty years or so press coverage of high profile scandals similar to that
of IPP led to a public questioning of the effectiveness of company boards in monitoring the actions of
executive management. Following several influential reports many organisations of all kinds now adhere
to certain key principles of good corporate governance such as:

having a governing board of adequate size and competence,


promotion of ethical decision making,
independent verification of accounts,
disclosure of all material matters to shareholders,
sound risk management and internal control systems,
having remuneration reasonable in relation to responsibility and performance.

Poor corporate governance led to IPPs failings but good corporate governance would benefit any
organisation including OK4u in a number of ways.
Separation of duties
Unhealthily, and detrimentally to the company, AK acted as both IPPs Chairman and Chief Executive.
One of the main principles of the UK Corporate Governance Code includes a separation of Chairman and
CEO duties as part of a wider system of checks and balances within an organisation. It would appear that
few checks and balances operated within IPP. IPP would therefore benefit from a proper separation of
duties.
Potential for fraud
Fraudulent actions damage companies themselves, and outcomes of fraud impact negatively on both
employees (who fear job losses) and shareholders (who suffer a fall in the value of their investment).
There is a saying that 'absolute power corrupts absolutely' and too much unregulated power can lead
to abuses and potential for fraudulent actions - as clearly demonstrated in the IPP case. Good
corporate governance as described in the UK Corporate Governance Code offers a clear and
structured system whereby AK would be more accountable and the potential for fraud such as that
highlighted by the IPP case can be reduced and hopefully eliminated.
Leadership
Good leadership is crucial to the future success of all organisations including the companies in this case.
If the charges are proven then it appears that IPP suffered from corrupt leadership and the actions of AK
brought about a slump in company fortunes. Good corporate governance can improve company
leadership. It allows increased expertise to be brought to bear on strategic decision-making, through the
influence of non-executive directors (NEDs). NEDs offer a wider pool of knowledge and experience to the
board. This should lead to closer examination of strategies and hopefully an improvement in leadership
decision making.
Scrutiny over the actions of an individual
Good corporate governance ensures that there is proper scrutiny over the actions of individuals in
positions of power. Had non-executive directors (NEDs) and Audit committees operated in an effective
manner then AKs power may never have grown to the extent it did. The risk of a situation similar to
that experienced at IPP occurring in another company such as OK4u would be minimised through
effective systems centred on greater scrutiny and accountability for actions.
Alignment to stakeholder objectives
Good corporate governance would help ensure that the personal objectives of executive managers,
directors and the companys strategic objectives are brought into line with those of its stakeholders.
This point is apparently not lost on OK4u given the press statement confirming its commitment to serve

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rather than exploit stakeholders.


Framework for reviewing development risk
Good corporate governance can provide a mechanism to review many forms of risk. Potentially, it can,
through rigorous questioning, reasoning and justification provide a framework for reviewing and
assessing new projects, developments and investment proposals. As such, strategic decisions which
have a lasting impact on the future of an organisation can be properly considered. IPP and OK4u are
both diverse conglomerates so this point is particularly relevant for them. Future investment proposals in
different sectors and areas can be better considered under a good system of corporate governance.
Impetus to performance enhancement
A system of corporate governance that includes the operation of a remuneration committee (a principle of
the UK Corporate Governance Code) can ensure that there is an effective link between performance and
rewards. In this way an impetus will be offered to stimulate, encourage and enhance performance.
Remuneration committees would also help curb so-called unjustified fat cat salaries and bonuses which
can attract unfavourable publicity particularly at a time when economies are failing and standards of living
in society as a whole are falling.
Access to funding and capital markets
The Cadbury report recommends that a board of directors should use the AGM as a vehicle to have a
dialogue with its shareholders. Shareholder confidence is of critical importance. A loss of confidence was
reflected by a fall in IPPs share price since the fraud investigation which must have wiped millions of
dollars of value from the company. Good systems of corporate governance can reduce the perceived
level of risk and can instil confidence in external stakeholders- not least shareholders and funding
institutions. Only with this assurance can companies such as OK4u operate normally and access capital
markets, etc. to raise necessary finance in the future.
Improved stakeholder confidence
OK4us desire to distance itself from IPP, strengthen corporate governance and commitment to 'serve
rather than exploit' stakeholders is significant. The use of an independent management consultant and
the appointment of a new Director of Compliance and Ethics should, through effective communication
and good public relations activities, improve stakeholder confidence. Stakeholder groups such as
employees, customers, suppliers and partners in joint ventures are vital to the future success of any
company. (For instance a positive image of the company by potential and existing customers can
enhance the marketability of OK4us goods and services producing greater income).
Transparency and social accountability
Negative press speculation, financial scandals and protests by anti-capitalist groups can raise
uncomfortable questions about the operation of large businesses. Good corporate governance is
therefore vital in terms of transparency and social accountability. OK4us positive actions and
commitment can help avoid negative publicity and potentially even foster political support for the
organisation at a time of heightened scrutiny.
b) Explain, using Hofstede's thinking on national culture, how cultural tolerance could have
allowed AK's power to grow.
(10 marks)

Requirement (b)
It is claimed that AKs power within IPP was allowed to grow partly because of a cultural tolerance
within the countries in which the company operated. Cross- cultural differences in peoples belief
systems and values inevitably impacts on attitudes to work, authority and equality, etc. The importance
of national culture for the operation of a Multi-National Enterprise (MNE) such as IPP is therefore most
relevant.
Geert Hofstedes work can potentially help explain the importance of national culture for the operation of

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large firms such as IPP when operating over a number of different countries. Hofstede first researched
the role of national culture within a single large organisation (IBM) in a study of thousands of their
managers. He identified a framework of dimensions which he argued largely accounted for cross-cultural
differences in peoples belief systems and values. His initial four dimensions are summarised below.

The uncertainty avoidance dimension measures the extent to which people tend to feel
threatened by uncertain, ambiguous, risky or undefined situations.

The measure of masculinity versus femininity. Highly masculine societies tend to provide
weaker people with less support. Society and organisations learn to admire the strong and
have a relatively negative view of the weak and dependent.

The level of individualism versus collectivism in a society hinges on the question as to whether
the individual is viewed as the basis of society or whether society gives meaning to the
individual.

The power-distance dimension measures the extent to which individuals tolerate an unequal
distribution of power in both organisations and society as a whole.

Later Hofstede added a fifth dimension, long versus short term orientation or Confucian dynamism. This
dimension describes the importance a society attaches to the future versus the past and present.
More recently, a further dimension of indulgence/restraint is sometimes referred to.
Uncertainty avoidance
The dimension of uncertainty avoidance captures a society's tolerance for uncertainty and ambiguity.
This reflects the extent to which a national culture influences its members to feel either comfortable or
uncomfortable in novel, surprising, or different situations. Uncertainty- avoiding cultures (such as Japan
and France) try to minimise the possibility of such situations by strict laws, rules, safety measures, etc.
Uncertainty-accepting cultures (such as Denmark and Sweden) are more tolerant of opinions different
from what they are used to and tend to have as few rules as possible.
In cultures where uncertainty avoidance is low there is more of an acceptance of an absence of rules and
regulations and an acceptance of exceptions to the norm. It is true that countries exhibiting low
uncertainty avoidance would be more accepting of the entrepreneurial ways of operating and autonomy
exercised by AK.
Masculinity (versus femininity)
Masculine cultures (such as Japan and USA) celebrate assertiveness while feminine cultures (such as
Denmark and Sweden) stress nurturing qualities. Women in feminine countries have the same modest,
caring values as men but in masculine societies women are much more assertive and competitive; but
not as much as the men!
If IPP operated in countries exhibiting a masculine culture there would be a likely acceptance of (even
approval for) AKs assertive ways of working.
Individualism (versus collectivism)
Collectivist societies (such as China, Pakistan and Taiwan) have individuals integrated into groups, such
as extended families which protect one another. Here conformity is generally considered the norm and
societys rights and responsibilities are dominant while individual needs are subservient. By comparison
individualist societies (such as USA) expect individuals to look after themselves and their immediate
family. In societies in which individualistic traits are most pronounced, differences are admired and the
cult of individuals prospers most.
If there is a high degree of individualism in society then self -reliance, autonomy and individual

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achievement is valued. In the case of IPP, AK is described as high profile, entrepreneurial, autonomous
individual and would be regarded as a high achiever. Certainly there would be a societal acceptance of
this position in countries where the individualism dimension is high- possibly even respect (until the fraud
investigation became public).
Power-distance
The power- distance dimension is the extent to which the less powerful members of organisations both
accept and expect that power is distributed unequally. In low power-distance societies, (such as
Denmark and Austria) members of organisations tend to feel equal and relatively close to each other at
work. As a consequence power is much more likely to be delegated and shared in low power-distance
cultures.
In high power-distance societies (such as France and India) superiors display their power and exercise
it in organisations. Subordinates expect this behaviour and feel uncomfortable if they do not personally
experience their superiors displaying their status and power. In these cultures, subordinates may feel
separated from one another, it is not easy to talk with higher-ranking individuals and real power tends to
be concentrated at the top.
AK exercised high levels of financial autonomy (he did not require another directors counter-signature to
sanction transactions). This is clearly an unhealthy situation and one that apparently led to thefts totalling
millions of dollars. The enormous power accumulated by AK, his autocratic decision making, and status
as both Chairman and Chief Executive of IPP would have been more readily accepted in countries where
society reflected a high power -distance dimension. The apparent lack of challenge for his actions from
within IPP may have been a product of the respect held for a person with such high ranking.
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)

Requirement (c)
The new Director of Compliance and Ethics wishes to establish a minimum professional standard
amongst OK4us managers. A number of lessons might be drawn from the CIMA Code of Ethics for
Professional Accountants. Following financial scandals and what has been seen as a growing crisis of
confidence in accounting ethics internationally, the CIMA Code of Ethics for Professional Accountants
was launched in 2006. The code reflects the standards CIMA expects of its members and students and is
aligned with global standards across the profession.
Clarity over fundamental principles
CIMAs Code offers clarity over what it sees as fundamental principles. The code itself is split into
three parts including Part A (General Applications of the Code) which offers an introduction and
makes clear the fundamental principles of integrity, objectivity, professional competence and due
care, confidentiality and professional behaviour.OK4u can learn that it needs to define its own
fundamental principles and make these explicit in the way that CIMA has.
Practical
The code provides a framework by which fundamental values can be put into practice in challenging
'real life' situations, where there may be more than one course of action which may have undesirable
consequences. In order to help a management accountant in his or her day-to-day role, CIMA identifies
common areas where ethical pressures may exist and the sort of pressures which might compromise
independent and sound decision-making. The Code is there to help the individual
analyse those situations and provide a recommended course of action. CIMAs Code is both practical
and relevant and OK4u should aim for the same.
Focus on personal responsibility
A feature of CIMAs Code of Ethics for Professional Accountants is a focus on personal responsibility. The

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code aims to identify the nature of the personal responsibility that the management accountant takes on as part
of the price for getting a reasonable salary and status. The same principle applies to OK4us managers: with
privilege comes certain responsibility of an ethical nature.

Comprehensive
The CIMA code is comprehensive to the extent that it recognises different working environments. There
are separate parts of the code recognising the differing working environments of professional
accountants (Part B deals with public practice and part C business). OK4u is a diverse conglomerate
and it is likely that managers will be involved in a range of different operating environments and ethical
challenges. OK4u may also reflect this when drawing up its own code.
Framework rather than a rule book
Rather than stipulating a set of rules, CIMAs code establishes a broad framework. Many observers
consider this approach to be more comprehensive than that of a system based on rules, because,
although rules can sometimes be circumvented, principles are always applicable. This is another area
that OK4u could learn from.
(An alternative approach to answering this sub-question might use as a framework CIMAs five principles
of integrity, objectivity, professional competence and due care, confidentiality and professional behavior.)

Question Four
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
customer-led. Describe the impact on RU2 of such a development. (10 marks)

Requirement (a)
RU2 recognises that as a company it is undergoing significant change and apparently is looking to
develop a more customer-led approach. If the company does succeed in becoming more customer-led
then it will exhibit a number of distinctive features.

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An adoption of the marketing concept


An organisation that is customer-led would need to adopt the marketing concept. This may involve
several key changes to the way in which it conducts its business. The most important requirement is for
RU2 to focus on the need of its customers. This shift in orientation will require RU2 to change the way it
defines and investigates its markets, prices its products and communicates with its customers. The
appointment of a new Marketing Manager to replace the outgoing Senior Sales Manager (possibly
heralding an emphasis away from sales to the wider notion of marketing) is a promising early sign.
Inclusion and involvement
Being customer- led and market orientated will involve a need to involve the whole organisation in the
marketing effort. The new Marketing Manager has already invited a number of senior colleagues across
the organisation to help contribute to the marketing planning process.
Emphasis on customer
When RU2s Senior Sales Manager retired last month he was replaced by a new Marketing Manager.
The suspicion that the company concentrates on selling, implies that it is not currently focused on
customer needs. Instead of finding out what the customer wants, RU2 may be trying to sell whatever
items it happens to have in stock. Sales orientated organisations are so-called because of their
aggressive selling, advertising and sales promotion. But selling is not marketing. As all the textbooks
make clear, marketing is about trying to get the company to supply what the customer wants rather than
getting the customer to accept what the company supplies.
Research-informed practice
Kotler and Armstrong (1994) interpret being customer-led as determining the needs and wants of
target markets and delivering satisfactions more effectively and efficiently than competitors do.
For RU2 to become more customer-led it should engage in research-informed practice. Good
market research should help identify the needs of potential customers and how these needs can be
satisfied. This research should also cover competitors products so that RU2 knows exactly what is
on offer in the market place and what gaps if any exist.
A shared understanding
Being customer-led, involves more than changes within the marketing department: it also involves the
adoption of a new way of thinking by the whole organisation. This will take effective communication and
an internal marketing effort. It is apparent from YYs comments that the Marketing Manager would do well
to concentrate on the basic job of selling that there is still some way for RU2 to go.
Equipping its people
The critical people in a customer-led organisation (that RU2 is aspiring to be) are the front line staff because
it is they who come into direct contact with the customer. Staff need to be trained to be responsive to
customer needs and to provide the best possible service and image for the company.
Sharing the same philosophy
More than representing a range of techniques marketing should instead be a shared business ethos.
Employees outside RU2s marketing department or sales force can play an important role in making the
company truly customer-led. The marketing concept is a philosophy that places customers central to all
organisational activities. This customer-led focus should, in fact, permeate every department through
production, packaging and merchandising so that the needs of the customer are kept in focus by all RU2
employees at all times.
Redefining the management role
In a company that adopts a marketing approach, it is the task of middle and senior managers to help front
line staff meet customer needs by providing necessary support and by removing obstacles. (The
replacement of many senior managers by younger managers with different ideas and approaches and the
establishment of the post of Marketing Manager are positive signs that RU2 could be moving in this

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direction).
Measurement orientated
Marketing is about getting close to customers and satisfying their needs with the right products at the
right price, in the right place, at the right time. Failure in this respect will involve a competitor succeeding
instead. A requirement for success therefore is to meet customer needs better than competitors. RU2
will need to measure itself against competitors by some kind of benchmarking system that compares
indicators on sales, return business and customer satisfaction, etc. with those of key rivals. RU2 can
then use this kind of information as a basis for possible improvements to the design of its products, its
manufacturing processes, customer service, etc.
An investment in systems and processes
Corporate investment in systems and processes that will support a customer-led approach will be
necessary. RU2 has already committed itself to the purchase of a Customer Relationship
Management (CRM) system which will help the company know its customers and use that
knowledge to serve them better. RU2 should also fund market research and staff training.
b)

Explain the benefits of developing a marketing plan for RU2.


(10 marks)

Requirement (b)
The new Marketing Manager is for the first time developing a comprehensive marketing plan for RU2. Despite
YYs criticism of this initiative there are a number of benefits for RU2 developing such a plan.

Support RU2s longer-term aspirations


A benefit of developing a robust marketing plan is that it can support the long-term strategies of RU2
whether centred on profit maximisation, market share growth, or growth in real terms. None of these
things can be achieved without satisfying customers - without customers there would be no business. If
the marketing plan helps the organisation become more customer-led then this will significantly enhance
RU2 achieving its corporate aspirations.
Adopting a strategic approach
The process of developing a plan for RU2 will encourage strategic thinking amongst those taking part.
Inevitably strategic issues will be debated and agreed upon, including importantly:

clear marketing goals and objectives,


subsequent measures and performance indicators, etc.,
the costing of the plan,
identification and costing of any capital requirements,
identification of strategic alternatives,
a detailed action plan-incorporating SMART (specific, measurable, achievable, realistic time
bound) targets.

The plan will also need to be realistic in terms of organisational capability and finance available. This will
for the first time lead to a strategic long term, and considered approach to marketing, taking place. When
specific goals have been defined, then strategic alternatives to the current position can be discussed, and
ways to achieve those alternatives can be chosen. The marketing plan can then be formalised with
specific actions identified.
Reduces the impact of change
Planning is complicated by factors such as the significance of the nature of the organisational
environment (whether stable and predictable or fast changing and unpredictable). Increasingly these
environments appear dynamic, volatile and complex implying shorter product lifecycles and
unpredictability in customer tastes. Planning helps reduce the impact of factors such as these by
considering these matters in a structured fashion. Developing a marketing strategy will be vital in

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helping RU2 manage when faced with changing circumstances in the future.
Provide direction
The plan will give direction to both RU2s managers and its workforce. When everyone in the organisation
understands where the organisation is going and what their individual contribution is then objectives can
be established and a clear sense of direction will be shared. This should prevent effort going into
unproductive activities. Far from being pointless (as YY contends), the plan will reduce misdirected effort
and rather than waste time will actually save time.
Provide a foundation for control
One benefit of RU2 developing a marketing plan would be to establish cost requirements, develop an
accurate budget and thereby lay a foundation for effective control and monitoring. The processes and
techniques used in monitoring, implementing and controlling a marketing plan are arguably more
important than the outcome - the plan itself.
With a greater emphasis being attached to measuring and monitoring performance more sophisticated
tools are being developed. This control information is helpful in both coping with volatile environments
and also ensuring greater internal accountability.
Informed decision making
The new Marketing Manger is for the first time developing a comprehensive marketing plan. As part of a
planning exercise a considerable amount of data, both internal and external, must be collected and
analysed. The plan will provide RU2 with a framework for research-informed, rather than 'ad hoc' decision
making.
Coordinate efforts company-wide
The plan itself will be developed in conjunction with individuals with responsibilities for different parts of
RU2. The involvement of this wider body of expertise and perspectives leads to a greater depth of
shared knowledge and understanding and hence will result in a more robust plan. It will also help
coordinate marketing with other aspects of the organisation and ground strategies within local realities.
As such the plan will provide RU2 with a mechanism to coordinate efforts company-wide. Decisions
made about marketing will impact on all other functional areas, for instance:

Finance: Cash flow implications, finance for marketing campaigns, etc.


Human Resourcing: Training requirements, specialist recruitment, etc.
Operations: Cost and volume implications of switching production, etc.

Establish a new ethos


RU2 wishes to develop a new ethos based more on a customer-led approach. The development of
a comprehensive marketing plan and the involvement of a number of senior colleagues across the
organisation should help contribute to the establishment of such an ethos.
Bringing together plan formulation and implementation
The involvement of RU2s managers in the planning process along with specialist marketers will offer
real benefits. It is likely that these individuals will need to implement the ultimate plan and will therefore
need to be committed to it. By involving them in this earlier stage this commitment should be ensured. In
this way the formulation of the plan will not be divorced from its implementation.
Motivation and team working
The inclusive nature of the planning process will offer RU2s managers an opportunity to share
responsibility and make a real contribution. This can act as a powerful source of motivation. In
addition the interaction of interdisciplinary teams working on a shared task can help break down
harmful departmentalism and foster cooperation and teamwork.

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c)

Identify the range of possible costs associated with a Customer Relationship


Management (CRM) system.

Requirement (c)
RU2s Managing Director has approved the purchase of a Customer Relationship Management (CRM)
system and this could help support the companys stated aim to become more customer-led. There has
however been some criticism of the purchase of the system by YY and it is true that the decision is not
cost neutral.
Software purchase
The cost of CRM will depend on what RU2 requires the system to do, what current off the shelf
packages there are on the market and their associated costs.
Associated costs
RU2 will also need to consider related costs such as new hardware required as a result of CRM, and
running costs associated with maintaining the new system. It is also conceivable that certain marketing,
sales and invoicing systems are computerised at the moment but may need scrapping. This will have
cost implications.
Cost of staff training and cost of disruption
New systems involve employees undergoing training in their use. This may involve the cost of hiring
external consultants and the cost of the participants time away from activities such as dealing with
customer enquiries. (It could be argued that this is a price well worth paying as it will help reorientation
of RU2 towards a customer-led philosophy).
Opportunity costs
When making a decision to implement CRM, RU2 will need to carefully consider the objectives of the
system and set out a clear specification for what is required, balanced against the budget available. What
is important is to articulate how CRM will support and add value to existing operations, specifically how to
help the company become customer-led and the costs involved. Inevitably, the provision of a budget for
CRM will represent an opportunity cost as there will be many other pressures and potential projects
competing for budgetary provision. (YY has for instance requested that some of the production machinery
be upgraded).
Adjustment of business processes to fit software
There may be a need to adjust existing business processes, work flows and responsibilities to fit the
software, including possibly production. This will need negotiation with, and cooperation of YY.
Cost of getting staff buy-in
The introduction of any new system will require time and effort. Communication with staff not just the
'how' of using the system but also 'why' introduce this system and 'what' the benefits are. Projects such
as this often involve implementation teams and individuals acting as project managers. The time
consumed by this important process may be hidden but will nevertheless be 'real'.
(Other costs might be identified such as cost of time to select the most appropriate software, time to
maintain data accuracy and time to order and input data).

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E1 Enterprise Operations
September- 2013
SECTION A 20 MARKS
Question One
1.1

A lean approach is associated with which ONE of the following?

A
B
C
D

Supply sourcing strategies


Demographic profiling
Employee selection criteria
Removal of waste

1.2 Which ONE of the following is NOT normally a barrier to international trade?
A
B
C
D

High levels of consumption tax


Subsidies for domestic (home) producers
Customs duties
Embargoes

1.3

Under a free market economy prices are determined by which ONE of the following?

A
B
C
D

The stock market


Government regulation
Multinationals
Supply and demand

1.4

Which ONE of the following is NOT a macroeconomic factor?

A
B
C
D

The relationship between price and demand in a particular market


Price inflation
Levels of savings and investment
Unemployment amongst young people

1.5
Under an ABC inventory management system which ONE of the following items
should be monitored most closely?
A
B
C
D

'A' classified items


'B' classified items
'C' classified items
All items equally

1.6
Which ONE of the following characteristics is NOT normally associated with a NonGovernmental Organisation (NGO)?
A
Furthering humanitarian causes
B
Championing social causes
C
Making profits
D
Exercising independence

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1.7

When government regulation and restriction is absent the effect is

A
B
C
D

protectionism.
economic nationalism.
liberalisation.
a mixed economy.

1.8
Mintzberg's design of an effective organisation does NOT include which ONE of the
following categories?
A
B
C
D

Technostructure
Outsource partners
Operating core
Strategic apex

1.9

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

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

Answer to Question One


1.1 D
1.2

1.3

1.4

1.5

1.6

1.7

1.8

1.9

1.10

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SECTION B 30 MARKS
Question Two
a) Describe FIVE types of loss that a company may face when investing in another country
unless the risks are managed.
(5 marks)
There are several types of loss that a company may face when investing in another country unless the
risks are managed.

Loss of profit is a risk that may arise from a variety of reasons such as disruption of trade,
increased taxation, financial penalties and new regulations that restrict operating freedom (e.g.
workforce hiring policies, product manufacturing requirements, etc.).

Loss of assets. There is a risk of expropriation of assets by a new or reactionary


government with little or no compensation or the passing of indigenisation laws which
require that national citizens to hold a majority share in all enterprises operating in that
country.

Loss of contracts. There is a risk of cancellation or revision of previously negotiated


contracts.

Loss of property. There is a risk of damage to property from terrorism, riots, civil unrest, etc.

Loss of personnel. If there is a similar risk of damage to personnel from terrorism or riots, etc. key
ex-pat staff may resign and there may be difficulty in recruiting replacements.

(Other examples include loss of financial freedom such as the ability to repatriate profits to the
home country, and loss of intellectual property rights etc.)

b) Distinguish a wide area network (WAN) from a local area network (LAN) providing an
example of each.
(5 marks)
A network is where a number of computers and other devices are linked in such a way that one can
communicate with any other so enabling resource sharing between a number of users.
Local Area Network
A Local Area Network (LAN) involves linking computers within the same local site. LANs are typically
owned, controlled, and managed by a single organisation over a small geographic area e.g. an office, a
university, or a group of buildings.
Wide Area Network
A Wide Area Network (WAN) involves linking computers in different organisations over widely
distributed geographical sites. WANs cover a broad area and are not owned by any single
organisation; instead they exist under collective or distributed ownership and management. The
Internet is a good example of a WAN.
c) Explain the relationship between system implementation and a systems development life
cycle (SDLC).
(5 marks)
System implementation represents a stage or phase in a fuller cycle of systems development. This
can be viewed as a serial process, whereby each stage produces an output which in turn becomes the
input for the next stage forming a systems development life cycle (SDLC). Some models depict the SDLC
in terms of five stages (analysis, design, implementation, testing and evaluation) . The SDLC is a

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process of creating or altering information systems, and involves the participation of users and managers
throughout.
The implementation stage of the SDLC is initiated after the system has been accepted by users. This
phase continues until the system is operating in accordance with the previously defined user
requirements and includes data transfer, on- going staff training and minor changes to perfect the
system. While all of the planning stages that take place in preparation for the implementation phase are
vitally important, successful implementation is critical.

d) Describe the potential disadvantages of introducing Just-In-Time (JIT) operations within a


manufacturing organisation.
(5 marks)
The objective of JIT is to buy or produce products or components only when they are required, and not
so that they simply go into stock and effectively become buffer stock. The disadvantages of the
requirement to carry no buffer stock under a JIT system include:

Over reliance on suppliers. JIT is based on the assumption that a firms suppliers are reliable
and competent. Manufacturing operations are, however, vulnerable to unexpected disruptions in
the supply chain because by carrying no buffer stocks, a minor disruption from one supplier
could force production lines to cease.

Vulnerability to outside factors. An organisation operating JIT would also become more
vulnerable to external factors such as natural disasters and adverse weather conditions, etc.
potentially resulting in a loss of supply and transport delays, etc. (A buffer stock could offer
some insurance against these factors 'just in case').

Staff and system readiness. JIT offers little or no room for human or systems error as there is
no buffer stock and consequent fall-back position. If systems are unreliable or methods of
working prone to mistakes then these matters need to be addressed before a move to JIT is
considered.

Additional investment. JIT may require an additional investment in machines and their
tooling to ensure both zero defects and also quick changeovers.

In addition:

Disruption. Implementing a JIT procedure within the organisation may be difficult and
expensive as it can involve a major overhaul of existing business systems and working
practices.

Cultural upheaval. JIT would require a cultural upheaval within the organisation and a revised
operating philosophy. This change may meet with resistance from staff who may have ingrained
methods of thinking and working.

e) Explain FIVE ways in which advances in technology have allowed international trade to
expand.
(5 marks)
Some of the major technological developments that have allowed international trade to expand
include those given below:

Electronic transfer of funds. Technology has assisted the improvement of financial


systems and these have been important in developing international trade by enabling an

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immediate and safe transfer of funds from the buyer to the seller worldwide.

Improved communication. Advances in communication technology (e.g. email, Skype,


conference calls, video-conferencing, etc.) have contributed greatly to the development of
international trade as it is possible for businesses to communicate with each other
instantaneously and meet regularly, despite living and working in different parts of the world.

Technology assisted mass production methods. The development through technology of


industrial production processes has enabled mass production methods and a lowering of unit
costs to take place. This means that industries are able to satisfy home markets and still have
capacity to look towards supplying international markets.

Technological improvements to transportation systems. Transportation systems, including


rail, shipping and air travel have seen technological improvements and goods can now be
moved relatively easily and quickly from where they have been produced to the place where
they are consumed.

Improved storage and logistics. Technology enabled improvements have improved logistics
and storage considerably. For example, it is now possible to track the progress of orders online also the introduction of cold storage facilities and handling has made the exchange of
perishable goods possible.

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)
Kotter and Schlesinger identified six main strategies to overcome resistance in the workplace:

education and communication,


participation and involvement,
facilitation and support,
negotiation and agreement,
manipulation and co-optation,
explicit and/or implicit coercion.

The first four are all likely to take time, whereas the final two methods (whilst raising ethical and
legal problems) have the advantage of speed.
Manipulation and co-optation. Manipulation relies on presenting partial or misleading information to
those resisting the implementation of a new information system. Although this represents a quick and
inexpensive approach, future problems will arise if the people involved realise they have been
manipulated. Co-optation involves identifying key individuals resisting the changes and buying them off
by giving them positions of authority to help implement the new information system. This may be
considered by many to be unethical.
Explicit and implicit coercion involves the use of force, or the threat of it, to bring about compliance.
Management may consider this strategy to be necessary as a very last resort if the parties involved are

operating from fixed positions and there are fundamental disagreements over objectives and/or
methods. Again many may consider such practices to be unethical, in some countries such practices
could also be challenged in law.
(Note that alternative frameworks exist including McElroy and Cleland who suggest fast change might
be achieved through reward, procedure change and organisational restructuring).

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SECTION C 50 MARKS
Question Three
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)

Requirement (a)
It is apparent from the Universitys investigation of performance appraisal systems that a significant
number of organisations choose not to operate such a system (as many as 50% in the retail sector).
The reason appears to be the belief that the potential benefits of a formal system do not justify the time
and cost involved. However, for a large organisation a number of potential benefits arise from such a
system and these are described below.
Assist performance management
A good appraisal system would assist performance management across an organisation. Appraisal of
performance is a vital part of the HR cycle and performance appraisal systems provide a convenient
systematic method of linking overall corporate objectives to actual levels of performance. The approach
also offers an opportunity to identify possible reasons for unusual performance, particularly where there is
apparent 'underperformance'.
Provide individual workers with necessary feedback
Individuals need to be reassured that their past efforts have been worthwhile and are recognised by

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management. Individuals also need to know that their planned future activities meet with the satisfaction
of their superiors. The activity associated with a staff performance appraisal system can contribute to
the success of an organisation by providing such feedback and reassurance.
Identify training needs and maximisation of budget
A performance appraisal system could help provide a foundation for structured education,
development and training for the workforce as a whole. The system could contribute towards:

developing the abilities of employees by identifying training needs that support technical,
professional and management development;
maximising the effectiveness of an organisations training and development budget;
monitoring the effectiveness and results of past staff development activities.

Source of motivation
The Universitys findings suggest that there is little relationship between levels of motivation and the
existence of a staff performance appraisal system. Other research suggests however, that an effective
system of staff performance appraisal could, if properly administered, be a source of staff motivation.
(The professional management body apparently believes this to be the case, hence the project). If the
system offers an opportunity for staff to be listened to and helps foster an open, healthy atmosphere then
it can only be beneficial.
A system for rewarding employees
Only 15% of organisations surveyed used outcomes from the process to help determine pay yet this
represents a tantalising possibility. Increasingly organisations are trying to relate pay to performance
(rather than status). The performance appraisal system could also enable the achievement of rewards
other than pay such as promotion, opportunities for development, job enrichment and secondments, etc.
Focus on objectives
Central to performance appraisal is a dominant focus on objectives that:

help achieve important organisational and individual objectives;


provide a mechanism to set individual objectives for the next period;
check attainment against existing targets.

A good performance appraisal system should also improve the opportunities for employees to
contribute to organisational goals and objectives in a recognised fashion, A system of 'management by
objectives' (MBO) is helpful in establishing a hierarchy of objectives so that individuals can recognise
their own role within the wider organisational context. Objectives which can be set as part of appraisal
involves agreement using SMART objectives (specific and challenging, measurable, but achievable,
relevant and realistic and time-bound).
'Talent spotting'
It is sometimes healthy for a large organisation to experience some degree of staff turnover. However,
this should be balanced against the need for continuity and retention of its most valued workers. A
performance appraisal system could be a systematic and thorough means of identifying particular
individuals for advancement, so allowing a degree of succession planning and reducing the loss of a
companys most talented workers.
Develop relationships
A formalised system can help develop the relationship between a line manager and an individual
subordinate by providing an agenda for discussion in a way that would not normally be possible.
Benefits to individuals
There are several benefits of a formal annual meeting for an individual employee. The annual interview
can, for instance, provide an opportunity for genuine two-way discussion and feedback on

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individual objectives and progress;


career and promotion prospects;
training needs and opportunities.

The meeting also offers an opportunity to formally voice concerns and forces individuals to reflect on
both existing and past practice.
(Other benefits might reasonably be given including re-assigning staff to roles that are more suited to their
strengths and interests, etc.)
b) Explain the possible reasons for employees being critical of their own
organisation's system of formal staff performance appraisal.
(10 marks)

Requirement (b)
As explained in response to sub question (a) there are many potential benefits of a formal staff performance
appraisal system for a large organisation. Employees in the research project however were critical of their
own organisations system and there are a number of possible reasons for this.

System feature: system is dated


Systems require periodic review in order to ensure that they are still robust and relevant. Whilst a system
may originally have been fit for purpose it may now fail to reflect current organisational needs, and staff
will be critical as a result.
System feature: Poor system design
A system may have a poor reputation amongst employees because it has been poorly designed. If there
is an over-reliance on standardised procedures and paperwork then the system may seem too restrictive
and unduly bureaucratic. Conversely, ill-defined processes and a lack of standardisation of paperwork
may mean that the system operates haphazardly. Individual performance assessments should be
supported by rational performance criteria (including performance indicators and measurable outcomes)
. Poor system design can allow undue levels of subjectivity which may undermine the scheme as a
whole and render it unfair and ineffective.
System feature: Organisational 'fit'
It is also important that the nature of the system is 'right' for the organisation concerned. For instance, a
180 degree feedback scheme is better suited to an organisation that has a high degree of project team
working or a matrix structure. If the organisation has an open, reflective organisational culture then 360
degree feedback might be even more appropriate.
System operation: faulty implementation
One reason for employees being critical of their own organisations system of formal performance
appraisal may be because of the way it operates rather than the features of the system itself. A failure to
follow established procedure or lacklustre enthusiasm for the scheme can prove detrimental. If the
scheme was introduced some time ago then employees joining an organisation after this date will miss
out on the initial training that was given when the scheme was introduced and this may mean that they
are not operating the system properly.
Lack of support by senior management
If the system is not taken seriously by managers then employees will also have little commitment to the
scheme. Under these circumstances the system will be treated as a chore, a form of 'paper exercise'
that is an unwelcome distraction from the 'real job'. For any scheme to work effectively it must be taken
seriously by all parties with appropriate commitment to conducting formal appraisal interviews properly
and completing all the necessary paperwork.

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Lack of address of identified needs


For a system to be regarded as meaningful by a workforce, it requires an organisation to commit
appropriate effort and resources to address the outcomes of the process. For instance, where training
needs are identified a budgetary provision should be made. Similarly, it is unhelpful to formally note
impediments to effective performance without attempting to address these matters.
Promotion policy ignores scheme outcomes
Decisions over staff promotions may be made without taking account of past performance. This would be
very frustrating for an employee with a solid record of achievement evidenced by appraisal
documentation being overlooked for promotion and would undermine the scheme as a whole.
Inadequate rewards attached
Only 15% of organisations surveyed used outcomes from the process to help determine pay, yet this
represents a tantalising possibility. The performance appraisal system could also enable the achievement
of rewards other than pay such as promotion, opportunities for development, job enrichment and
secondments, etc. Divorcing rewards from the formal performance appraisal system may mean that the
system lacks the necessary incentives to make it successful and well regarded by staff.
Adequacy of communication and training
Communication and training systems should explain the purpose of the system to the workforce as well
as outlining ways to conduct appraisal interviews effectively. The organisations surveyed by the
University may not have given sufficient attention to these issues and this is reflected in the
dissatisfaction of the workforce that is expressed.
Ineffective appraiser technique and lack of planning
It is desirable that the system is participative and enables those being appraised to have a meaningful
input. Poorly conducted appraisal interviews may frustrate this taking place. Insufficient training,
nervousness, a lack of organisation or time may lead to poor appraisal interviews and negative staff
experiences. Careful planning should be a feature of the scheme and it may be that either or both parties
have failed to plan properly for the appraisal interview.
Inappropriate choice of appraiser and timing of appraisal meetings
Employees may be critical of the way in which performance appraisal is operated within their own
organisation for two reasons that are contained in the research findings.

Line managers invariably act as appraisers. Managers can misuse the time available in appraisal
interviews by 'saving' bad news rather than addressing issues when they occur. A more
developmental approach may be to have appraisals conducted by someone at the next tier of
management in preference to line managers.

Formal interviews tend to be annual. This means that vital dialogue and on-going
measurement of progress towards objectives may be missed.

Inappropriate target setting


A system may be disliked by staff if performance targets are unrealistically demanding or beyond their
individual influence. Otleys (1987) research into managers in the budget-setting process indicated that
where objectives have been set inappropriately, motivation and performance can fall off dramatically once
targets are 'missed'.
(Other factors might reasonably be given including delay between appraisal meeting and receipt of
feedback, time involved in the process, etc.)

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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)

Requirement (c)
The research reported in the scenario has indicated that motivation is more closely related to the
existence of environmental and sustainability initiatives than to the existence of a performance appraisal
system within an organisation. Action on sustainability and the environment are long term commitments
involving an organisation in series of programmes, practices and policies which appear (from this
research) to be important to its workforce. There are several reasons for this.
Giving employees a voice
Employees are likely to have many valuable ideas to contribute. If they are listened to then they will feel
they are doing something tangible to further these agendas and this may provide a powerful source of
motivation. Top management can be a little divorced from the 'action' whereas an organisations
workforce is closest to daily practices that can be improved upon to achieve environmental and
sustainability agendas. By way of example, the greatest energy efficiency savings and performance
improvements can come from focusing on the operation of an office building, warehouse, or
manufacturing facility. This is where workers can make a contribution through close monitoring of
temperature levels and questioning the need for lights to be lit and equipment to be left on stand-by.
Employer branding and enhancement of job content
Environmental action and sustainability programmes within an organisation may be well received by
employees if they are given a role to play. According to Hackman and Oldhams job characteristics
model, high levels of satisfaction and motivation follow critical psychological states of 'experienced
meaningfulness of work', experienced responsibility, and knowledge of the results of their activities. All
three states might be enhanced through participation in organisational environmental and sustainability
initiatives.
Job security through organisational stability
Practices associated with sustainability include improved energy and water consumption and waste
reduction, etc. Such practices can also ultimately lead to a lowering of operating costs. Sustainable
practices will also offer opportunities to enter new markets and appeal to a different customer range, so
increasing sales. In short, these programmes should provide a platform for organisational stability and
success and so provide some reassurance of job security to individual employees, hence the levels of
satisfaction that are evident.
Employee pride in the organisation they work for
There are many ways in which an organisation can tangibly demonstrate its social responsibility. For
example, if it takes the trouble to measure its total carbon footprint this will allow it to take effective
actions towards reducing the climate change impact of the business and its supply network. If actions
such as these strike a chord with the personal values and beliefs of employees then this will instil them
with a pride in the organisation they work for and will be better motivated.
Develop a positive culture
At the heart of an organisational culture is a shared paradigm. If environmental concerns and
awareness of a need for sustainable practice are dominant features of organisational life and a
shared world view this can help shape a positive organisational culture. A positive organisational
culture and meaningful corporate agendas are likely to be valued by employees.

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Question Four
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)

Requirement (a)
The key features of Repvilles draft strategy is a doubling of revenues within five years but some
managers fear that growth this rapid may damage its brand.
Brands and brand damage
Repvilles brand reputation is centred on key features of quality, flavour exclusivity and tradition and this
represents a significant organisational asset. If these features are jeopardised as part of initiatives for
increasing revenues then the whole business will suffer. A number of possibilities are discussed here for
Repville to increase revenues but the implications of each in terms of the brand will need to be carefully
considered.
Improving revenues from the existing markets
A company can concentrate on increasing revenues in a market in which it currently operates. The
company will attempt to generate greater income but will remain in the market it knows best; the one it
currently operates in. For Repville this appears to be a feasible approach and with careful handling the
companys brand reputation could be preserved. Repville is currently well respected for serving a niche
market nationally but greater revenues might be generated by:

attracting customers from other competitors (and consequently gaining part of its rivals
market share);
attracting non product users to Repvilles products;

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convincing current customers to buy Repvilles products more frequently;


increasing prices of existing products.

The size of Repvilles market share and overall market size will determine whether this strategy will be
sufficient in itself to double revenues within a five year period.
Improving revenues by introducing new flavoured products to existing markets
A company may concentrate on a market in which it currently operates with a view to increasing revenues
by introducing new products. Repvilles current product range is sourced from the regions entire fruit
harvest. Further flavoured jams and marmalades or pickles and sauces could also be introduced but this
would mean sourcing fruit from another region (or country) which may compromise the quality and flavour
of its products and so damage its brand.
Improving revenues by introducing entirely new products to existing markets
When a company such as Repville uses the strength of its brand name to extend its product range (e.g.
selling Repville cakes) the new product represents a spin-off. The strength of the Repville brand
means that customers are likely to try new products in a way they might not for a company with lower or
no brand recognition. The downside is that Repville has no expertise in producing anything other than
preserves so this is a high risk strategy and the reputation of the brand could be compromised if this
venture is unsuccessful.
Improving revenues from new markets
A company may concentrate on offering its current portfolio of products to a new market and additional
sales revenue will be generated from new customers. Repvilles choice of entry into a new market needs
to be made with great care as it will be competing against companies that already know and operate in
this market and so Repville will need to understand their competitive strategies. In addition, tastes and
preferences of customers in this new market may differ from those in existing markets. The company will
therefore also need to understand these new customers (possibly through market research) and may as
a consequence need to develop a new marketing mix.
Improving revenues from new markets through brand awareness
At the moment Repville sells its products through limited national outlets (such as delicatessens).
Clearly there is potential to sell more widely, possibly in foreign markets. In these markets however
there will be little or no brand awareness which will take time and an investment in a promotional
campaign to help overcome this situation. Even then Repville may not be able to command a very
high selling price. It is unlikely that Repvilles brand reputation in its existing market will be unduly
damaged by progressing this potentially difficult strategy.
Improving revenues from new markets through co-branding
When two companies cooperate to combine the strength of both brands this is known as co- branding.
(One example being the 'Intel Inside' campaign whereby heightened awareness of Intel was achieved
through co- branding with computer giants IBM and Compaq). This represents a potential means of
introducing one company's products to the loyalists of another and so could be a good way to enter new
markets and generate greater revenues. There are also risks involved to Repvilles brand if it makes a
poor choice of co-branding partner. Rogue actions by the partner could damage Repvilles brand
reputation.
Increasing revenues by making adjustments to Repvilles product mix
The main features of Repvilles product mix include quality, taste, packaging, product range (jams and
marmalades) and, significantly, brand. Repvilles brand with its associated brand name and packaging
conveys messages about quality, etc. In terms of product content the distinctive fruit flavour is important.
The product could be more cheaply produced by using lower cost (and quality) ingredients, lowering
production costs and selling price and so could make the products more accessible by making them
cheaper. Greater revenues may not follow however. Indeed these actions might seriously damage the

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Repville brand which would lose its aura of luxury and exclusivity.
Increasing revenues by making adjustments to Repvilles promotional mix
A key promotional tool for Repville is brand recognition which helps differentiate it from its
competitors. Greater spending on promotional activities that emphasise brand features could help
cement buyer loyalty and attract new customers without damaging the brand itself.
Increasing revenues by making adjustments to Repvilles place mix
The place mix covers arrangements for the movement of goods from production to consumption. An
effective place mix will result in getting the right products to the right places at the right time. Repvilles
products are presently sold in exclusive outlets and delicatessens but greater revenues might be
generated by getting products onto shelves of supermarket chains. So long as these outlets stock
'luxury' product lines extending the number of outlets need not hurt the brand. Another possibility is that
Repville acquires the expertise and moves into on-line selling. If handled with care this may generate
additional revenue for Repville without compromising its brand reputation.
Increasing revenues by making adjustments to Repvilles price mix
When a brand positively influences buying decisions it can be exploited within the price mix to command
higher prices. Repville differentiates its products from competitor products by using fruit from its home
region, hence the premium pricing. There is an argument that by lowering its selling price Repville would
attract greater sales revenues. In this case however, the price charged signifies a level of quality and
exclusivity that Repvilles customers are currently prepared to pay and price discounting could
conceivably damage Repvilles brand.
b) Explain the differences between Repville and XYZ in terms of marketing
considerations.
(10 marks)

Requirement (b)
The companys new Head of Strategy was previously with XYZ, an international producer of furniture.
One of Repvilles managers has bluntly pointed out that 'Consumer goods vary enormously by type.
Repville operates an entirely different marketing model in to XYZ..' In terms of marketing
considerations it is true that there are significant differences between Repville and XYZ.
Differences in type of consumer goods
Consumer goods can take the form of either durable goods or fast-moving consumer goods (FMCGs).
Consumer durable goods include cars, televisions, computers, household electronic appliances, furniture,
sports equipment and toys, etc. By contrast FMCGs refers to those nondurable retail goods that are
generally consumed immediately in one use or ones that have a lifespan of less than three years.
Examples include drinks, confectionery, toiletries, grocery items and cleaning products, etc.
XYZs furniture is an example of a durable good, whereas Repvilles fruit preserves represent fast-moving
consumer goods. Both XYZ and Repville serve entirely different consumer markets and this is reflected in
the particular emphasis each gives to marketing considerations.
Differences in reasons for purchase
There are differences in reasons for customers purchasing the goods produced by each company. The
decision to purchase high cost durable goods such as XYZs furniture and the frequency of repurchase
will be influenced by a number of factors including changing technical features, changes in fashion and
taste, or the old product wearing out. By comparison, FMCGs such as Repvilles fruit preserves are
purchased for personal reasons. Most households have a store of packaged food and cleaning
materials which may be 'topped up' as part of a regular (perhaps weekly) shop.
Differences in purchasing decision making
For FMCGs like jams and marmalades, decision making is generally uncomplicated and involves little

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risk. As relatively low financial outlays are involved, buys might be based on impulse or involve
'satisficing behaviour', (accepting the first solution that is good enough to satisfy a need, even if a better
solution may exist). For consumers loyal to a brand of a particular FMCG there may be habitual
purchasing patterns exhibited (possibly the case with Repville). Products with very strong brand loyalty
may also involve the customer shopping around until they find an outlet that stocks the branded good.
When purchasing a durable good such as XYZs household furniture, buyer behaviour is rather more
involved with a consumer likely to follow a rational five stages decision buying process:
Problem recognition: the consumer identifies the need or problem;
Information searching: the consumer may remember past purchasing experiences, talk with
others or actively research possibilities by shopping around either physically or on-line;
Evaluation of alternative options by the consumer;
Purchasing decision;
Post purchase evaluation: the consumer will decide whether they are satisfied with their
purchase decision.
Differences in sales volumes
FMCGs are sold at relatively low cost with frequent purchases being made throughout the year by the
consumer. The absolute profit made on each item may be relatively small but FMCGs generally sell in
large quantities, so the cumulative profit on such products can be substantial. From a marketing
perspective this means that Repvilles products have substantial sales volumes and repeat sales are
particularly important to the company. Durable goods such as XYZs furniture differ greatly because items
are relatively high cost and involve infrequent purchases by an individual consumer (perhaps once every
ten years for a particular item). Each unit sold is significant to XYZ in terms of profit margin per item.
Differences in shelf life
There are differences in the respective shelf life of both sets of goods. FMCGs have a short shelf life
as a result of turn-over rates and because the product is perishable. For some FMCGs (such as
meat, fruits and vegetables, dairy products and baked goods) there may be heavy price discounting
nearer sell-by dates as stock becomes quickly wasted. Repvilles products are sealed in air tight glass
containers and can remain unsold on store shelves for a certain length of time (maybe a year) but will
ultimately deteriorate and need to be scrapped. By comparison durable products such as XYZs
furniture will not deteriorate in the same way and could potentially remain in store for several years
before being sold.
Differences in significance of the brand
The importance of brand recognition differs considerably between Repville and XYZ. Some of the largest
brand names produce FMCGs such as Nestle, Procter and Gamble, and Coca-Cola. Branding is
therefore of particular relevance to FMCGs, and often promotion and packaging help reinforce a brand.
For Repville, its association with high quality, tradition and flavour are brand features reinforced through
its use of exclusive sales outlets and unique product packaging (distinctively coloured and shaped retro
bottles). XYZs goods by comparison have little if any brand recognition, indeed some of its furniture
appears in many stores throughout the world rebranded with the stores name.
Differences in the relative marketing mixes
There are fundamental differences in certain aspects of the marketing mix operated by the respective
companies as indicated below.
Product mix. Repvilles product mix stresses brand, quality, taste and package design. There are rather
fewer details in the scenario about XYZ. However, its products are certainly not branded and packaging is
likely to be unimportant. The fact that XYZ operates a low cost competitive strategy suggests that raw
materials might be sourced based more on price rather than quality considerations.

Place mix. Repvilles products are presently sold through limited networks (exclusive outlets and
delicatessens) nationwide. XYZ household furniture by comparison has extensive sales networks

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internationally (and hence the company may need to pay greater attention to logistics and distribution
issues than Repville).
Price mix. Repvilles products are made with high quality ingredients and this is reflected in the price it
commands. Despite this, sales are likely to be made in cash as an item represents a small fraction of
disposable income. XYZs products will involve significant financial outlays and this may involve payment
being made on credit. Although XYZ products are far more expensive per item than Repvilles goods,
they are compared to other furniture producers viewed as a low cost competitor.
(There is too little information on the respective promotional mixes of the two companies to discuss
this aspect of the marketing mix meaningfully).

(c) Describe the advantages of the Head of Strategy's idea for strengthening customer
relations management by using CRM software.
(5 marks)

Requirement (c)
Part of proposals for strengthening marketing practices will involve the purchase of Customer Relations
Management (CRM) software and the new Head of Strategy favours particular software. CRM software
aims to manage a companys interactions with customers and sales prospects. As such it could strengthen
marketing practices and offer a number of potential benefits to Repville.

Improved coordination and integration of systems


CRM technology could help transform practices in Repville particularly if some of its systems and
processes are not currently automated. The software has the potential to organise and synchronise
business processes, sales, marketing, customer service and technical support electronically. As
Repville does not have a CRM system, then it is likely to operate a variety of systems. With the level of
expansion envisaged this will offer many challenges and it makes good sense to coordinate and
integrate systems in this way in order that staff may be able to cope with future growth.
Improved customer relations
The overall goal of a CRM is to help an organisation:

identify, attract and win new customers;


retain existing customers;
entice past customers back.

These aims are consistent with Repvilles newly announced growth policy and a system would clearly
support its corporate strategy. A CRM system enables efficient marketing communication with
customers by holding mail and email addresses for mass distribution notifying customers of special
offers and features, so building and maintaining a good customer relationship.
Improved control and management
If successfully developed and implemented, the support offered by an effective CRM can provide a
significant advantage to Repvilles users by providing cohesive and fuller marketing and management
information. The system will supply Repvilles marketers and managers within the information needed to
control, develop and manage the organisations marketing activities more effectively. A CRM system will
maintain a record of lost sales as well as sales made, allowing further investigations to be made. CRM
systems also allow progress on enquiries to be tracked which can be used to identify and eliminate
inefficiencies. The reports produced by the system should strengthen decision making, planning,
implementation, and control.
Improved motivation

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As a by-product, CRM could lead to improved satisfaction and motivation amongst Repvilles users
who may feel that they are being properly equipped to do the job they are employed to do.
A source of competitive advantage
The preference of the new Head of Strategy is for particular CRM software that is 'tried and tested'. If
Repville does not make the investment to buy the software now then it may lag behind competitors that
have it. Conversely, purchasing the software may offer a means of gaining a competitive advantage over
rivals that do not currently have such a system.
Cost effective
Customer Relationship Management (CRM) software is widely used, tried and tested and there should
be few difficulties in the functionality and operation. The package itself will be off the shelf and as such
relatively low cost, well supported, and have a familiarity amongst some users. As such the purchase
could prove good value for money. Implementation will involve Repville reviewing existing practices and
systems and there may be potential to identify and eliminate duplication in systems leading to cost
savings.

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E1 Enterprise Operations
March- 2014
SECTION A 20 MARKS

Question One
1.1

Which ONE of the following is NOT a category featured in Porter's Value Chain?

Procurement

Operations

Marketing and sales

Gross profit

1.2 'Uncertainty avoidance' is a term used to describe which ONE of the following?
A

A national cultural dimension

A country risk

A political risk

A sustainability audit key finding

1.3
Which ONE of the following is an independent member of a company's Board with particular
concern for governance?
A

Non-executive director

Management consultant

Political lobbyist

External examiner

1.4
An investment made by a company into a company or entity based in another country is
known as which ONE of the following?
A

Foreign direct investment (FDI)

Portfolio flows

Outsourcing

Offshoring

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1.5

Mendelow's four cell matrix illustrates which ONE of the following?

The dominance of various stakeholders in a decision

The potential growth and market share of a product

The support required by a technostructure

The direction of organisational growth strategies

1.6

The acronym BRIC refers to which ONE of the following?

A system of business reporting and inventory control

A tool for macroeconomic analysis

Certain important national economies

A framework for determining business risk in a country

1.7
The range of management issues associated with converting resources into required goods or
services within an organisation is known as which ONE of the following?
A

Sourcing strategies

Product marketing

Liberalisation

Operations management

1.8
Electronic Executive Information Systems (EIS) and Expert Systems (ES) are examples of which
ONE of the following?
A

Customer relationship management software

Database management

Computer networking

Decision based software

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1.9
Which ONE of the following is the usual reason for dispersed and virtual team working in an
organisation?
A

Weak management

Utilisation of developments in technology and information systems

Poor hygiene factors in the workplace

Localised human resource management

1.10 When evaluating a new information system, which ONE of the following would NOT represent
a tangible cost?
A

Additional training undertaken by IS staff

Heating and lighting where the system is housed

Staff uncertainty caused by the change

Time taken on system design

Answer to Question One


1.11

1.12

1.13

1.14

1.15

1.16

1.17

1.18

1.19

1.20

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SECTION B 30 MARKS
Question Two
a) Distinguish between ISO9000 accreditation and Total Quality Management (TQM).
(5 marks)

Both ISO9000 accreditation and Total Quality Management (TQM) represent popular organisational
approaches to quality and both require employee involvement and commitment.

Aim

Outcome
Basis

Requirement

Focus

ISO9000 accreditation
Consistent delivery of a product or
service to meet customer
requirements.
A nationally accepted standard of
quality.
Compliance with the European ISO
9000:2000 series quality award (a
quality system standard).
The submission and approval of
documentation, including a quality
manual, procedures manuals and
work instructions.
External inspection both before
accreditation is awarded and then
with regular reappraisal visits.

Total Quality Management


Continuous improvement of goods, services
and processes.
Adherence to the kaizen (continuous
improvement) concept.
Prevention of errors and defects before
they occur and the importance of total
quality in the design of products/services
and systems.
Multidisciplinary teams (quality circles) to
discuss and implement improvements.

The involvement of all employees at all


levels so that TQM represents an
organisational philosophy.

b) Describe FIVE features of a successful database system.


(5 marks)

The essential features of a successful database system are as follows:

Data seen as a corporate asset. Data is regarded as an asset of an organisation as a whole.


Like other assets it will be owned and maintained for the use and benefit of the entire
business.

Data independence. The data must be defined and exist independently of the individual
programs that use it. As both data and programs are independent either can be amended
without changing the other

Data sharing. The database must be capable of being shared. Different users, using different
application programs, must be able to access the same data often at the same time.

Elimination of duplication. Duplication of data and data redundancy should be eliminated as


only one entry per record or transaction is needed in the database. Data inputs may also be
reduced as data is only required to be input once to update all files.

Data accuracy. Controls need to exist to ensure that the data remains accurate at all times
and the integrity of the data in the database is maintained.

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c) Explain the relationship between stakeholders and corporate governance.


(5 marks)

Stakeholders are individuals or groups with a legitimate interest (stake) in an organisation. Examples
include shareholders, employees, company pensioners and directors,
According to the Cadbury report, corporate governance is the system by which companies are directed and
controlled. In some countries corporate governance is a legal requirement (e.g. USA), in others it is formalised
by a code or a set of best practice guidance (e.g. UK). The practice of corporate governance is aimed at
protecting and taking account of the rights and claims of stakeholder groups.

The primary reason for corporate governance is to protect stakeholders such as shareholders,
employees and pensioners against directors abusing their positions of power. Corporate governance
reminds directors of the limitations of their power, and enforces the principle that directors work on behalf
of shareholders.
d) Explain the reasons for, and main types of, systems maintenance.
(5 marks)
Systems maintenance is the repair, correction or further enhancement of systems that are operating.
Systems maintenance can take several forms:

Corrective maintenance remedies errors that are identified normally as a result of some problem
occurring. This form of maintenance is reactive by nature and has the main aim of ensuring that a

system can continue to operate on a daily basis.

e)

Adaptive (or adaptative) maintenance involves adjusting systems to reflect changing business
operations or the wider external environment. This type of maintenance is likely to occur in the
mid to long-term life of a system.

Perfective (or preventative) maintenance anticipates and aims to prevent possible future
system failures so improving efficiency and avoiding corrective maintenance. (The
maintenance in effect aims to make the system nearer perfect).

Describe FIVE main features of the Six Sigma approach.

(5 marks)
Motorola in the US set a goal of 'Six Sigma' in the mid 1980s for all of its manufacturing operations, and
this goal became a byword for the management and engineering practices used to achieve it. The main
features include:

Consistency of output. The use of statistical methods leads to minimising variation in a product offering.
It is a methodology that strives for near perfection. These aim to eliminate defects and errors (driving
toward six standard deviations between the mean and the nearest specification limit).
A defined methodology. A feature of Six Sigma is a disciplined, data-driven methodology with a
defined sequence and approach.
The use of tools. The approach involves the use of particular quality orientated tools for process
improvement.
The use of experts within the workforce. Six Sigma involves creating an organisational infrastructure
of workers who are experts in often very complex methods (sometimes referred to as 'Champions',
'Black Belts', 'Green Belts', 'Orange Belts', etc.).
The use of targets and metrics. Quantified financial targets are a feature of the approach (normally cost

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reduction and/or profit increase).

f)

Describe the types of waste a lean management approach would try to eliminate.

(5 marks)
Lean production and its management involve a consolidation of improvement systems into a single
coherent process to provide value for the customer. Womack et al describe waste as any human
activity that absorbs resources but creates no value.

The types of waste a lean management approach would try to eliminate include:
Product defects which will lead to scrapping manufactured products or a reworking of those outputs.
Both alternatives have unnecessary cost implications.
Over-production of goods that are not currently needed so leading to unnecessary stock levels being
held and possibly stock wastage and loss occurring (particularly where goods are perishable).
Excess work in progress and production bottlenecks leading to stocks of goods waiting further
processing. (This may possibly involve employees waiting for upstream activity to take place before
they can complete their work).
Unnecessary processing of goods such as adding product features which are not valued by the
customer.
Unnecessary transport of goods (and/or movement of people) possibly through faulty record
keeping and/or poor plant layouts.

SECTION C 50 MARKS

Question Three
The country of Cland has twelve regions, each with a regional government responsible for local services
including education and law and order. Following last years election, SW region has a new regional
government (SWRG) that wishes to simplify pay structures and increase workforce flexibility and
productivity for all its employees.
Employee pay and conditions of service have developed over time as a result of collective national
negotiation between employer representatives and the several national trade unions. Currently all
SWRGs employee groups are paid on separate pay scales and have different leave, maternity and
sickness entitlements. Each pay group has particular features, for instance, all university lecturers have
the same fixed holidays and no teaching takes place at weekends. By comparison, police officers work
more flexible hours in return for generous allowances to help pay accommodation costs. No bonus
payment schemes apply to any group.
Following detailed discussions with Clands national government SWRG has begun a two phase
programme of reform. Although regional bargaining has never been tried before, the national government
supports the idea.
Phase 1 involved a number of senior SWRG managers including Human Resource (HR)
professionals providing a range of policy options. SWRG then made certain choices and
announced that it wishes to make the SWRG more flexible by introducing:

A unified pay scheme incorporating a performance management system (basic pay will be
reduced but high bonuses for individuals meeting performance targets would be possible);

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Promotion based solely on achievement of individual targets.

In addition, a feasibility study reviewing outsourcing possibilities for some of SWRGs non front-line
services was commissioned. (Any decisions arising from this study will follow on after Phase 2 is
complete.)
Phase 2 began with a negotiating team led by SWRGs senior HR managers meeting with all regional
union representatives collectively in order to persuade them to abandon nationally negotiated contracts.
A small uniform 'once-off' compensation payment to staff would be made in return. The parties have met
many times over the past ten months and although agreement is close with others, the lecturers union is
reluctant to accept the changes, so halting overall agreement.
SWs political leaders are frustrated by this slow progress, and have instructed the negotiating team to
meet with each union separately to agree the terms and size of the once- off payments for their
respective groups. In addition, the regional university lecturers union will be made a 'final' offer and, if
rejected, all lecturers will be written to personally offering them a 'deal'. Lecturers accepting a new
contract within 30 days will receive a small payment immediately. Those who do not accept the new
contract arrangements will be considered to have resigned from their jobs.
A newspaper finds out about these plans and the front page headline next day reads 'SWRG's unethical
plans'.

Required:
a) Explain the HR implications of the reforms that are taking place in SWRG.
(10 marks)

Requirement (a)
The potential significance of the programme of reform upon SWRGs workforce can be gauged by the
involvement of HR professionals. Phase 1 involved senior employees including HR managers
determining a range of options for consideration. Phase 2 began with senior HR managers leading a
negotiating team to meet with regional union representatives collectively. (Less positively is the latest
decision to force a conclusion to Phase 2 negotiations without the apparent input of HR professionals).
Improved performance through the workforce
Many organisations wishing to operate more effectively focus their attention on greater use of technology or
lean operations. Others alternatively concentrate on their most valuable (and often expensive) resource: their
human resource. The reforms identified by SWRG are consistent with this thinking. SWRG evidently believes
that it is their workforce that can deliver improved organisational performance. SWRG apparently believes
that improved organisational performance can be levered through a concentration on HR issues such as
flexibility and remuneration and incentives - all significant factors for a member of the workforce and likely
change from what has gone before.
Recognising employee achievement
SWRGs workforce may welcome the introduction of a well designed and implemented scheme. The
attempt by SWRG to better target resources to reward individual effort and achievement might improve
staff morale and consequently improve retention of valued staff. Greater employee morale can lead to
greater commitment and lead to improved performance, quality and customer service. The way in which
the reforms are introduced is also important. The latest developments to speed up the process may
impact negatively on morale. (SWRG would be advised therefore to demonstrate greater fairness in its
dealings with regional unions and put effort into 'selling' the changes it is proposing).
Industrial relations and harmony
SWRGs political leaders are frustrated by the slow progress of Phase 2, and have instructed the

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negotiating team to meet with regional union groups separately to agree separate deals over the size of
once-off payments for their respective groups. This move does little to further good industrial

relations and workplace harmony. (Indeed it may help breed an 'us against them' attitude within the
workforce which may prove counter-productive to achieving increased workforce flexibility and
productivity).
Psychological contract damaged
The psychological contract is a set of expectations between an employer and employees. Unlike formal
contracts of employment, a psychological contract tends to be unwritten, assumed and unspoken. With
SWRGs political leaders frustrated by the slow progress of Phase 2 of the reforms its decision to deal
with lecturers and their union in the way it is doing may damage the psychological contract between
SWRGs staff and their employer permanently.
Productivity levels
The entire employment relationship is built on a 'wage-effort bargain'. The aim to provide a closer linking
of rewards and performance might encourage SWRGs workers to become more productive (assuming
all employees are motivated by promotion and financial inducements). Rewards must however be
commensurate with the associated effort required. If bonuses are relatively insignificant then behaviour
may not change as a result, similarly if targets are difficult to achieve then staff may not be motivated to
reach them. (Indeed if bonuses are paid for by reducing basic pay levels then productivity may actually
fall off). Interestingly, Otleys work (1987) into behaviour and accounting control indicated that if targets
are not met a demoralising affect might occur whereby there is a dramatic dip in performance. The
scheme may be counter-productive if this happens, and may cause a decline rather than an increase in
productivity.
Team cohesion and collaborative working
Under the proposals, high bonuses for an individual meeting performance targets would be possible,
implying a need to measure individual performance. This may not be possible where team working is 'the
norm'. Under such circumstances, team bonuses would be more appropriate. If individual bonuses are
paid under these conditions then the scheme might impede effective team working and encourage
harmful competition within the workforce rather than co-operation.
Feelings of fairness
Pay awards need to be applied in a consistent, fair and transparent manner. Negative behaviour may
arise if certain groups within the workforce (e.g. university lecturers) believe that other groups (e.g. the
police) have a scheme that is more leniently applied or where it easier to 'hit' targets. Undesirable
behaviour may then result, such as workers manipulating 'results'.

b) Describe the ethical issues associated with SWRG's attempts to alter pay and
conditions.
(10 marks)

Requirement (b)
Ethics involves morality and what the individual considers to be 'right'. Ethics applies in most fields and
can be seen most clearly in religion and medicine. Business and management is also subject to ethical
considerations. This thinking can be related to SWRG and what constitutes a 'proper' or moral way to
bring about reforms to pay and conditions. Such judgments are inevitably personal but are set within the
context of what individuals, organisations or society as a whole generally believes to be 'right'.
Local negotiation
The fact that negotiations are taking place with regional union representatives when a national forum
exists is an issue. Some may believe that locally (in this case regionally) determined pay and conditions

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through negotiation are ethical and fair as employers are in the best position to determine detailed
issues taking account of local conditions. Alternatively, others may believe that locally determined
agreements are inappropriate and that it is 'fairer' to conduct such discussions at a national level where
regional employers are less able to exercise undue, possibly unethical influence on individual trade
unions and individuals. (Although new to Cland, the national government is apparently supportive of the
initiative. National trade unions alternatively may believe that 'unity is strength' and take the opposite
view).
Compensation package
The abandonment of nationally negotiated contracts in return for a small 'one off' payment to existing
post holders may also be considered unfair. Later post holders will not enjoy certain benefits (whatever
they may be) which are 'sold' once and for all by existing post holders.

Individual union negotiation


The regional unions have apparently accepted an invitation to conduct negotiations collectively, and the
negotiating team has met 'many times' in this way. The instruction to the negotiating team to meet with
union groups separately may be seen as unfair and is blatantly divisive. It has been an accepted way of
operating to meet as a group and this has happened over the past ten months. SWRGs regional
government is undoubtedly breaking 'custom and practice' in a way that might be seen as high handed
and unethical.
Side-lining the regional lecturers' union
Regional trade union officials are legitimate representatives of individual members and they have been
used as a vehicle for collective bargaining so far. The intention to write to individual lecturers to make an
offer directly if their trade union declines a 'final' settlement offer is questionable. This development may
not be seen as ethically defensible to many observers.
Issuing time limits and ultimatums
The ultimatum to lecturers to accept new terms within a tight timescale and a threat to terminate
employment is undeniably heavy-handed and bullying. Not only is this a distraction from individuals
doing their job professionally it is also potentially very stressful. This development would certainly be
viewed as unethical by lecturers and their union and by many external observers (including the
newspaper mentioned in the scenario).
Compensation for loss
As far as can be ascertained from the scenario the initial method chosen by SWRG of negotiation and
agreement appears to raise few ethical concerns. Negotiation and agreement suggests dialogue,
compromise and compensation to those losing out because of change (in this case a small 'one off'
payment).
In the case of the bonus scheme, basic pay will be reduced but high bonuses for individuals meeting
performance targets would be possible. Under such a scheme there will be both 'winners' and 'losers'
amongst individual workers should the scheme be introduced and the question of how fair this might be
is an issue.
Appropriateness of influencing strategies adopted
With Phase 2 progress being slow, SWRG has altered its influencing strategy from 'negotiation and
agreement' to what Kotter and Schlesinger (1979) might term 'manipulation and co-optation' or 'explicit
and implicit coercion'. Manipulation and co-optation involves presenting partial or misleading information
and 'buying off' key players. Whilst there is no suggestion of misleading information being used, offering
terms separately to the unions more amenable to the proposal is divisive. Some groups (such as the
lecturers union, or the general public) might feel that manipulation and 'sweeteners' are being used
unfairly to remove obstacles in the way of a speedy resolution.

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Use of manipulation and co-optation


SWRG is obviously trying to expedite the implementation of its policies. However there are a number of
dangers associated with its change in approach. Manipulation and co-optation may hasten the process
but experience shows that normally future problems arise if those involved feel they have been
manipulated. Explicit/implicit coercion involves the potential risk of making a situation more difficult,
especially if trade unions are in a position to provide opposition and protection. The trust between
lecturers and SWRG is likely to be irreparably damaged as a result of these actions.
Questionable employment policies
The observance of ethical employment policies and a status as a 'good' employer are important issues
for many organisations. The reputation of SWRG as an employer might be tarnished by the adverse
publicity including the newspaper that has accused it of engaging in 'unethical plans'. Under these
conditions it may be difficult to retain key staff and also recruit successfully from outside SWRG in future.
Ethics of intervention
Frustrated by slow progress SWRGs political leaders have intervened into a process while it is still
underway. By instructing (not suggesting that) the negotiating team to meet with each union
separately to agree the size of payments for their respective groups the position of the team is
compromised. The decision to use 'final' offers, personal 'deals' and dismissals represent heavy
handed interventions which unsurprisingly the newspaper describes as 'unethical'.
c) Explain how outsourcing some of SWRG's non front-line services might help make
SWRG become more flexible.
(5 marks)

Requirement (c)
Outsourcing
SWRG wishes to introduce more flexible working arrangements and its intention to operate a pilot
scheme looking at the feasibility of outsourcing some of its services is part of this same initiative. These
decisions are similar to those made by a manufacturing firm over whether to make components
themselves or sub-contract or outsource work to a third party. Such decisions will take account of a
number of factors including whether or not the work involved constitutes an organisational core
competence. (In the case of SWRG the fact that the services potentially involved would be 'non front-line
and therefore not core is significant).
The concept of the flexible firm
Decisions made over outsourcing and staffing levels help define the boundaries of an organisation. The
benefits of organisational flexibility and the concept of the 'flexible firm' first became popular in the 1980s.
The work of two theorists is significant in this context. Charles Handys concept of the shamrock
organisation depicts three categories of worker who help provide flexibility to the firm:

Core workers who possess key and scarce skills and enjoy relatively high status positions
with good prospects of security and promotion.
Periphery workers on temporary or part-time contracts that act as a buffer against changes in
demand.
Contractual workers provide additional flexibility and are not a payroll cost.

Different forms of flexibility are also suggested by Atkinson (1984) as follows:

Task or functional flexibility where traditional demarcations between jobs are removed and
employees undertake a wider range of tasks. This can be viewed both horizontally, involving
employees undertaking a broader range of tasks at the same level as their original tasks, and
vertically, involving undertaking tasks that were previously carried out by employees at higher or

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lower levels.
Numerical flexibility including temporary, part-time, short-term contract working and subcontracting in response to demand fluctuations.
Financial flexibility through the growth of individualised and variable systems of reward and
performance related pay schemes. Fees for service payments are also used for an increasing
numbers of self-employed sub-contractors.

Outsourcing and the flexible firm


Outsourcing therefore supports the concept of the 'flexible firm' in a number of ways, such as
offering:

a contractual fringe to complement core and peripheral workers consistent with Handys
flexible shamrock organisation.
numerical flexibility by using both sub-contractors and outsourced services (possibly in non
front-line services such as maintenance, cleaning, transport, catering, computer services and
security, etc.)
financial flexibility through a cheaper service, due to economies of scale from specialisation by
the supplier of outsourced services, and a unified pay scheme incorporating performance
incentives.

Question Four
5NX is a growing regional company that has successfully used local radio advertising to raise awareness
of its products. The company supplies fresh 'quality' sandwiches, home baked snacks, the finest coffee
and freshly squeezed fruit juices for sale at relatively high prices in petrol filling stations. Products are
produced by traditional methods from very early morning by a team of employees at a central depot and
are delivered throughout the day by temporary workers in a fleet of company vehicles. Drivers bring back
order sheets at the end of a shift for future deliveries to be scheduled. Invoicing for payment takes place
some time afterwards.
5NX is, for the first time, undertaking a full strategic marketing planning process in conjunction with a
local business advisor. So far, limited market research, financial projections and a SWOT (strengths,
weaknesses, opportunities, threats) analysis have been prepared. One weakness already identified as
part of the SWOT analysis is that the number of deliveries required is increasing, while some of the
drivers are becoming unreliable. The owner is worried that this may create a poor image with customers
and lead to delays in delivery. She is also interested in two opportunities that have emerged from the
planning process:

The use of time saving food preparation and packaging equipment. This will mean
considerably fewer people being involved in food preparation but some employees could be
redeployed as drivers on a permanent basis.
In addition to making deliveries, drivers could get direct feedback from customers, persuade
petrol stations to take new product lines and provide intelligence on competitors' products. If time
allows they could also leave promotional brochures with staff at other petrol stations and outlets
(such as railway stations and newspaper shops) in the hope of future business.

The business advisor has suggested that the owner captures the elements of 5NX's marketing mix for
incorporation into its marketing plan.

(a) Discuss how 5NX's marketing mix might contribute to its marketing plan.
(10 marks)
Requirement (a)
The business advisor has suggested that 5NXs owner may wish to capture the elements of the

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companys marketing mix. The marketing mix can be used as a structure for identifying the main
marketing issues which will need to be addressed in the final marketing plan itself.
The term 'marketing mix' was first applied at the Harvard Business School, USA to explain the range of
marketing decisions and elements that must be balanced to achieve maximum impact. The marketing mix
represents a tool kit for marketing practitioners to blend the component 'Ps' of marketing. The
apportionment of effort, the precise combination, and the integration of all elements to achieve
organisational objectives represent an organisations own marketing programme or 'mix'. The marketer
therefore is a mixer of these ingredients of procedures and policies to produce a profitable outcome.
Kotler and Lane Keller (2006) define the marketing mix as: ' the set of controllable variables and their
levels that the firm uses to influence the target market.'
The marketing mix variables that are relevant to the marketing plan are given below. The detail arising
from this analysis will need to be considered and incorporated into 5NXs marketing plan.
Product
There do not appear to be any plans for 5NX to expand its product range. (Currently the range is fresh
sandwiches, home baked snacks, 'real' coffee and freshly squeezed fruit juices). This will however need
to be articulated in the plan. A further key product issue is the maintenance of quality, which is vital to
the companys reputation. The new technology proposed in preparing and packaging may be a
timesaver but this should not be at the expense of quality of the finished product. (The technology is
likely to help achieve consistency of standard but this should be of a high quality standard). It might be
helpful in the marketing plan to identify the need for product standards and procedures to be established
and a need for reliability of suppliers of raw ingredients.
Place
Petrol filling stations apparently represent 5NXs sole distribution outlets at the moment. The notion that there
is potential for product sales in newspaper shops and railway stations represents a form of market
development. However, the method proposed of extending 'place' in this way is rather more questionable.
Much depends on the effectiveness of drivers, and a reliance on them to perform this task is perhaps
ambitious. Nevertheless, the marketing plan will need to identify precise targets and commit training resources
towards this aim. Additional time will need to be allocated to drivers rounds in order to perform their expanded
duties and projected additional new locations will need to be factored into revised driving rounds. If this
necessitates the use of extra vehicles then this should also be articulated in the plan.
Promotion
Local radio advertising appears to be a successful medium in expanding 5NXs operations so far. The
growth strategy up until now has been based on 'more of the same' and repeat purchases. The use of
drivers to cement existing sales relationships is a sensible policy but the effectiveness of using 'cold call'
selling is (according to conventional wisdom) questionable. The plan will need to attach SMART (specific,
measurable, appropriate, realistic, time bound) targets to these aspirations and quantify the amounts that
will be spent on radio advertising as well as the time to be allocated to 'cold calling' by drivers. Again this
is a matter for the marketing plan.
Price
5NXs current pricing strategy could be said to be both market sensitive (based on the value of the
product in the perception of the customer) and premium (achieving a 'high' price due to differentiation of
the product). Pricing includes basic price levels, payment terms and credit policy, discounts and
allowances, etc. Of all the elements comprising the marketing mix, price is the one most directly linked to
revenue levels. The need to recover total costs plus levels of desired profit is a powerful and legitimate
consideration. At the same time, customers need to see price as 'fair' commensurate with the quality of
the product. Pricing, therefore, goes to the heart of 5NXs financial and marketing aspirations and should
feature prominently in the plan. Customers feelings about a product are reflected in what they are
prepared to pay, so getting pricing right is crucial. 5NX appeals to discerning customers who are prepared
to pay a little extra for fresh, traditionally made 'quality' sandwiches, home baked snacks, fine coffee and

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freshly squeezed fruit juices. Existing customers are generally less price sensitive than new ones. For
prospective new customers price can imply quality. Pricing that is too low can have a detrimental effect on
purchasing decisions and overall sales levels. Conversely, the higher the price, the more customers will
expect in terms of the product.
People
The co-ordination of the four elements of the basic marketing mix identified above is crucial to the
success of the overall marketing plan. Some thinkers believe that other factors could also usefully be
considered including people. An organisations people come into contact with customers and can have a
huge impact on customer satisfaction levels. In the customers eyes, an organisation's workforce is
generally inseparable from the total service they receive. This implies the need for well-trained, motivated
workforce mindful of the adage 'the customer is always right'. 5NXs owner is considering redefining the
job role so that drivers will also get direct feedback from customers, persuade petrol stations to take new
product lines and provide intelligence on competitors products. If this idea is progressed then 5NXs plan
should recognise an investment in training its drivers and other employees.

(b)

From the information that is given, illustrate the extent to which 5NX is following the
marketing concept.
(10 marks)

Requirement (b)
The marketing concept
The extent to which an organisation is adhering to the marketing concept is an interesting issue. This
concept is best captured by the UKs Chartered Institute of Marketing (CIM) definition of marketing as 'the
management process responsible for identifying, anticipating and satisfying customer requirements
profitably'. It follows that marketing-orientated organisations have a main focus whereby the services and
products they offer are determined by consumer preferences. To be marketing (or market) orientated is in
effect a way of implementing this marketing concept by putting customer needs first.
Although this may seem preferable to other approaches it should be conceded that there might be a
need for a heavy initial investment of time and effort in achieving such an orientation for the first time.
Some organisations therefore reject or ignore the possibilities of this philosophy and instead operate in a
way that is production, product or sales orientated.
5NXs operating philosophy
Although the scenario mentions the possibility of an investment in technology to improve production
processes in 5NX there is no evidence to suggest that the firm is production-orientated. (The main
focus of 5NX does not appear to be on production efficiency and low costs).
Similarly, although sales are important to 5NX, it could not fairly be described as a sales-orientated
organisation as its main aim is not simply selling the goods that are produced.
There is, however, more of a suspicion that rather than being truly marketing orientated, 5NX may tend
towards being product-orientated. Such organisations have a main focus of product features. This
could result in the production of goods with high quality features (as 5NXs products have). For productorientated organisations, little or no research to identify a demand is undertaken before a product is
launched. This means that the product orientated organisation risks its products not selling in sufficient
numbers. 5NX appears to be successful in the sale of its high-end products so far but this may be
despite rather than because of the level of market research conducted beforehand. (The current planning
process means that some limited research has recently been undertaken).
A concentration on the customer
Adopting the marketing concept involves an organisational focus on the perceptions and needs of its
customers. In short: what customers think is important. 5NXs owner is concerned that a poor image may
be presented to customers because of the unreliability of some of the drivers. Her determination to

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overcome these difficulties is one sign at least of being customer focused. She evidently believes the role
of the driver as the companys interface with the customer to be significant. The critical people in the
customer led organisation are the front- line staff because it is they who the customer comes into direct
contact with. 5NXs drivers need to be trained to be responsive to customers and to provide the best
possible service and image for the company.
Planning to meet customer requirements
For companies adhering to the marketing concept there will be an understanding that the satisfaction of
customer requirements is paramount to the achievement of organisational goals. CIM stresses the
importance of getting the right product or service to the customer at the right price, in the right place, at
the right time, and that 'business history and current practice both remind us that without proper
marketing, companies cannot get close to customers and satisfy their needs. And if they dont, a
competitor surely will'. To do this an organisation needs to plan carefully so that it can succeed. The
involvement of a business advisor and formal planning processes could be interpreted as signs of 5NX
leaning towards a marketing philosophy. 5NX is said to be undertaking a full strategic marketing planning
process 'for the first time'. The use of the marketing mix as a technique for planning strengthens a desire
to get the right product to the customer at the right price, in the right place, at the right time.
Understanding the market
Kotler and Armstrong (1994) link the marketing concept with organisational success which 'depends on
determining the needs and wants of target markets and delivering satisfactions more effectively and
efficiently than competitors do'. There is evidence that 5NX is endeavouring to determine the needs and wants
of its target markets better through the initiatives identified in the scenario.
Firstly, there is to be a proposed redefinition of the role of drivers to get direct feedback from customers
and provide intelligence on competitors products. Secondly, some market research has been undertaken
as part of a full strategic marketing planning process within the company. Only when the customers
needs are known can a company develop a range of products to meet them. This detailed knowledge
allows marketers to respond quickly to any changes in what the target customers want. For 5NX,
although market research is said to be 'so far limited' it is clearly a move in the right direction. (Possibly
the term 'so far' implies that further more detailed marketing research will be undertaken).
A shared philosophy
The marketing concept is a philosophy that places customers central to all organisational activities. To do
this an organisation needs to embed marketing at the core of its thinking and ensure that all employees
buy into to this thinking. Satisfying customers is at the heart of the marketing concept. Exactly who
assumes responsibility for this important function within 5NX will determine the degree to which the
company truly embraces the marketing philosophy. It is important for 5NX that this is not seen as the job
of the owner or the business advisor. Only when the philosophy is shared by the entire workforce
including production staff, administrative staff and drivers then 5NX might be said to be adhering to the
marketing concept.

Intelligence on competitors
The redefined role of the 5NX driver to include providing 'intelligence on competitors products' is
significant. One aspect of the marketing concept is to meet customer needs better than competitors.
5NX can then use this kind of information as a basis for possible improvements to the design of its
products, processes, customer service, and means of display, etc.
It might be reasonably concluded that in terms of 5NX following the marketing concept, although it
may not yet be truly marketing orientated, there are signs that it is making progress.

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c) Describe other ways in which Information Systems (IS) and Information Technology (IT)
might assist 5NX's marketing operations in the future.Your answer should not include
reference to food preparation and packaging equipment.(5 marks)

Requirement (c)
5NXs owner is interested in the opportunities to use time saving food preparation and packaging
equipment. There are a number of other ways in which IS and IT might assist 5NXs marketing and
other operations in the future.
A 5NX website
5NX could develop a website which could potentially be useful in a number of ways:

Allowing interactive marketing. Deighton (1996) defines interactive marketing as 'the ability to
address the customer, remember what the customer says and address the customer again in a
way that illustrates that we remember what the customer has told us'. To remember' and then
'communicate' with existing customers could also assist 5NX. Such a development would enable
the details of those making enquiries to be captured. This would then allow 5NX to communicate
by email to follow up business leads, etc. Customers (managers of garage shops) could also be
addressed personally so building relationships, and previous orders made by customers might
lead to suggestions being made for future purchases, etc.

Online orders could be placed and delivery arranged through links from 5NXs web pages. With
unique customer log-ins and passwords the process could be streamlined, and delivery details
once input could be 'remembered' for future reference. This could be attractive to both existing
and potential customers

Online advertising could usefully supplement existing radio advertising as part of 5NXs
promotional mix, with the aim of encouraging garage shops and other outlets to take their
products.

Direct online payment could be made through a secure 5NX facility. At the moment orders are
received from drivers and so require later invoicing and paperwork to be raised. Online
payment could speed up the process and save administrative costs and improve company cash
flow.

Telephone technology
Currently 5NX drivers bring back order sheets at the end of a shift for the next days deliveries. As an
alternative, customers could telephone orders through directly - an option that customers themselves
may prefer. Advances in key pad technology mean that unique customer references and credit card
details can be input directly. This would expedite delivery and payment procedures (and also improve
cash flow).
IS assisted market and competitor research
As indicated in earlier answers, 5NX is moving towards becoming a marketing orientated organisation.
This implies a need for the company to 'know' its customers better through market research. The
internet could be a powerful source of information in this respect. Details of customer activities, market
trends (e.g. cost of ingredients, purchasing trends at petrol stations, etc.) and competitor products and
strategies, etc. could offer a rich seam of data.
Customer analysis
Off-the-shelf, inexpensive spread sheet and database packages can help 5NX analyse sales to (for instance)
identify purchasing trends, repeat purchases, etc. and enable a better targeting of products.

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E1 Enterprise Operations
May - 2014
SECTION A 20 MARKS
Question One
1.1
Which ONE of the following is NOT normally associated with the (rational) staged decision
making purchasing process?
A
B
C
D

Need recognition
Loyalty to a brand
Information searching
Post-purchase evaluation

1.2 Transaction costs are expenses resulting from which ONE of the following?
A
B
C
D

Outsourcing of services
Off-shoring of organisational functions
Penetration pricing
Organisational downsizing

1.3
Subsidies for home industries, quotas and embargoes are mechanisms associated with
which ONE of the following?
A
B
C
D

Fiscal policies
Free trade
Liberalisation
Protectionism

1.4
When segmenting a market based on demographic factors, which ONE of the following
would NOT be considered?
A
B
C
D

Age
Gender
Stage in the family life cycle
Frequency of purchase

1.5
Diagrams which present the flow of information and products across supply networks are
known as which ONE of the following?
A
B
C
D

Process maps
Fishbone 'cause and effect' diagrams
Job analysis outlines
Statistical control maps

1.6
Queuing theory analysis and flexible manufacturing systems represent methods of which
ONE of the following?
A
B
C

Process design
Managing operational capacity
Quality control

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D
Quality assurance
1.7
The outsourcing of an Information Technology service by an organisation can lead to
which ONE of the following?
A
B
C
D

Increased reliance on the IT department


Increased reliance on central departments generally
Certain staff having responsibility for monitoring contracts
Recruitment of additional programmers

1.8

Social networking and blogging are normally associated with which ONE of the following?

A
B
C
D

Web 2.0 tools


Management information systems
Distributed data processing systems
An open database

1.9
Which ONE of the following is NOT normally associated with Total Quality Management
(TQM)?
A
Six sigma
B
5-S
C
Kaizen
D
Insourcing
1.10 The terms 'guerilla' and 'viral' are often applied to which ONE of the following?
A
Different organisational forms
B
Predatory take-over tactics
C
Marketing communications
D
Stakeholder groupings

Answer to Question One


1.1 B
1.2

1.3

1.4

1.5

1.6

1.7

1.8

1.9

1.10

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SECTION B 30 MARKS

Question Two
a) Describe FIVE main benefits of free trade.
(5 marks)
Free trade leads to overall production efficiencies consistent with the concept of the division of labour.
An individual nation no longer has to produce everything its population requires and can concentrate
instead on producing a more limited range of goods and services to a better standard.

For this reason, different countries with differing competencies and resources can specialise in the
production of goods and services in which they have a natural advantage.
Free trade allows companies to develop a larger market for their products beyond home sales. This
has the potential of both allowing them to achieve a greater volume of production (and hence economies
of scale in production) and possibly extending the product life cycle of certain products.
Free trade encourages greater competition which should lead to incentives for improvement and
greater efficiencies. This in turn should result in lower prices and greater choice for customers. The
overall outcome may be improved overall economic prosperity and raised standards of living for all.
Free trade can encourage a better understanding of other nations and cultures so leading to greater
political harmony and collaboration. This may also lead to initiatives such as more prosperous
countries supporting free trade in certain commodities where other nations have switched production
from demerit goods (e.g. opium production).
(Other valid responses are possible and these will also receive credit.)
b) Explain FIVE different ways in which operations management thinking and techniques may
benefit a hospital.
(5 marks)
Help reduce queuing time. Queues for treatment in hospitals are common, particularly for unplanned
admissions and emergencies. Operations management thinking can suggest ways of managing capacity
and developing optimal staffing levels to cater for 'peaks and troughs' in demand.
Stock control of medicines, etc. There could be serious consequences if a hospital were to run
out of necessary supplies such as medicines, surgical equipment and dressings. Operations
management thinking includes stock management and control systems that would prevent this
happening whilst avoiding 'over stocking' and waste.
A lean philosophy and associated practices can lead to an elimination of waste and hence
unnecessary costs in hospitals. Efficiency and cost reduction is particularly significant for publicly
funded healthcare systems (such as the NHS in the UK) where funds are limited but demand is
increasing.
For operating theatres, wards and patient waiting rooms to operate to maximum capacity and efficiency
there is a need to plan and organise appropriate floor layouts and work flows . Hospitals could benefit
in the same way that cellular manufacturing and plant layouts do by utilising operations thinking on
layout and work flow.
Enlightened operations management thinking stresses a need to develop relationships with suppliers
in order to guarantee quality, timely deliveries and a continuity of supply. Hospitals could develop supplier
relationships with pharmaceutical companies, laundering and catering suppliers, etc. in the same way.

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.)
c) Describe FIVE different systems for managing inventory (stock).
(5 marks)

Continuous. Inventory levels are continuously monitored, and when a predetermined level is reached a
fixed amount is ordered to top stock up. The re-order size will depend on a number of factors such as the
rate of usage and the lead time for delivery. An example of continuous inventory is the EOQ (Economic
Order Quantity) system.
The Periodic Review System (fixed re-order intervals). Orders of variable size are placed at fixed,
pre-determined intervals. For some operations this may be once a week, possibly (in the case of
supermarkets for instance) there may be a daily top up of stock.
ABC. This classification is based on the Pareto rule which suggests that 20% of the items are likely to
account for 80% of the total expenditure. The system focuses on the important 20% of items that need
careful monitoring (called category A). Items which are much less significant (e.g. nails, screws, tacks,
etc.) are referred to as category C and demand little attention. Category B items fall between these two
extremes and are treated as such.
Just- in-time (JIT). The aim of this system is to purchase a stock of products or components only when
they are required for use. JIT is the exact opposite of 'just in case' and represents a pull-based system of
planning and control in response to customer demand. The obvious advantage of JIT is the elimination of
large stocks of materials to near-zero levels.
Materials Requirement Planning (MRP). MRP is normally a computerised system that plans the
requirement for raw materials, work in progress and finished items based on orders and expected
future workload. The system starts by determining production planned and from this develops a
timetable so that stocks arrive in time for their use. Stock is therefore only held as a response to
future known demand.
(Other valid responses are possible and these will also receive credit.)
d) Explain FIVE reasons for the growth in geographically dispersed (virtual) teams.
(5 marks)
Technological advances in systems and telecommunications. Organisations can manage and
link individuals who work across different time zones and locations through improved, reliable
communications and information technologies.
Potential for cost savings for the organisation. Virtual team working can offer the organisation a
number of potentially significant financial benefits. These include reduced office accommodation and
other overhead costs, greater employee productivity (through fewer workplace interruptions) and
reduced travel costs (through e-mail, videoconferencing, Voip (voice over internet protocol) and webcam
equipment, etc.).
Advantages to individual employees. Virtual team working offers employees greater flexibility of
working hours and patterns and allows an improved work/life balance to be achieved. The time and
cost saved by removing a need to commute to the office on a daily basis could also be significant (and
better environmentally).
Availability of faster cheap travel. Despite the available technology face-to-face meetings may
occasionally be necessary. The growth in cheaper, efficient transport including economy flights
means that such arrangements are viable.
The opportunities offered by globalisation. Business opportunities and expanded trade with other

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nations can be better supported by a network of workers who are not based in a fixed location. Indeed,
there are advantages to employees working in different countries and time zones. This could potentially
lead to an organisation operating 24 hours a day.
Note: The Examiner's answer and subsequent marking scheme have been prepared on the basis that the
teams are geographically dispersed but from within the same organisation. Cross-organisational teams
do exist and this might legitimately be reflected in alternative answers which may also be given credit.
e) Explain FIVE reasons why a firm might attempt to actively manage its relationships with its
suppliers.
(5 marks)
Dependency upon particular suppliers
A firm might attempt to actively manage its relationship with its suppliers due to its dependency on
that supplier. The dependency will be greater if there are only a few suppliers in the industry or the
raw material involved is crucial to the production of the final product.
Influence
A firm might attempt to actively manage its relationship with its suppliers in order to positively
influence the price paid and negotiate discounts for (for instance) swift payment, loyalty or bulk
orders, etc. (A more contemporary view is rather than emphasise price, firms should build
relationships with suppliers in order to jointly manage the entire supply chain better so that mutual
benefits can accrue).
Competitive advantage
One aim of actively managing its relationship with its suppliers may be to gain a relative competitive
advantage over rival firms which do not currently practice relational procurement and operations.
Quality of supply
Relationships might be formed to ensure suppliers are performing well, in particular to ensure the quality
of supply. This is especially important where the purchasing firm is attempting to operate TQM or JIT
approaches, etc.
To establish long-term relationships and continuity of supply
To help ensure a continuity of supply and goodwill, strong relationships are needed with suppliers. A firm
might attempt to actively manage its relationship with its suppliers because it recognises that it may need
a suppliers cooperation when there are 'rush' orders or changes in production requirement at short
notice.
(Other valid responses are possible such as innovations by learning from suppliers, improved delivery
through better communication and these will also receive credit.)

f)

Explain FIVE risks associated with a direct approach to changeover from one system to
another.

(5 marks)
A direct approach to changeover means that at a predetermined time an old system ceases
completely and a new system starts. There are risks associated with such an approach.

Risk of errors being undetected. There is no parallel run under this approach. Instead there will be a
direct changeover between the old and new systems. There are risks that errors may occur in migrating
data between the two systems which may be difficult to identify because it would be impossible to
compare the output from the two systems.

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Risk to continuity of operations. Stopping one system and implementing another may have a
significant negative impact on the organisation if the new system does not work.
Risk of misuse. Even if a new system is easy to use it is possible that users will not be aware of the
most effective or efficient method of using it. Mistakes can be made, significant amounts of time can lost
through trial and error and users may become frustrated.
Risk of lack of user acceptance and inefficiencies. If users have not been involved in system testing,
then they may not fully accept the new system when it goes live. In addition, the new system may not
meet user requirements, leading to inefficiencies in operations.
Risk of outright rejection. The sudden introduction of the new system and a lack of user testing
(which is a feature of direct changeover) carries the problem that because of this extreme approach
users may reject the system completely.
(Other valid responses are possible and these will also receive credit.)

SECTION C 50 MARKS

Question Three
Relative to other nations on the same continent, the country of Oland performs poorly on many
measures of social and health wellbeing. For instance, Oland has the highest rate of both alcohol
related disease and also unwanted pregnancies amongst teenagers. Successive governments have
presided over worsening social conditions in the country. High levels of taxation on individuals and
heavy regulation of businesses have led to a lack of innovation and economic prosperity. However,
change is promised with the election of a new Government which has policy aims of economic
regeneration, tax reforms and the introduction of a set of policies and measures to help address the
country's social problems.
You work for an international marketing agency with expertise in social marketing and you have been asked to
advise the new Government ministers on the potential for introducing appropriate social marketing
programmes which could be used alongside other government measures.

Required:
a) Explain what would be involved in introducing a social marketing programme in Oland.
(10 marks)

Requirement (a)
The concept of social marketing
The term 'social marketing' first gained popularity in the 1970s when marketing gurus Philip Kotler and
Gerald Zaltman argued that the same marketing principles used to sell products to consumers could be
used to 'sell' ideas, attitudes and behaviours. Social marketing uses commercial marketing practices to
achieve non-commercial goals, specifically by communicating with and then influencing a target
population using marketing thinking and techniques. In doing so the approach combines science,
practical 'know how' and reflective practice and is particularly useful in addressing issues such as health
and the environment.
The use of social marketing in international health programmes highlights the potential to Olands new
government in trying to address issues such as unwanted pregnancies and the rate of alcohol related
disease. There are a number of issues associated with introducing a social marketing programme in
Oland, some of which are explained below.

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Establish a budget for the programme(s)


Any programme will need funding whether directly from government budgets or through part funding
provided by sources such as foundations or charitable donations, etc. The size of the budget available will
need to be clearly established in advance.
Agree goals
The Government will need to articulate what it wishes to achieve in SMART (specific, measureable,
attainable, realistic, and time driven) terms. (Examples might include a reduction in unwanted
pregnancies amongst teenagers by a percentage by a specific date.)
Market research to understand behaviour
The social marketing approach attempts to understand existing behaviour before modifying it for social
good. Gaining research data on the target population, their knowledge, attitudes and beliefs, in addition
to the social context in which they live and work will provide a clear focus for understanding existing
behaviour and the key influences upon it.
Segmentation and targeting
The target population for social marketing programmes might be identified by segmentation of Olands
entire population by (for instance in the case of unwanted pregnancies) age and possibly gender.
(Although some might argue strongly that the target audience must include both males and females.) By
focusing on the target audience, marketers can pinpoint the most appropriate means of engaging with
their target audience.
Understand the social marketing 'product(s)'
In order to have a viable 'product', individuals must first perceive that they have a genuine problem, and
that the product offering is a good solution for that problem. In the cases of the social difficulty cited in
the scenario the 'product' aspect of the marketing mix may range from tangible, physical products (such
as contraceptive devices), to services (such as health check-ups, and counselling for heavy drinkers).
Get the price right
Merit goods are commodities that society believes that individuals should have on the basis that it is
good both for them individually and for society as a whole. Governments often provide merit goods 'free
at the point of use' and then finance the programme through general taxation (e.g. in the UK access to
health care through the National Health Service). 'Price' in this context represents the cost to the
consumer in order to obtain the social marketing product. This cost may represent actual financial cost,
time, effort, embarrassment and disapproval of peers, etc. If these costs are seen as less than their
benefits, then the programme is likely to succeed. If the physical product (e.g. alcohol-free drinks or
contraceptive devices) are priced too low, or provided free of charge, then consumers may perceive
them to be of low value and undesirable and so reject them. Conversely if the price is too high, some will
not be able to afford the good and the programme will fail.
Establish a clear focus on the message: sell beneficial behaviour
Social Marketing is based on the logic that if marketing techniques can encourage people to buy products
such a fizzy drink brand or a particular telephone handset then it can also encourage people to adopt
'beneficial' behaviours for their own good and the good of others. There does however need to be a clear
focus in any programme or campaign on the benefits. Demerit goods are the exact opposite of merit
goods and negative consequences can arise from their consumption for society as a whole. The
campaign message needs to persuade people to refrain from demerit goods (harmful behaviour) and
adopt merit goods instead.
Determine effective communication media
The focus of the promotional aspect of the marketing mix is on creating and sustaining demand for a product.
The integrated use of appropriate communication media may be key to achieving this (possibly including in this
case paid newspaper and magazine advertising, billboards, mass mailings, media events, editorials, public

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relations events, personal selling, public service announcements, etc.)

Using social marketing as part of a coordinated approach


It should be recognised that social marketing should be used alongside a combination of other
measures in order to achieve a particular behavioural goal (see (b) following).
Anticipate competitor action and measure a programmes effectiveness
Finally, there is a need to anticipate possible counter-promotion (for instance increased advertising
activities by firms and outlets selling alcohol). There also needs to be some means of capturing the
effectiveness of the programme by devising monitoring mechanisms guided by the SMART objectives set
at the beginning of the programme.
(Other valid responses are possible and these will also receive credit.)

b) Explain the range of different measures Oland's Government could introduce to


discourage excessive alcohol consumption (apart from social marketing).
(10 marks)

Requirement (b)
Olands new Government has promised to introduce a set of cohesive measures to help address the
countrys social problems. Part of these policies includes the use of appropriate social marketing
programmes (see (a) earlier). Other potential measures are also available. These are explained below
using the illustration of alcohol consumption (as Oland has the highest rate of alcohol related disease on
the continent).
Partnership and joint initiatives
Social and health issues are often so complex that the activities of a single agency (such as Olands
Government) acting alone may be insufficient to address the problem. Instead, a team approach with
other organisations with similar (but not necessarily identical) goals might be more effective and
discussions might lead to the identification of ways in which collaboration may be possible. In the case of
excessive alcohol consumption partnerships could be cultivated with (for instance) local community
groups that are troubled by drunken behaviour, medical organisations, professional healthcare groups
(such as representatives of nursing professionals and doctors) and religious groups which discourage
the consumption of alcohol, etc. Joint initiatives and coordinated programmes might be possible through
an inclusive team approach.
Education
In addition to attempting to discourage existing consumers' use of demerit goods (in this case the
excessive consumption of alcohol) through social marketing there is an argument for educating the
very young before they engage in the same activities. Future drinking habits might be influenced by
persuasive education in schools, etc. from a young age. Such measures are likely to have a more
lasting effect as they seek to influence cultural and societal attitudes to the dangers of excessive
alcohol consumption. This is a long term approach to the social problem and 'results' may not be
evident for several years.
Voluntary regulation
When making a business decision a conflict may be encountered between what furthers an individual
firms interests and what satisfies society more generally. This gives rise to the notion of social
responsibility for businesses which might be understood as taking more than just the immediate interests
of the shareholders into account when making such a decision. One issue that might be associated with
this concept is the decision of a business to cease or reduce producing socially undesirable goods. A
case might be put by the Government to alcohol producing and distributing businesses to curb their
activities, or to self-regulate in order that alcohol is consumed in a responsible way.
Legislation

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If the drinks industry fails to regulate itself in a way that is acceptable to the Government then
compulsory regulation may be necessary. The scenario states that successive governments within
Oland have been guilty of imposing high levels of taxation and heavy regulation of businesses which has
apparently had the effect of stifling innovation and economic prosperity. Despite this, both taxation and
regulation (if administered efficiently) have some potential to help address the countrys social problems,
along with social marketing. (Efficient regulation is said to exist if the total benefit to the nation is greater
than the total cost of administering the legislation).
Legislation: taxation
An alcohol tax (like a tobacco tax that is applied in many countries) artificially inflates the purchase price
of the product. The main aim of such a tax might not necessarily be to raise revenue for the government
(although it could help fund a social marketing campaign) but to discourage the target population from
drinking which will be good for the nations health and reduce the demands on the health provision. In the
UK, the Scottish Government has also introduced a compulsory minimum unit price for alcohol sales to
prevent outlets selling very low cost alcohol.
Legislation: compulsory regulation of advertising
Compulsory regulation of advertising may be seen by some as heavy handed but if business is seen as
acting irresponsibly (by, for instance, portraying drinking alcohol as glamorous to an impressionable
audience) then regulation may be seen as necessary. This can be a significant measure for government
to use, for the simple reason that if advertising had little effect on sales it would not be used by
producers. So, in the case of provision of alcohol, the legislative approach would be to not only apply a
product tax but also regulate product advertising. This legislation might cover when and how products
are advertised, and the packaging that is used.
Legislation: other
An extreme policy the new Government might wish to introduce would be an outright ban on sales but such a
move might prove counter- productive and lead to illegal activity (as American prohibition once proved). Other
forms of regulation short of outright bans on sales of alcohol might be considered, for instance there could be
a compulsory regulation of outlets to make alcohol less readily available. This may include a process of
registration or licensing to permit and approve the provision of alcohol and a process of inspection to
ensure compliance to standards. There may also be restricted times when sales might legally take place
and venues where alcohol might legally be consumed.
(Other valid responses are possible e.g. limiting sales to adults, packaging warning of dangers, etc.
and these will also receive credit.)

c) Describe the different forms of taxation that are available to Oland's new Government in
order to raise the revenue necessary to finance its spending plans.
(5 marks)

Requirement (c)
There are several different forms of taxation that the new government may consider in order to finance its
spending plans. Some may be considered more suitable than others. The scenario makes clear that
successive governments in Oland have stifled innovation and economic prosperity through high levels of
taxation for individuals. (Too high a level of taxation will not encourage people to work harder to raise their
income levels). This suggests that an appropriate balance between the incidence of tax (e.g. the individual and
business) and the different types has not been appropriate in the past.

Direct taxes on earned income


Straightforwardly revenue can come through taxation (normally a percentage) raised on earnings of
both
Individuals (normally referred to as income tax and deducted by employers on behalf of the

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government at source), and


Businesses (corporation tax) through tax being applied to profits.

In addition an individual may be self-employed and again tax might be applied to earnings (possibly net
of costs of self-employment).
Direct taxes on unearned income
Individuals may also accrue income through so called 'unearned income' such as dividends from
shareholdings (possibly unrelated to their work) and interest on investments, etc.
Indirect taxes on general expenditure
Indirect tax is unlike direct taxation in that the incidence falls on expenditure rather than on income and is
sometimes referred to as consumption tax. It is common for a form of value added tax (VAT) to be
applied meaning that the cost of an item will have been inflated by a percentage which the vendor pays
to the government. One of the advantages of this type of tax for the government is that it has to collect
tax from fewer sources (there are fewer vendors in most economies than there are earners).
Indirect taxes on expenditure on demerit goods
Particular purchases may be the target of additional tax beyond the normal general level of indirect
taxation because they are deemed to be demerit items (as explained earlier). This means that a number
of governments levy a hydrocarbon tax (tax on fuel used in motor vehicles) or a tobacco tax. The
motivation for government over and above the mere raising of revenue is that it wishes to discourage
demerit goods.
Protectionism: the imposition of taxation on imported goods
Where a government is pursuing a policy of protectionism it may impose a tax on imported goods. The
impact would be that those goods would be made more expensive and may cost more than locally
produced goods as a result, so their purchase would be discouraged. Where imported goods continue to
be purchased the tax would be a source of revenue for the government. This could be used as a general
form of revenue or specifically be used to (for instance) make local producers more competitive.
Other forms of tax
There are many other examples of tax that have been applied by various governments in the past
including a wealth tax on property, an inheritance tax, a premium tax (for example in the UK, so-called
stamp duty on house purchases). Sometimes a special tax on individuals will be designated for a
particular purpose, (for example to help finance healthcare or road improvements, etc.).
(Other valid responses are possible and these will also receive credit.)

Question Four
The CM group is organised into geographical regions and managed through Strategic Business Units (SBUs).
The group has a small but skilled central core of service departments including Human Resources (HR),
Marketing, Finance and Purchasing but power and responsibility is devolved to the SBUs' general managers.
In addition to maintaining and providing standard information systems such as inventory, payroll, debtors and
accounting systems, each central service provides monthly performance data and management reports to
SBU general managers and offers additional 'consultancy' advice and services to individual SBUs on request.

BP has been the general manager of the North Western SBU for many years and is very traditional in his
approach. He distrusts the monthly reports from the central service departments calling them 'ineffective'
and prefers to trust his own instinct and judgement instead. He is also personally involved in the selection
of all staff to the SBU as he believes he is a good judge of character. This involves conducting a twenty
minute one-to-one conversation with candidates.
Although BP's methods seem to have worked in the past, North Western SBU's productivity and financial

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performance have fallen recently. BP believes this to be due to certain staffing problems, including
abnormally high levels of staff turnover and a failure of new workers to fit into the patterns of work within
the SBU. The SBU has been unable to retain its most valued workers who have often gone to join
competitor organisations. When replacement staff have been appointed, BP finds that most do not
perform their role to a very high standard and many leave after a short period of time.
BP calls a meeting of his assistant general managers who suggest consulting with the HR department
about ways of improving the SBU's recruitment and selection processes so that only suitable candidates
are appointed. One assistant explains that she has recently read a management article about the use of
assessment centres in selection and wonders if this might help when replacing supervisors and more
senior staff.

Required:
a) Describe the factors that might be contributing towards the high levels of staff turnover
in North Western SBU, apart from failures in its recruitment and selection processes.
(10 marks)

Requirement (a)
The high level of staff turnover within North Western SBU is a serious matter. Doubtless this trend is
partly contributing to the falling productivity and financial performance of the SBU.
Staff turnover has been interpreted by BP as due to 'certain staffing problems', and his assistant
general managers apparently believe that improved recruitment and selection may offer some
solution. They may be correct. However, it is likely that there are other issues and factors that are
contributing towards the situation.
Ineffective management
Ineffective management might be leading to the high staff turnover. If there is poor management locally,
then staff may experience a variety of emotions including feeling ignored, mistreated and unsupervised.
They may lose confidence in management's ability to maintain a stable working environment and
ultimately may decide to work elsewhere. There is some suggestion of poor management in the scenario.
BP has been the general manager of the same SBU for many years and is 'very traditional' in his
approach, distrustful of management information, and perhaps over reliant on personal instinct and
judgement. In addition the SBUs assistant general managers generated limited solutions to the issue BP
raised in their meeting.
Poor promotion and career opportunities
The most capable employees are likely, by their very nature, to crave promotion, development and
career opportunities. Progression or promotion through developmental pathways and career ladders are
often effective ways of rewarding performance. It is noted in the scenario that North Western SBU has
been unable to retain its most valued workers. This may possibly be due to a lack of promotion and
career opportunities within the SBU, meaning that staff are leaving in order to find such opportunities
elsewhere.
Uncompetitive rates of pay
A key aspect of any job is the associated economic rewards such as pay, security, and general 'perks',
etc. A well designed pay structure provides a fair and consistent basis for motivating and rewarding
employees and recognising contribution, skill and competence. The managerial aims of a reward system
include both successful recruitment from the market place and retention of key staff. There is evidence
that the SBU is experiencing difficulties in both retention and recruitment suggesting that it has a weak
pay structure or rates of pay that are uncompetitive within the local market (the SBU has lost its most
valued workers to its competitors). If factors such as these are left unattended to by management then
further staff will leave.

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Inadequate training
Training is often a formal, short-term process where the organisation attempts to increase an individuals
ability to perform a particular set of tasks in a particular way. On-the-job training delivered by peers can
be effective if existing employees have time to devote to the process, and are themselves competent and
have the know-how to impart the necessary skills. When new staff have been appointed to North Western
SBU 'most' do not perform their role to a very high standard and often move on after a short period of time
(possibly out of frustration and a lack of job satisfaction). One reasonable interpretation for this situation
might be inadequate training for these new employees.
Low levels of morale
Morale tends to be high in well-managed organisations that create opportunities for workers to play a
role and offer remuneration systems that provide a fair and consistent basis for rewarding contribution.
Research also suggests that both absenteeism and staff turnover will increase where morale is low.
Morale is likely to be low in the SBU meaning that employees are moving on. If it is common knowledge
that productivity and financial performance have decreased this in itself may be driving a vicious circle
leading to even lower morale and hence lower productivity, etc.
Unsatisfactory job design
An important consideration is the intrinsic satisfaction an employee receives from the nature of work and
the job itself. Individuals will feel frustrated if jobs are poorly designed or if they cannot make the
contribution they want to. The scenario states that new workers tend to fail to 'fit into the patterns of work'
within the SBU. It may be that these patterns of work and their associated job roles are difficult or
unpleasant meaning that poor job design is contributing towards the high level of staff turnover that the
SBU is experiencing.
Lack of general hygiene factors, etc.
Herzbergs dual factor theory is based on the idea of so-called motivators and hygiene factors. Factors
linked to job satisfaction are called 'motivators' such as recognition, achievement, work itself,
advancement, etc.), and factors that cause dissatisfaction are called 'hygiene factors' (such as status,
pay, supervision, working conditions, etc.). In Herzbergs terms North Westerns staff turnover may be
high because of general lack of hygiene factors and insufficient motivators within the organisation.
Negative culture
It is generally acknowledged that a positive organisational culture can be a source of corporate strength,
and valued employees are more easily retained. As demonstrated by the classic Hawthorne study many
years ago social relationships, such as being part of a team and relationships between workers and their
bosses, can have positive outcomes. The converse is also true and a negative underlying culture may be
at the root of some of the SBUs difficulties- not least the high staff turnover levels.
Poor appraisal systems
Appraisal of staff performance is an important dimension of human resource management. The best
appraisal systems aim to provide staff with meaningful feedback on their performance whilst focusing on
future activities to achieve important organisational and individual objectives. Appraisal is a pivotal
process enabling managers to assess the gap between existing staff competences and the skills and
knowledge that the individual needs to develop. The lack of performance by new starters and slipping
corporate performance strongly suggest that performance appraisal is either absent or poorly
administered within the SBU so contributing towards dissatisfaction and staff leaving.
Poor induction and mentoring processes
Many new staff joining the SBU do not perform their role very well and generally struggle with patterns of
work before moving on after a short period of time. This represents an organisational failing possibly as a
result of inadequate induction programmes to familiarise new employees with the SBU. In addition
mentoring/buddying arrangements to support new staff which are often used by 'good' organisations may
not be in place in the SBU or may be poorly administered.

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(Other valid responses are possible and these will also receive credit).

b) Explain the benefits to North Western SBU of using an assessment centre approach to
recruitment.
(10 marks)

Requirement (b)
One of BPs assistant managers has drawn attention to the potential use of assessment centres in the
selection process. Under this approach vacant jobs are first analysed to produce a list of criteria and
competencies. The assessment centre tests and procedures are designed to expose a group of
candidates to a comprehensive interrelated range of techniques which test them against necessary job
criteria and competencies. Assessors observe this testing, interpret results and pool their individual
judgements so that an overall assessment of each individuals suitability is reached.
A team of assessors in this case might include SBU managers and HR professionals. Although
assessment centres can be a very accurate method of selection (if administered properly), they are
expensive to design and operate and can only be justified for certain types of job, possibly the
supervisors and more senior staff identified by one of BPs assistants.
Improve reliability, validity and fairness generally
At the moment BP is personally involved in the selection of all staff and conducts a twenty minute one-toone conversation with all candidates because he believes himself to be a good judge of character. This is
far from an enlightened contemporary HR practice and is prone to errors of judgment and unfairness. Any
technique used in staff selection should be reliable (give consistent results), valid (accurately predict
performance), and fair (make selections in a non-discriminatory way, particularly in terms of race, age,
and gender, etc.). Research suggests that unstructured one-to-one selection interviews of this nature are
fraught with difficulty and often invalid. The failure of new workers to fit into the patterns of work within the
SBU and indifferent performance in their new roles demonstrates a 'defective' process. Fairness is
extremely important in order to fulfil potential legal requirements and also be consistent with the ethical
frameworks under which an organisation operates. The use of an assessment centre instead would
guarantee improved reliability, validity and fairness with its breadth of testing, lack of personal bias and
focus on job requirements.
Focuses on necessary competencies
Mention was made earlier of the need to identify criteria or competencies of a job role prior to the design of
the assessment centre tests and processes. This focus on competencies means that there will be a
concentration on the key skills, behaviours, attitudes and values that are necessary for different roles within
the SBU. One of the main advantages of assessment centres is that they focus on how candidates can
perform and their potential for developing existing levels of competency.
Help prevent outcomes of a faulty selection process
The reliance on the judgement of a single individual (BP) based on intuition is dangerous and is likely to
be causing faulty selections being made. Faulty selection currently is manifesting itself in organisational
underperformance, a failure of new recruits to 'settle' and high turnover levels. This will lead to a loss of
morale and additional future recruitment costs. Scientific, empirically proven techniques such as those
used in an assessment centre can help remedy this situation.
Unique insight into candidates suitability
One of the advantages of an assessment centre is that it provides a detailed and balanced set of
insights into the ability, psychology, and motives of candidates as well as measuring the alignment of
their own values to corporate values. Insights such as these would be impossible to derive from the
existing situation of a simple interview or analysis of a job application form or CV. If the SBU were to
adopt the assessment centre approach then BP would have more confidence in newly recruited staff

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succeeding in the future.


Allows good candidates to 'shine'
Apart from employing people who turn out to be unsuitable the 'missed opportunity' of rejecting applicants
who would have been suitable might be significant if these individuals go and work instead for the SBUs
competitors. It may be that in the past perfectly capable candidates have not been appointed to vacancies
due to the limited nature of selection techniques used and the lack of opportunity for them to 'shine' under
examination. An assessment centre offers a rare opportunity for candidates to demonstrate a range of
necessary skills and demonstrate their potential to make a contribution to the operation of an organisation
such as the SBU.
Improves decision making
In the case of North Western SBU, the team of assessors in the assessment centre might comprise BP,
the relevant line managers and professionals from the groups HR Department. This combination offers
a good opportunity for BP and his line managers to compare opinions with experts in their field and so
get a more rounded and balanced view of the candidates. This experience will benefit those involved
from the SBU by helping them develop their own abilities in staff selection and improve their team
working skills generally.
Improved collaboration
BPs self-reliance and distrust of existing services provided by CMs central departments suggests a general
lack of collaboration and mistrust. By operating an assessment centre there will be a vehicle for
SBU/Departmental collaboration and team working. This should enhance relationships within the
organisation as a whole and lead to greater cooperation and more harmonious working in the future.
Cost effective
Assessment centres because of their very nature can be seen as costly to design and administer.
However, such costs are relatively modest in comparison to the annual salary and associated overhead
costs of a new appointee. Employers that use this form of selection can be more confident of the abilities
of successful candidates to make a real organisational contribution once in post. These benefits
represent something of a 'payback' and viewed in cost benefit analysis terms, assessment centres may
be viewed alternatively as cost effective rather than costly.
Improve retention
When poorly performing new staff move on after a short period of time it is very disruptive to SBU
operations, impacts on work colleagues and leads to expensive repeat job advertising costs. Selection
centres can improve this situation by ensuring that successful candidates are correctly matched to job
requirements so leading to greater stability within the workforce and less disruption.
Benefits to candidates
The depth and level of analysis provided by this selection process can pinpoint an individual
candidates strengths and development needs. Often organisations operating assessment centres
provide written feedback with analysis of scores and a rationale for the 'scoring' to candidates upon
request, or provide face to face feedback at the close of a process. In this way even unsuccessful
candidates may receive some benefit from the experience they have encountered as part of the
selection centre.
(Other valid responses are possible and these will also receive credit).
c) Describe the features that should be present in any organisational information
system for it to be considered effective by its users.(5 marks)

Requirement (c)
CMs central service departments provide performance data and management reports to the general

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managers of its SBUs. Unfortunately, BP distrusts these reports calling them 'ineffective'. It is not clear
from the scenario whether or not this is fair criticism. There are certain features that should be present
in any organisational information system for it to be considered effective by its users. The system
should aim to deliver effective information and possess a number of important features as described
below.
Relevance
The system should be capable of generating information that is capable of helping managers such as an
SBU general manager make an informed management decision. Relevant information can reduce
uncertainty and increase knowledge about that decision. For example, making a decision about reducing
prices to generate greater sales might include an analysis of competitors response to previous price
cuts. (An analysis of competitor staffing levels would not be relevant).
Accuracy
One feature that should be present in any organisational information system for it to be considered
effective might be the degree to which managers rely on it for decision making. For this to happen, the
manager concerned should have no doubts about the accuracy of the information provided. Clearly
inaccurate or only partially accurate information can lead to poor decision making and might be
considered ineffective for decision making purposes.
Timeliness
Information should be available to decision- makers in a sufficiently timely fashion for it to be used in the
decision- making process. (For instance productivity ratios provided some time after the event may mean
that is impossible to investigate why certain units have performed poorly in a particular month) . There is
often a tension between timeliness and accuracy and it may be decided that it is preferable to sacrifice
100% data accuracy in favour of slightly less accurate information delivered in more timely fashion.
Understandability
Information needs to be presented in a way that allows the manager to understand and so apply it
effectively when making a decision. Information needs to be clear enough that the user can easily
appreciate the potential importance of it to a particular decision.
It is perhaps of some significance that CMs central services provide performance data to SBU general
managers. This suggests that the data is left for the user to try and interpret and turn into intelligible
information. (Information is data that has been produced in such a way that it is meaningful to the user
and may be used in decision making).
Neutrality
Information should not be biased towards one particular perspective over all others or rely unduly on one
particular source. Unless neutrality is maintained (by for instance reflecting a range of viewpoints and
validating information by the use of multiple sources) biased information is likely to result. Biased
information can lead a decision-maker to make a faulty or an incomplete decision.
(Other features might include meaningfulness, consistency, completeness and cost of production of the
information, etc. features such as security and ease of amending, etc. might also be identified. All valid
alternatives will receive credit.)

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E1 Enterprise Operations
November- 2014
SECTION A 20 MARKS

Question One
1.1
Which ONE of the following is NOT associated with the internal governance of a
company?
A
B
C
D

The use of non-executive directors (NEDs)


Annual environmental reporting
The operation of remuneration committees
The operation of audit committees

1.2
A
B
C
D

Brand equity is
something that only exists in the minds of customers.
the value due to the premium customers are prepared to pay for branded goods.
additional production costs arising from product differentiation of branded goods.
a purely notional concept.

1.3
A
B
C
D

According to Herzberg, hygiene factors represent which ONE of the following?


Compliance with health and safety regulations
A particular job context that can influence levels of dissatisfaction
Motivators to work harder
Typical attitudes of theory Y workers

1.4
A planned national economy moving towards becoming free is known as which ONE of the
following?
A
B
C
D

A transition economy
A transactional economy
A 'stuck in the middle' economy
An intermediary economy

1.5
as

Mutual 'promises' and 'expectations' of an employer and the workforce is generally known

A
B
C
D

the psychological contract.


the employment contract.
the person specification.
the job description.

1.6
A
B
C
D

Which ONE of the following activities is NOT associated with recruitment?


Conducting panel interviews
Performing a job analysis
Preparing job advertisement copy
Preparing a person specification

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1.7
An organisation that continually uses promotional offers in order to entice customers is
known as which ONE of the following?
A
B
C
D

Marketing orientated.
Production orientated.
Product orientated.
Sales orientated.

1.8
A technique depicting driving and restraining forces, sometimes used when overcoming
problems when introducing an information system, is known as which ONE of the following?
A
B
C
D

A fishbone diagram
A process map
A directional matrix
A force field analysis

1.9
Information indicating the profitability of potential markets is an example of which ONE of
the following?
A
B
C
D

'Blue sky' information


Operational information
Tactical information
Strategic information

1.10
An organisation that offers the same product to the market as a whole is said to engage in
which ONE of the following?
A
B
C
D

Unitary marketing
Concentrated marketing
Differentiated marketing
Undifferentiated marketing

Answer to Question One


The correct answers are:
1.1 B
1.2

1.3

1.4

1.5

1.6

1.7

1.8

1.9

1.10

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SECTION B 30 MARKS
Question Two
a) Describe FIVE possible reasons for the failure of a Total Quality Management (TQM)
programme within an organisation.
(5 marks)
A number of common reasons for failure of Total Quality Management (TQM) programmes exist
including those given below:
Poor project management
The introduction of the TQM programme may have been poorly project managed. This may have
resulted in key stages being overlooked and/or ineffective communication of aims, etc. so leading to
programme failure.
A lack of impetus
The implementation of TQM in an organisation is a long-term process. There may have been some
sort of a 'tail-off' whereby after an initial burst of enthusiasm, management and workers may have
failed to maintain interest.
Lack of genuine buy-in by top management
Successful introduction of TQM requires the commitment and support of top management. Programme
failure may result where management is not totally convinced by the value of TQM and/or only pays 'lip
service' to its principles.
Cultural resistance
If TQMs principles are not compatible with an organisations prevailing culture and ways of 'doing
things around here', there may be resistance or even rejection of TQM. (For instance, if the cultural
emphasis does not change from punishment of mistakes to encouragement and rewards then the
programme may fail.)
Deflection
The organisation may be deflected by other initiatives (e.g. business process re-engineering) or
problems (e.g. organisational down-sizing) which can take attention away from the programme
leading to its failure.
(Other valid responses are possible such as poor project definition, faulty resource planning and
allocation, a lack of progress monitoring mechanisms, ineffective communication and coordination,
inadequate attention given to education and training, threat to middle management, lack of
departmental alignment, etc.)

b) Explain the organisational benefits of introducing good Management Information


Systems (MIS).
(5 marks)
A management information system (MIS) refers to an organisational computer-based system that
provides managers with the information needed to manage operations. The benefits of having good
Management Information Systems include:

Potentially improved management control, better managed departments and more effective
operations.

Better informed decision making and improved forecasting, etc. thanks to the
comprehensive information available to managers.

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Improved satisfaction and motivation amongst managers as MIS will provide them with
effective tools to enable them to cope with job requirements better.

MIS provides middle managers with information to monitor the organisations activities leading to
improved budgetary control, inventory control, etc.

(Other valid responses are possible such as responsiveness, efficiency and reduced errors, etc. and
will receive credit.)

c) Describe FIVE significant advantages of web-based applications for an organisation.


(5 marks)
There are many significant advantages associated with web-based applications including those given
below:

Improved marketing operations thanks to online survey tools for customer feedback and
search engines for market research and competitor intelligence, etc.

A platform for doing business and internet shopping offering the potential to reach new
customers and markets.

The internet offers a tool for improved communication with stakeholders both internally
(amongst departments and groups) and externally (e.g. suppliers, customers, business
partners etc.) leading to greater cohesion and enhanced relationships.

The potential for members of the workforce to work at home or outside the organisations
premises generally leading to greater organisational flexibility and staff satisfaction.

Online customer services leading to enhanced customer responsiveness and loyalty.

(Other valid responses are possible including improvements to a supply chain leading to cost
savings and new business thanks to online contract tendering, etc.)

d) Describe FIVE potential risks associated with computer-based operations for an


organisation.
(5 marks)
There are several potential risks associated with computer-based operations for an organisation
including those given below:

The risk of unauthorised access from outside the organisation by 'hackers' or approved users
accessing information not intended for them. Such privacy and security breaches could lead to
data theft, fraud, vandalism, loss of confidentiality or industrial espionage, etc.

The risk of physical damage to systems and equipment due to natural disasters, including fire,
flood, heat or dust, etc. which could lead to a break down in operations or impediments in normal
day to day trading.

The risk of data corruption whereby reliability and continued operations are compromised by
viruses, the work of hackers, etc.

The risk of computer hardware and/or software malfunction due to programming and

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other unintentional errors, leading to operational problems, a loss of power, etc.

The risk to users of continued operation of equipment such as repetitive strain injuries, eye
strain, etc.

(Other valid responses such as inflexibility of operations, etc. are possible and these will also receive
credit).

e) Explain the reasons why a host country may encourage Foreign Direct Investment (FDI).
(5 marks)
Foreign direct investment (FDI) is a direct investment into another country normally by a
multinational enterprise (MNE), either by buying a local company or through 'greenfield' investment
whereby new facilities are created to take advantage of local conditions in that country. The benefits
of FDI for the host country include those factors listed below:
FDI is likely to create jobs for the local population and boost the economy generally.
Although the profits made by the MNE are still exported, the domestic economy should
benefit from the wages earned by the workforce and the income earned by any local firms
that supply the MNEs.

An influx of capital and increased local tax revenues will result in improved economic
growth in the host country.

FDI will lead to a transfer of new and advanced skills through the skills training invested by
MNEs in the local workers and the availability in the workplace of more advanced technology and
management approaches.

Host countries often try to channel FDI investment in 'greenfield' developments into new
infrastructure and similar projects so that benefits are shared locally.

Greater competition from companies controlled by MNEs can provide a stimulus to


productivity gains and greater efficiency by the countrys local companies.

(Other valid responses are possible and these will also receive credit).

f)

Describe briefly, the primary activities of a value chain.

(5 marks)
The concept of the value chain was developed by Michael Porter in the 1970s. The value chain is a
dynamic process view of an organisation with both primary and secondary activities. Briefly, the
effectiveness of how value chain activities are carried out determines the value that is created by the
organisation, its costs and, by implication, its profits.

Primary activities can be grouped into five main areas: inbound logistics, operations, outbound
logistics, marketing and sales, and service.

Inbound logistics: involves the receipt, storing and handling of materials acquired by the
organisation in their raw state.

Operations: involves the processes used to transform these basic inputs into finished
products.

Outbound logistics: involves the warehousing and distribution of finished goods.

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Marketing and sales: involves the identification of customer needs and facilitating the sale of
finished goods.
Service: occurs after sales have been made (e.g. installation, support and repairs, etc.).

SECTION C 50 MARKS
Question Three
Successive governments in the country of Rainland have tried to overcome the social costs associated
with the closure of certain high profile home-based companies by taking them into public ownership. As
a result, a variety of nationalised companies exist in manufacturing, coal and steel production, rail
travel, chemicals and aerospace. Most of these companies are regarded as inefficient and rely on big
government subsidies in order to continue to operate as going concerns. This is not however the case
for aRL, a large nationalised manufacturing operation. aRL is well managed, known as a 'good
employer' and has a well-motivated workforce. The company has successfully 'turned around' most of
its loss-making operations over the past few years and boasts high productivity levels per employee.
Following a recent general election in Rainland, a new Government with a different political agenda is
promising change. The new Government has announced that all nationalised companies must both
reduce their workforce 'full time equivalent' numbers by 50% and outsource a 'significant proportion' of
their activities over the next two years. In order to implement these new policies aRL's management has
identified three crucial questions:

Which of aRL's activities should be outsourced?


What are the ways of reducing workforce numbers whilst acting as honestly and as fairly as
possible, consistent with being a 'good employer'?

What are the consequences of an inevitable loss of motivation amongst aRL's workforce?
Required:
a) Explain how aRL's management should decide which of its activities should be
outsourced.
(10 marks)

Requirement (a)
Outsourcing involves dealing with key decisions an organisation makes over whether to perform
production or process activities itself or to sub-contract or outsource such activities to a third party. In
this case the impetus for change in aRL comes from the new Government. aRLs management will need
to take into account a number of different factors when deciding which of its activities should be
outsourced.
Activities that will contribute significantly to the required workforce reduction
Part of Rainland Government's programme for change includes a requirement for all nationalised companies
to both reduce their workforce and outsource a 'significant proportion' of their activities. Both initiatives are
linked - the very act of outsourcing activities will automatically reduce an organisations workforce numbers.
When deciding which activities to outsource obviously aRL will look at those areas that are labour intensive.
Labour intensive areas will make the most significant contribution to the 50% target. Activities within aRL that
are not very labour intensive could potentially be exposed to outsourcing but the impact would not be great
upon the headcount reduction required.
Activities where aRL currently has a difficulty
There may be activities within aRL where management recognises that it has a strategic weakness.
(Such a weakness may be as a result of a variety of factors, e.g. a lack of expertise, a failure to recruit
staff with the correct skills or a lack of investment in technology, etc.) Whatever the cause, this weakness
could be quickly remedied through outsourcing the activity.

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The nature of competence the activity represents: core competences


aRLs managements deliberations may be guided by an underlying understanding of competences
and their nature. According to Johnson, Scholes and Whittington (2008) competences are "the skills
and abilities by which resources are deployed effectively through an organisations activities and
processes. Strategic competences can be classified as either 'threshold or 'core' competences.
Threshold competences represent the level of competence necessary for an organisation to compete
and survive in a given industry and market. (For example, a manufacturing operation such as aRL
must, like all its competitors, have a logistics system that allows goods to be delivered to their
customers as promised) . Core competences by comparison involve something the organisation
does that underpins a source of competitive advantage it holds. For example, if aRL has a superior
logistics system capable of delivering goods a day or two earlier than its rivals, this represents a
core competence.
A step in the decision making process for aRL therefore is to categorise the nature of the competences
underpinning the activity concerned and ensure that threshold competences are maintained through
outsourcing and core competences are protected at all costs. Cox (1996) expands the competence
categorisation to include 'complementary' and 'residual' competences and suggests that companies
should never consider outsourcing core competences due to the need for maintaining a competitive
advantage.
The nature of competence the activity represents: complementary competences
Following Coxs categorisation of competences (1996) aRLs management should decide which of its
activities can be classified as 'complementary' competences. In such cases, aRL should consider
outsourcing, but only if there are trusted suppliers and management are confident it has the necessary
skills to supply the service to an appropriate standard. To ensure continuity of supply aRL should also
consider developing a strategic relationship with the supplier.
The nature of competence the activity represents: residual competences
Following Coxs categorisation of competences (1996) once more, aRLs management should decide
which of its activities can be classified as lower level 'residual' competencies. In these areas, aRL should
consider outsourcing by means of an 'arms length' relationship as there is less risk involved.
Experience of others
When deciding which of its activities should be chosen, aRLs management should take account of the
experience of other public sector and competitor organisations when undertaking outsourcing. Those
areas that appear to have been successfully outsourced by others may guide aRLs future practice.
Reputation and nature of supplying companies
The reputation of potential contractor companies (in terms of reliability, quality of work, price, etc.) and
nature of that contractor (e.g. in terms of history, size, capability, etc.) may guide thinking on which areas
should be exposed to outsourcing. If there are several trusted contractors in a particular area the risk of
outsourcing would be lessened.
Potential to become a core competence
Quinn and Hilmer (1994) identified three tests for outsourcing the first being "what is the potential for
gaining competitive advantage from this activity, taking account of transaction costs? The lower the
potential, the more sensible it is for aRL to outsource. Conversely aRLs management should be wary of
outsourcing any activity that could potentially become a source of future competitive advantage if retained
in-house. Core activities are precious and should not be trusted to outsource partners.
The likelihood of market failure
The second of Quinn and Hilmer's (1994) tests is what is the potential vulnerability to market failure that
could arise if the activity was outsourced? It follows that the lower the risk, the more sensible it is for aRL
to outsource the activity. The higher the risk the less inclined aRLs management should be to expose

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this area to outsourcing.


Identifying necessary safeguards
The final Quinn and Hilmer (1994) test is what can be done to reduce risks of market failure or nonperformance by structuring arrangements with suppliers in such a way as to protect ourselves? The
issue for aRLs management is to consider whether adequate protection can be put in place and only if it
can should outsourcing take place.
(Other valid responses are possible and these will also receive credit.)
b) Describe initiatives aRL can take to achieve the job reductions whilst maintaining the
company's reputation as a good employer. (10 marks

Requirement (b)
In order to implement the Governments policy aRLs management have identified three crucial questions
to be addressed including how to reduce workforce numbers whilst acting as honestly and as fairly as
possible, consistent with being a 'good employer'. Above all else, aRL will wish to preserve the
reasonable expectations an employee might have of it as an employer (e.g. to be treated 'properly' in
return for fulfilling a number of reasonable requirements). This thinking forms the basis of the
psychological contract which is important in a number of ways due to its impact on HR issues such as
motivation (and therefore productivity) and retention. If employees believe that management has broken
this 'contract' a negative impact might result leading to difficulties such as job dissatisfaction and lack of
individual commitment, etc.
Minimising human cost
As a good employer aRL will, as far as possible, want to minimise the human cost involved whilst
achieving job reductions. This means that the actions will need to be sensitively handled and
management should seek to cushion negative impacts upon any individuals affected. Consideration
should be given to ways of compensating individuals for loss or minimising the severity of actions that
could be taken.
Reduce numbers through natural wastage, etc.
As a first step, aRL should review current staff turnover rates and then determine how much of the 50%
reduction can be achieved through 'natural wastage' due to normal turnover. aRLs management should
also be able to use its human resource records to project the number of staff who will reach retirement
age within the next two years. Normal retirements and natural turnover will contribute to the 50% target
and aRLs management should then make clear the projected job losses that will also be required to meet
the government target. Honesty in this matter and realistic estimates should help preserve the
organisations reputation as a good employer.
No further recruitment
Given the requirement to reduce staff numbers, aRL should put an embargo on further external
recruitment early on. Instead the organisation should seek to fill vital posts from 'within'. In addition,
aRL should also stop any overtime working and seek to spread excess work to other under-utilised
employees. Measures such as these will help preserve existing jobs.
Encouraging those over retirement age to leave
There may be certain employees who are over 'normal' retirement age but who choose to continue to
work. After discussions with trade union groups it may be possible to encourage such staff to retire
(possibly by offering inducements).
Communication and transparency of the process
Key features of the operation of an organisation considered to be a 'good employer' include effective
communication and transparency of processes. aRL will therefore need to consider and discuss possible
alternative actions with the relevant trade unions and/or staff representatives and be clear as to how it

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intends to conduct the process and the timescales involved. The important thing is that any proposal for
change in response to the Government policy is formulated in conjunction with key stakeholders (not
least key employee groups) rather than being devised in private and then presented as a fait accompli.
Counselling and practical support
As a good employer, aRL should consider appropriate and varied forms of support for individuals
affected by job reductions. This might involve organising counselling and peer support groups, support
for those retiring early and (if there is an embargo on recruitment) retraining opportunities for those with
skill deficiencies in order to undertake different roles within the company.
More flexible working practices
The new Government has announced that all nationalised companies need to reduce their workforce by
50% (calculated as computed 'full time equivalent' numbers). aRL may give consideration to adopting
more flexible working practices such as offers of job-sharing between two or more people, and/or a
shorter working week for certain groups. Measures such as these will preserve employment, reduce the
computed 'full time equivalents' so contributing towards the 50% target (but will not reduce absolute
payroll numbers).
Help for redundant workers
If, as a last resort, there is a need for compulsory redundancies, aRL must follow any established and
agreed processes. For those workers made redundant the organisation should do all it can to assist
displaced individuals to find new work, by offering a range of opportunities such as retraining, career
coaching, sessions in CV writing and financial advice, outplacement consultants and job fairs, etc. in
order to get redundant workers back into work as soon as possible.
Redefining roles sensitively
In order to improve an employees contribution, a number of management approaches are generally
adopted including job enlargement (expanding a job role with tasks at a similar level of difficulty), job
rotation (a periodic swopping of roles) and job enrichment (adding tasks that might normally be carried
out by someone on a superior grade) . It is clear that aRL will need to readjust its workforce and working
practices in the future but these measures should be used sensitively for fear of underlying motives
being misinterpreted by a less trusting workforce.
Outsourcing negotiations
As explained in part (a), Rainlands new Government now requires nationalised companies such as
aRL to both reduce workforce numbers and outsource a 'significant proportion' of their activities. Where
(presumably) non-core activities are outsourced it may be possible to try to negotiate terms whereby
aRL staff potentially displaced through outsourcing are taken on by the contractor, so preserving
employment of individuals, albeit outside the company.
(Other factors may be valid and if identified will also receive credit.)

c) Describe the likely impact of a loss of motivation amongst aRL's workforce.


(5 marks)

Requirement (c)
aRLs management has rightly identified the consequences of an inevitable loss of motivation
amongst its workforce as a crucial issue.
The new Governments requirement for all nationalised companies to reduce their workforce by 50%
and outsource a 'significant proportion' of their activities over such a short space of time is bound to
impact negatively on the workforce of such companies. There is likely to be a particular feeling of
injustice amongst aRLs workforce because the company is not regarded as inefficient and unlike
others, does not rely on big government subsidies, indeed certain loss making operations have been

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turned around over the past few years.


Motivation has been defined as "the driving force within individuals by which they attempt to achieve some
goal in order to fulfil some need or expectation (Mullins, 2007) . Levels of motivation influence both
employee productivity and quality of work. The likely impact of a loss of motivation amongst its workforce
might show itself in a number of ways including those described below.
Loss in productivity through increased absence through sickness
aRL currently has a well-motivated workforce with high productivity levels per employee. A loss in
motivation often shows up as increased absence through sickness and less productivity generally. The
danger for aRL is that if absence through sickness increases the current high levels of productivity will
fall, the company will be less competitive and may not operate as efficiently as it has in the recent past.
Damaged industrial relations
Key ingredients for positive industrial relations are currently present within aRL: good management, a
highly motivated workforce and high productivity. If motivation diminishes this could lead to difficult
industrial relations and disputes that can be harmful to productivity and profitability targets.
Increased worker turnover
Typical consequences of a loss of motivation amongst any workforce includes poor staff retention and
greater levels of staff turnover. Given the current Government policy requirement, this may appear at first
sight to be a good thing. This is not necessarily the case as there may be an exodus of aRLs most
talented workers in areas that the firm does not wish to outsource. This could leave the firm exposed and
with a staff-skills mismatch and gaps in key abilities and talents.
Damaged organisational culture
A relatively recent concept of organisational citizenship behaviour (OCB) describes the efforts of those
who voluntarily undertake innovative, spontaneous tasks that go beyond their normal job role. Organ
(1988) describes such behaviour as discretionary, not directly or explicitly recognised by the formal
rewards system and that in aggregate promote effective functioning of an organisation. Clearly such
behaviour is most apparent in organisations that have positive inclusive cultures that value team work and
adopt supportive management approaches. It could be reasonably speculated that aRLs relatively
encouraging corporate performance is partly as result of a positive organisational culture. A loss of
motivation amongst aRLs workforce could damage this positive culture. A weakened culture can harm
the long term future of the firm by damaging innovation and creativity.
Diminished 'feel-good' factor
Motivated workers often take pride in the organisation they work for. This is likely to be the case for
aRL which is well managed and known as a 'good employer'. If motivation within the workforce falls
away because of unfavourable government announcements there will be a diminished feel -good
factor, less positive feelings towards the organisation, lower productivity levels and poorer quality work.
(Other factors e.g. a threat to the preservation of the existing psychological contract are valid and will
receive credit.)

Question Four
You are a management consultant with expertise in operations and marketing and have been asked to
make a presentation to a conference for automobile (car) industry managers. Senior managers from all
disciplines (including operations, finance, marketing, production and human resources) will attend the
conference.
In a briefing from conference organisers, you understand that you will need to cover two areas of
particular interest to conference delegates, specifically demand and capacity planning and the marketing

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implications of 'new generation' cars. Apparently, much research and development has gone into the
development of cars that are more environmentally friendly than in the past, particularly with electric,
hybrid and lower CO2 emission models. What is different about 'new generation' cars is the use of
hydrogen rather than petrol or diesel as fuel. (Hydrogen is burnt in a conventional internal combustion
engine but produces no CO2 emissions, only water and heat). A further feature of 'new generation' cars is
an aim to manufacture car body parts from at least 80% recycled materials. A few companies are due to
launch their version of the 'new generation' car in spring of next year.
You conduct further research which indicates some significant facts including those shown below:

Companies that have been commercially successful with more environmentally friendly
models in the past are those with the strongest brand name.

The automobile industry is highly competitive and globally there is 'overcapacity'. In some
countries and at certain times however, there is unfulfilled demand for specialist makes and
models. (You are already aware of different planning strategies for dealing with variations in
demand and matching production capacity including 'level capacity', 'demand management'
and 'chase demand' strategies.)

Required:
For the benefit of the senior managers who will be at the conference:

(a)

Explain the implications of different capacity planning strategies.


(10 marks)

Requirement (a)
The implications of operating particular capacity management strategies for automobile producers will be
of relevance to several types of manager who will be at the conference including operations managers,
finance managers, marketing managers, production managers and human resource (HR) managers.
The need for capacity management
All organisations are capacity-constrained to a degree and so methods of 'balancing' demand and
productive capacity is a key challenge in operations management. Capacity and hence supply is fixed by
factors largely internal to a particular organisation such as its facilities, systems, technology, human
resources and capability, etc. Demand is by comparison less easily controlled by an organisation as it
represents a force external. Inevitably there will be fluctuations between these two dimensions of supply
and demand. For automobile producers, like any other organisation, effective capacity management is
vital. Effective capacity management ensures that customers needs are more effectively met and that
there are fewer unfulfilled delivery date promises.
Although globally there is 'overcapacity' in the industry there is excess demand for specialist makes
and models in certain parts of the world. There are several strategies available to the industry for
dealing with variations in demand and matching production capacity including 'level capacity' planning,
'demand management' planning and 'chase demand' planning.
About level capacity
The level capacity approach concentrates on inventory levels and so is of particular interest to
operations managers, and (because of the consequent revenue requirement), finance managers.
Level capacity involves building inventory to levels sufficient to deal with increases in demand beyond
what is normally expected. For the automobile industry this suggests a building of buffer stocks of cars to
deal with periods of excess demand.
By adopting a level capacity strategy customer satisfaction may be improved short term by making

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immediate or near-immediate delivery possible so doing away with waiting lists and extended delivery
periods. Level capacity does however increase stockholding costs and demands more working capital to
build stocks. This approach may be effective but comes at a cost and may not be the most effective
means of capacity management.
About demand strategies
The demand strategy approach as its name suggests, concentrates on demand rather than supply. Demand
may be external but strategies can attempt to influence it by 'smoothing' variations so that a seller of cars is
better able to cope. In effect, demand is manipulated so that it is 'made' to 'fit' supply capability. This will
be of particular relevance to marketing managers in the automobile industry. Marketing managers will
want to ensure that the basic marketing mix of product, price, promotion and place is appropriate. This
may involve, for instance, varying the price of cars to either encourage or cool demand, intensify
promotional activity in 'slack' periods and restrict sales outlets (place) when there is excess demand, etc.
Benefits: A clear approach.
Implications: these marketing tactics represent short-term practices and may not benefit the organisation
long-term. Customers may decide to switch to a competitors product when full prices are applied or when
promotional campaigns are over.
In the UK, car sales are seasonal and generally peak twice yearly, coinciding with changes in the type of
car registration plate numbering. In the months immediately before a change of car numbers prices tend
to be discounted and 'deals' offered. For finance managers, profitability may be affected as a result of
financing sales promotions and price reductions as part of a demand strategy.
About chase strategies
The chase strategy approach concentrates on levels of activity, and involves the car producer constantly
adjusting activity levels to shadow fluctuations in demand. This will be of particular relevance to both
production managers and human resource (HR) managers. HR managers will be looking to develop a
flexible workforce, flexible structures and appropriate HR policies and practice in terms of rewards,
recruitment and training to allow the organisation to display maximum flexibility and responsiveness to
customer demands. So for example, core working hours could be adjusted so that in times of high
demand workers may work (say) a 50 hour week and in slack periods a 30 hour week. In addition, skill
flexibility might be achieved by cross training employees to perform different operations.
Benefits: By flexible approaches to resourcing 'peaks and troughs' might be accommodated and
customer demands met.
Implications: A supportive culture and good industrial relations need cultivating.
A combined approach
Rather than adopt one strategy or another, in reality most organisations combine several approaches
when managing capacity. In the automobile industry manufacturing plants already often hold finished
cars that have yet to be ordered, while promotional activity and price cutting is often aimed at selling
certain types of cars that will soon be replaced by newer models. At the same time modern automobile
workforces often exhibit highly flexible approaches.
(Other valid responses are possible and will also receive credit.)

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(b)

Explain the reasons why a strong brand could be important to the success of 'new
generation' cars.
(10 marks

Requirement (b)
'New generation' cars are fuelled by hydrogen and constructed with body parts from 80% plus recycled
materials. They will represent a new and costly development for any car producer in terms of research
and development. Significantly a strong brand could be important in determining the success of such a
development for a particular company. Little wonder then that the most favourable brands are a
significant source of organisational strength and may even be a key organisational asset.
Past history and buying patterns
Car companies with the strongest brand name have, in the past, been successful with more
environmentally friendly models (such as electric, hybrid and those with lower CO2 emissions). In
short a strong brand is good for sales to customers with particular environmental concerns and this
trend is likely to continue for 'new generation' cars.
Strong brands lead to customer loyalty and repeat sales
When customers have a level of familiarity and recognition for a particular car name and its associated aspects
such as badges, symbols and slogans, brand awareness has been achieved. This awareness will hopefully
lead to brand loyalty and repeat sales of cars from a particular company. It is likely that this pattern will
extend to new generation cars produced by a particular motor company.
Strong brands communicate a companys vision
Brands are a quick way of communicating to the market place what an organisation stands for. As well as
communication of the unique product characteristics, brands assist image creation and vision projection.
These factors could be important in the production and subsequent sale of 'new generation' vehicles. If a
narrative can be developed that a certain brand has, in the past, demonstrated its green credentials and
the 'new generation' cars are a natural extension of this policy then potential customers may respond
favourably.
Strong brands help product differentiation
A strong brand distinguishes one company from its competitors by making it easily recognisable. In this
case, a particular difficulty is that there are plenty of cars on the market and competition in the industry is
intense. This makes the value of a particular brand more important because it helps draw attention to
features that differentiate one make of car from another. Certain brands may present an image of
themselves as being good at getting cars to market first, or good at introducing 'greener' cars that
maintain performance whilst others may appear to be a 'less risky' option for a buyer, etc.
Strong brands generally command premium prices
Brands that communicate a car manufacturer's social and environmental credentials will allow it to
charge more for its vehicles. There will be consumers who naturally choose socially and environmentally
responsible products over others and are prepared to pay a little more to do so, particularly where a
brand is attached that is desirable. This may be crucial because, due to high research and development
costs, the unit costs of 'new generation' cars are likely to be relatively high in the short term.
Strong brands infer superiority of a particular car
Branded goods will always attract higher prices than unbranded products. The appeal of brands is
that these goods are somehow perceived as being 'superior' in some way. Given the additional
production and research and development costs associated with 'new generation' cars those
companies with a strong brand could be important to the success of 'new generation' cars.
Strong brands connect with the customer base

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Successful brands create special relationships with customers because of their intangible qualities that
provoke strong emotional responses by individuals. A brand represents the linkage between the product,
what it stands for and the consumers' own beliefs. Modern consumers have higher expectations of
companies than ever before, thanks to greater choice of products and easy access to company
information. A brand is a way of describing all the information or perceptions that are connected with a
particular product or service. The brand is therefore important in captivating consumers and fulfilling their
expectations. It is likely that the strongest brands will more easily make such a connection with
customers in relation to 'new generation' cars.
Strong brands allow customers to 'make statements'
Brands are important because they allow individual customers to make statements about themselves.
For instance, branded watches, footwear and clothing help project images for those who wear them as
being either sophisticated, trendy, fun-loving or sporting etc. In the case of 'new generation' cars, it is
likely that customers will feel that they have (however indirectly and modestly) somehow contributed to
some worthy environmental cause and will wish to demonstrate this by driving the make of car they do.
Strong brands offer reassurance over the purchase
Potential customers of vehicles with new technology such as 'new generation' cars may initially have
concerns over unproven technology, potential repair costs, safety risks and concerns over resale value
etc. In this respect brands may offer some reassurance. Following a purchase, the individual customers
will inevitably consider whether they made the correct choice or not, particularly when a less well
established product is purchased. Companies with the most reliable brand will give greater reassurance
to a purchaser of a 'new generation' car.
(Other valid responses are possible and these will also receive credit.)

(c)

Explain how future sales of 'new generation' cars might be understood in terms of the
main stages of the product life cycle.
(5 marks)

Requirement (c)
The product life cycle
Classically, marketing theory explains products as passing through a cycle of life normally depicted in
terms of time on the horizontal x axis and revenue on the vertical y axis. Most products are said to have
a life cycle, which has certain distinct stages which the model assumes all products pass through.
(Certain products (e.g. Kelloggs cornflakes) have existed in their present form for many years throwing
doubt on the theory, however this thinking remains popular).
If the life cycle theory is correct, its associated stages may offer insights into future sales of 'new
generation' cars, which is an area of particular interest to conference delegates.
Introduction stage
The introduction stage of the life cycle reflects when an organisation starts to produce and sell a new
product. This is the stage at which 'new generation' cars have reached (a few companies are due to
launch their version of the car in spring next year). Relatively high prices tend to be charged at this stage,
because the product is new, supply is limited and there are heavy research and development costs to
recover. At this stage, demand and hence sales are low and heavy advertising or other promotional
activity may be necessary to make customers aware of the product and introduce them to the potential
benefits of 'new generation' cars.
Growth stage
The next stage of growth recognises the increasing success of the product reflected in increasing sales
thanks to demand for the product building within the industry as a whole. Marketing messages have been
heeded by customers. Unit prices may fall, but profits may improve because of the higher volume of
sales. It may be that product design of 'new generation' cars may improve as car producers gain

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production and marketing experience.


Furthermore car companies are likely to enter the market and start producing further versions of 'new
generation' cars. As the product is proving successful, competition between rival producers intensifies.
The most significant feature of this stage is increasing complexity as the range of products widens as
producers seek to attract customers from each other with novel features. The marketing focus is upon
differentiating the firms product and brand in the minds of customers.
Maturity stage
The maturity stage represents the longest stage in the life cycle of most successful products. This is
where sales settle down into a pattern of replacement purchasing and overall industry sales remain
consistently high but do not peak any further . Demand has reached its limit. For producers of
successful 'new generation' cars there will be no further research and development costs. As there is
market awareness, promotional costs will also reduce. At the same time sales should remain constant in
the industry as a whole.
Decline stage
The final stage of the life cycle reflects a decline of product sales as technically superior alternatives
replace the product (in this instance possibly new vehicles with even cleaner, greener fuel sources or
more recycled parts may become available) . The existence of these rival products will cause sharp profit
reductions among manufacturers and many car companies will switch production away from 'new
generation' cars. As demand starts to fall, so prices (and profits) reduce until eventually the product
disappears from the market.
Note: some marketing thinkers add the additional stage of 'shake-out' between growth and maturity
stages where the weakest producers are 'shaken' from the market and cease production.

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E1 Enterprise Operations
September- 2014
SECTION A 20 MARKS
Question One
1.1

The need for external accreditation is associated with which ONE of the following?

A
B
C
D

Total Quality Management


SERVQUAL
ISO 9000
Six Sigma methodologies

1.2 Process maps can highlight which ONE of the following:


A
B
C
D

Incidences of where costs arise in a process


Incidences of where benefits arise in a process
Duplication and unnecessary steps in a process
'Floats' in a sequence of activities

1.3
According to Michael Porter's value chain which primary activity immediately follows the
activity 'operations'?
A
B
C
D

Outbound logistics
Inbound logistics
Infrastructure
Marketing and Sales

1.4
Shifts in long-term trade balances are generally associated with which ONE of the
following?
A
B
C
D

Macroeconomic developments
Corporate social responsibility
Corporate political activity
Economic nationalism

1.5
Which ONE of the following systems allows for rapid change to manufacture different
products in different volumes in response to the demands of a particular customer?
A
B
C
D

Standardised production
Mass production
Queuing theory
Flexible manufacturing

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1.6

Country risk can be understood in terms of which ONE of the following sets of factors?

A
B
C
D

The nature of a business including ownership issues


Threshold and core competences
Asset specificity and branding issues
Political, financial and economic factors

1.7
A system of creating, capturing and sharing skills, experiences and expertise is known as
which ONE of the following?
A
A training needs analysis
B
A knowledge management system
C
Teleworking
D
Business Process Re-engineering
1.8
Which ONE of the following is NOT a recognised approach to outsourcing an
organisation's IS function?
A
B
C
D

Multiple
Collaborative
Total
Joint venture

1.9

A technostructure is mainly concerned with which ONE of the following?

A
The engineering departments within an organisation's structure
B
Downsizing and strategic realignment of the organisation
C
Offering technical expertise and control to the organisation as a whole
D
Implementing value for money reviews within an organisation
1.10 The term 'data redundancy' refers to which ONE of the following?
A
B
C
D

Lost data
Inaccurate data
Duplicated data
Old archived data

Answer to Question One


1.1 C
1.2

1.3

1.4

1.5

1.6

1.7

1.8

1.9

1.10

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SECTION B 30 MARKS
Question Two
a) Explain the difficulties associated with the management of geographically dispersed
(virtual) teams.
(5 marks)
Some technological difficulties
Geographically dispersed (virtual) teams work across time and space by utilising advanced
communications and information technology. This reliance on technology means that (for instance) an
area with lower bandwidth communication, localised power cuts, etc. coupled with diverse working hours
can cause coordination and productivity difficulties.
Communication can be inferior
Electronic communication methods (e.g. webcams, e-mail, online forums, etc.) are not as rich as
traditional face-to-face communication. Subtle changes in a tone of voice or body language, etc. can be
'missed' when using e-communication methods which could possibly lead to misunderstandings and
mistakes.
Set-up costs
Unlike traditional office working, remote teams require objectives and work tasks to be more fully
documented and tracked through online systems. Setting up and maintaining these systems can be
costly and time consuming
Monitoring difficulties
Virtual environments mean that managers cannot see individual workers, stop at their workplace and ask
them what they are working on and how they are progressing. This makes it harder to monitor an
individuals effort and wellbeing.
Maintaining a corporate culture
A shared organisational culture is harder to manage when the team is distributed. It is also harder to
create a sense of camaraderie through non work-related activities. (It may even be necessary to get the
team together in person at regular intervals for these reasons).
(Other valid responses are possible such as a requirement for new skills and behaviours by
managers, etc. and these will also receive credit).
Note: The Examiner's answers and subsequent marking scheme have been prepared on the basis that
the teams are geographically dispersed but from within the same organisation. Cross organisational
teams do exist and this might legitimately be reflected in alternative answers which will also receive credit.

b) Describe FIVE disadvantages of free trade for a country.

(5 marks)
There could be a lack of protection for young firms trying to establish themselves in
emerging industries meaning that they may have difficulty competing with longer
established foreign competitors in the short term.

Free trade may undermine a distinctive national culture, possibly including its language
and way of life (e.g. through the undue influence of multinationals or creeping
'Americanisation') and this may be seen as undesirable.

Free trade can potentially reduce national security by encouraging a reduction of border
controls, etc.

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With the specialism that free trade brings, individual countries become overly dependent
upon supplying a narrow set of products or services, and do not develop alternatives (e.g.
over dependency on oil exports by oil rich nations). This may be risky if such products become
less popular or alternatives are developed.

International free trade can be inefficient and environmentally damaging. Free trade raises
consumer expectations leading to (for instance) the costly shipping of 'out of season' fruit and
vegetables from the other side of the world.

(Other valid responses are possible and will receive credit)

c) Explain the main reasons for a government's taxation of individuals.


(5 marks)

In addition to taxing profits of business, governments may tax individuals in order to help finance
government programmes of spending from both direct tax (income tax on earnings) or through indirect
taxes (taxes on consumption). A general tax on consumption may be a flat rate general value added tax
(VAT) percentage which the vendor must pay to the government.
A government may use indirect taxation to encourage or discourage particular patterns of
consumption and examples are given below:

Import duties: to encourage consumption of home produced goods and services, and
discourage imports.

Hydrocarbon tax: to discourage the use of cars and the associated damage to the
environment through a heavy tax on fuel.
Tax on demerit goods: to discourage consumption of these goods and habits like smoking
(by applying a tobacco tax) because of health concerns for society and, possibly to reduce
the demands on the health provision in the country.

Variable rate value added tax: a government may decide to apply variable rates of value added
tax to different products. For instance there may a lower rate applied to books (in order to
encourage literacy) than chocolate (which might be considered a luxury item).

(Other valid responses are possible and these will also receive credit).
d) Explain the FIVE 'spokes' in Cousins' strategic supply wheel.
Cousins (2000) strategic supply wheel depicts the corporate supply strategy at the hub of a wheel and
underlines the need for an integrated approach to implementing a supply strategy. This involves
balancing all five spokes in the wheel. These spokes are given below:

Organisational structure (e.g. centralised, decentralised, matrix, etc.) affects interactions with the
rest of the organisation and the way in which control is exercised.

Relationships with suppliers (whether based on price, partnership sourcing or some other
basis).

Cost/benefit analysis as central to rational strategic decision making within the organisation.

Appropriate skills and competencies of staff to deliver the organisations strategy.

Appropriate performance measures, both internal and external, for monitoring and control of a

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strategy
e) Describe FIVE features of a service which are not found in a product.

(5 marks)
A product is a visible and tangible object, while services are intangible. Products can
therefore be inspected / sampled before buying, services cannot. It is also more difficult to
measure the quality of a service than it is for a physical product, (although SERVQUAL
attempts to do this).

Services are consumed immediately and therefore cannot be stored.


In a product manufacturing organisation there is normally a physical separation of production and
purchasing processes. However customers participate directly in the delivery process of a service.

When evaluating the quality of a service, customers will take into account the face-to-face
contact and the social skills of those providing the service.

Services tend to be more labour intensive than for products where manufacture may be
heavily automated.

(Other valid responses are possible and will receive credit e.g. a service can be paid for but not owned
(a product can be bought and owned), products can be standardised more easily than services which
customers like to be customised to their needs, etc.)

f) Explain briefly, the problems involved in offshoring part of an organisation's activities.


(5 marks)

Offshoring involves transferring some part of the organisations activities to another country.
Managing operations across national borders can lead to significant issues in areas such as:

Language barriers leading to potential misunderstandings and communication difficulties.

Time differences caused by operations in different time zones meaning that liaison may be
difficult and responses to queries may involve delays.

National cultural differences (as explained by Hofstede and others) can lead to
frustrations and misunderstandings.

Normally offshoring occurs in order to exploit lower labour costs in another country. The effects of
variations in currency exchange rates can undermine these potential costs savings.
The 'host' countries in which offshored activities are performed may not respect basic human rights to
a sufficient degree and may permit exploitation of workers, etc. which can lead to ethical dilemmas and
also attract adverse publicity for the organisation.
(Other valid responses are possible and these will also receive credit).

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SECTION C 50 MARKS

Question Three
M09 began long ago as a family-run business producing high quality chocolate bars for sale from a shop
at the back of a small factory. Since this time there has been considerable change and the company has
grown rapidly over the past five years. M09 now operates a chain of specialist chocolate shops located
in many major shopping malls as well as supplying its products for sale through two large supermarket
chains. The main reason for M09s growth has been the careful acquisition of a number of smaller
manufacturers of specialist snacks and bottled drinks. Each of these manufacturers has continued to
operate as a separate business unit.
At a strategic planning meeting a number of weaknesses were identified.

Thanks to its acquisition strategy M09 now has four head offices as well as many different
systems and support structures.

M09s technology lags behind that of its competitors and needs investment. The companys
marketing and human resource (HR) operations are also weak relative to others in the same
industry.

M09 has many middle managers performing a diversity of roles. For instance, human resource
specialists assist managers in chocolate production units with HR issues, whilst in other units
there is no such support. This means that in addition to their other duties and responsibilities
these managers are responsible for all the 'hiring and firing' of the units factory workforce.

As a result of this analysis M09s Chief Executive has announced a centralisation of support in a single
headquarters and has appointed a Director of Human Resources and a Director of Marketing to newly
created posts. Both of these new directors have been asked to establish effective centralised directorates
and identify their priorities to 'make a real difference'. Two weeks later the new directors present their
thinking on how to make a difference.

The Director of Human Resources feels that many of the existing administrative and
management systems are outdated and need replacing. She is aware of an advanced
centralised People and Payroll system that will be on the market within the next two months.
The software has a hand-held web browser facility and enables managers to have immediate
access to information on diaries, overtime, holidays and sickness, and direct timesheet entry
into a central payroll system (instead of relying on manual entry systems). The system produces
high quality information including productivity ratios for managers to use.

The Director of Marketing believes that M09 needs to review its portfolio of products. He
believes that market research is needed to better understand consumer behaviour which will
help guide future marketing practices.

Required:
a) Explain the contribution M09's newly established Human Resource Management (HRM)
directorate can make to future operations.
(10 marks)

Requirement (a)
M09s new Director of HR has been appointed to 'make a real difference' and the establishment of a
professional, effective centralised Human Resource Management (HRM) directorate can contribute
much to the successful future operation of M09 as a whole.

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Overcome identified strategic weaknesses


A number of strategic weaknesses exist within M09 including the companys Human Resource (HR)
operations relative to others in the same industry. Under current arrangements certain managers are
primarily concerned with day to day people related issues. Indeed, it could be argued that the continued
operation of these units in this way has prevented M09 as a whole from functioning in a truly strategic
way. As a result M09s Chief Executive has announced a move towards combining support into a single
central headquarters and has appointed a Director of Human Resources. An effectively led, cohesive
Human Resource Management (HRM) function can overcome this strategic weakness.
Alignment of human resource and corporate strategies
The new directorate can help M09 achieve its corporate goals through concentrating on the performance
of its most valuable asset, its people. Centralised HRM can offer a focus for strategic people
management by developing procedures and strategies that support achievement of corporate strategies
across all M09s operations.
Economies of scale
The way in which M09 has dealt with HR issues in the specialist snack and bottled drinks units until now
is likely to be producing operating inefficiencies. These divisions are currently deprived of the advice of
Personnel or HR specialists on issues such as optimum staffing levels and skills mix, etc. to the detriment
of operating efficiency. Taking (for example) the process of placing advertisements for new workers,
managers in the specialist snack and bottled drinks units would have to prepare newspaper copy, then
make arrangements for and then pay for each advert placed. In the confectionery divisions personnel
specialists take on this burden and (presumably) negotiate discounted advertising rates for 'volume'
business. A wholly centralised function would achieve even greater economies through a higher volume
of business.
Adopt specific HR theories and ideas
HRM importantly can help M09 adopt contemporary thinking and best practice in areas such as the
acquisition, motivation, development and management of an organisations workforce. A centralised
dedicated HRM function would be more familiar with the specific theories and activities and best
practice of HRM in a way that would not be possible for most line managers. HRM specialists
knowledge of these factors can be shared within the organisation.
Compliance
HRM importantly can ensure that the organisation complies with current employment and related laws.
Legal compliance in recruitment and dismissal (for instance) may be faulty where it is conducted by
middle managers in certain units who may not have been fully trained in the latest laws. This can lead to
the risk of the organisation being sued, which can be expensive, internally damaging and attract adverse
public relations.
Consistency and fairness
HRM can ensure that there are standardised, consistent, robust practices and mechanisms across the
whole of M09. At the moment differing standards, practices and demands in roles, responsibilities,
recruitment, reward and appraisal will lead to inconsistent outcomes and certain workers being treated in
an inequitable fashion. In summary, a centralised HRM function will help ensure that there is a
consistency and fairness in the treatment of all of M09s individual workers.
Support for managers
HRM specialists from the newly created directorate can offer expertise and guidance to individual
managers on one-off HR difficulties and issues and so help them meet their objectives. M09s middle
managers perform a wide diversity of roles. Whilst specialists assist managers in chocolate production
units in other units there is no such support meaning in addition to their other duties and responsibilities
these middle managers are responsible for all the 'hiring and firing' of the factory workforce. Without

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support, inexperienced or under pressure managers may feel isolated or have difficulty coping. In
addition, these managers might appear to be underperforming relative to their counterparts in other units
simply because they are unable to concentrate fully on other parts of their job because of HR
'distractions'. They may also be envious of other managers and this might lead to conflict and disrupt
working harmony.
Rationalise HR provision
The new directorate offers an opportunity to rationalise HR provision in M09. Best practice from all areas
of M09 can be shared and embedded as part of a rationalisation of HR provision. The current lack of
specialist support means that a more comprehensive package of services including induction, training,
career planning, etc. is only possible in the main chocolate producing unit. It is said that middle managers
in other units are responsible for all the 'hiring and firing' of the factory workforce, which suggests a lack of
emphasis on a wider pattern of HR provision. By implication workers in these units are denied access to
training and effective induction, etc.
Career planning and reduced staff turnover
Under the existing arrangements managers may not be aware of vacancies elsewhere within the
group. Workers who have 'outgrown' their job or need personal development in certain areas would be
forced to make their own arrangements which could lead to them leaving the organisation. This
represents an unnecessary and expensive 'drain' of talent which can be remedied by the new
centralised directorate.
Standardise the middle managers role
M09s many middle managers perform a wide diversity of roles with some being more closely involved in
human resource issues that others. A newly established Human Resource Management (HRM) function
can help standardise the role of and expectations of all these managers and so contribute positively to a
more rational approach to the management of the companys operations.
(Other valid responses are possible and these will also receive credit).

b) Explain how the People and Payroll system could benefit M09. (10 marks

Requirement (b)
The new Director of Human Resources has been asked to identify her priorities to 'make a real
difference'. She feels that many of the existing administrative and management systems are outdated
and need replacing. She is also aware of a revolutionary central People and Payroll system that will be
on the market soon. The proposed system could offer a number of benefits to M09 including those
outlined below:
System integration
A strategic planning meeting identified M09s many different systems and support structures as a strategic
weakness. The People and Payroll system can help address this weakness. The solution will provide a single
integrated technology for both centralised human resource and payroll processing. It is wasteful to operate
separate systems, and common data can be used for both applications.
Speed of entry and processing
Existing administrative and management systems are outdated and need replacing. Apparently the
current practice involves a submission of timesheet entries manually. This advanced technology will
involve a direct entry facility which should reduce entry and processing times. The unification of payroll
and HR systems will also make reconciliation of separate data sources (that is likely to occur presently)
unnecessary.
Ability to reduce costs and increase efficiency

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M09s current systems are both outdated and various, and the integrated solution offered by the People
and Payroll system will simplify and rationalise operations. The current maintenance costs of the several
systems that M09 operates presently are likely to be costly. There is now potential for increased
efficiencies and cost savings. (These savings should be balanced against costs associated with new
handsets, software, staff training, etc.).
Improved accuracy
According to the scenario, timesheet entries are submitted manually. This system with direct entry will
help eliminate errors and inaccuracies arising from data entry and operations could also be speeded up
as a result.
Better control
The softwares browser facility allows managers to have immediate access to information on overtime,
holidays and sickness, etc. The system also produces high quality information including productivity ratios
and analysis for managers. This facility will enable M09s managers to exercise tighter control over staff
activities (and possibly reduce costs).
Improved communication
The system which is described in the scenario as 'advanced' offers managerial communication to the
HR directorate and a mechanism for receiving information for decision making. The diary facility will also
make meetings and work scheduling easier.
Relative competitive advantage
M09s technology currently lags behind that of its competitors and the commitment to replace it with the
most advanced available may provide M09 with some competitive advantage over its rivals. Instead of
systems being a source of strategic weakness this new HR and payroll system could become a relative
strength.
Improved security features
Most modern systems tend to have inbuilt designed security features. As current systems are
outdated they may not be secure so there may be a risk of data loss and improper use. This is
particularly important in this case as potentially sensitive payment and personal information is
involved.
Break down departmentalism
The focus of existing systems is on individual production units rather than on the organisation as a
whole. The strengthening of HR practices including the establishment of a shared corporate central
department and common software should help break down potential departmentalism within M09 and
help establish a shared corporate focus.
Model for organisational transformation
It is significant that the new Director of Human Resources has identified the central People and Payroll
system as a priority to 'make a real difference'. This system is obviously seen by her as a driver for
beneficial change and this thinking may offer a model for the future transformation of M09 as a whole
through technology.
(Other valid responses are possible and these will also receive credit).

c) Explain how an understanding of consumer behaviour can help guide M09's future
marketing practices.
(5 marks)

Requirement (c)
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Theories of consumer behaviour and research into it can help guide M09s marketing practices by
offering insights into a number of issues such as those identified below.
Precise factors that may influence consumer behaviour
Influencing buyers consumption patterns is an important dimension of marketing. Consumer behaviour
can be influenced by a potentially diverse series of factors including all aspects of the marketing mix
and the social and physical environment in which sales take place. Only effective market research can
determine what these factors are. In terms of the marketing mix the following is significant.
The likely impact of price changes
Pricing incentives are normally introduced to stimulate further sales and ultimately higher revenue
streams. The likely impact on sales of pricing incentives being offered by M09 can be gauged through
understanding consumer behaviour, as can likely buyer behaviour when a price cut ends, etc. (Likewise
the impact of price increases can also be assessed).
The likely impact of promotional activities
Similarly, the effectiveness of a promotional exercise can be estimated including the likely impact of a
campaign on sales and customer loyalty. This information might also be used (for instance) to determine
the duration of such a promotion.
The impact of brand
Brand is important to any company and could represent a significant corporate asset. The reason for
this is brands importance when consumers make a choice between competing products. The likely
impact on consumer behaviour of efforts to strengthen a brand image on both new and existing
products might be better estimated through market research.
The strength of buyer habits
One of the main theories of consumer behaviour relates to the habitual nature of buyer behaviour
based on either loyalty to a particular brand, inertia or 'satisficing behaviour' (accepting the first
solution that is good enough to satisfy a need, even if a better solution may exist). The strength of
buyer habits represents a valuable piece of information for M09 in this respect.
Information for portfolio management
The Director of Marketing believes that market research is a priority in order that consumer behaviour
can help guide M09s future marketing practices including the strategic management of its product
portfolio. He also believes that M09 needs to review its portfolio of products (possibly because some of
the companys lines are in danger of losing touch with customer requirements) . Research into consumer
behaviour can help determine likely consumption patterns and provide an understanding of market share
(and potential share) as part of product portfolio management.
(Other valid responses are possible and these will also receive credit.)

Question Four
E88 is an innovative company run on the principles of its entrepreneurial owner. The company has a
diverse range of operations including a carbon neutral package distribution service, 'responsibly' sourced
clothing for children, mobile telephones and soft drinks made from natural ingredients. E88s approach
of ethical trading, and 'delivering quality products and services at affordable prices and doing it all with a
sense of fun' is well known. E88 does not pay for advertising in traditional media but still enjoys high
brand awareness particularly for those in the 18-30 age group, thanks to the 'visibility' and new ideas of
its inspirational owner, E.
E is currently considering the potential of social networking sites to the company. In addition, she has
announced an intention to launch an 'E88 cosmetic care' range of 88 ethically produced natural beauty
products including skin care, make-up, hair care and lotions, etc. The range will be competitively priced

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against high street brands and packaging will display the distinctive E88 logo. These products will not be
available in shops but instead will be sold both online and at cosmetic parties.
Cosmetic parties will be organised by 'E88 associates'. Anyone can apply to be considered as an
associate but successful applicants will need to undertake initial training and then buy a basic stock of
the entire cosmetic range. Associates will then use these products as samples and 'testers' when
organising parties at the homes of relatives, friends and other acquaintances. Orders for products will be
charged at a 'list price' and associates will receive a commission based on sales.

a) Describe the ethical and human resource (HR) considerations associated with the
proposed use of cosmetic associates by E88.
(10 marks)

Requirement (a)
E has just announced E88s intention to launch an 'E88 cosmetic care' range which will be sold at
cosmetic parties held in customers homes. There are various human resource (HR) and ethical
considerations associated with E88 selling cosmetics by this latter means. The ethical stance of an
individual business is determined by questions of 'fairness' often by reference to its organisational
culture and shared philosophy. What is known about E88 is that it is entrepreneurial (and arguably
therefore takes risks), is different and is associated with ethical operations. E88s venture into
cosmetics is certainly entrepreneurial and arguably different (albeit that companies such as
Tupperware and Ann Summers have used a similar approach for many years).
Ethical considerations

Fairness of using associates. Questions arise whether E88s prospective associates are
being exploited as there is a requirement to buy a basic stock, continue to sell products in
order to 'earn' and possibly exploit connections with family and friends. Whether or not this
breaches E88s ethical code is a valid point.

Use of customers homes. E88s general approach reflects ethical trading; however there may
be issues of using parties to make sales. The approach could be seen as being based upon
associates putting pressure on their relatives, friends, and friends of their friends to host parties in
their own homes. Is the public being tricked/pressured into using their home in this way? What is
in it for the host of the party (gifts, discounts, fees, etc.)? Is E88 unfairly passing on overheads to
its customers? These questions raise ethical issues for which there is no right or wrong answer.

Selling approach. Orders for products will be charged at a 'list price' and associates will receive a
commission based on sales. It could be argued that associates are obliged to adopt impolite or 'pushy'
sales techniques in order to achieve sales, which is unfair on partygoers.

Human resource (HR) considerations

Recruitment of associates. Potentially anyone can apply to be an associate. Successful


associates will however be required to buy a basic stock of the entire cosmetic range (88
products in all). This may be considered to be expensive and could deter some potentially
good new recruits from applying for such a position.
Selection of associates. From those who do apply careful selection criteria should be used.
Selection processes should include testing the attitude by applicants in terms of (a) displaying a
sense of fun, (b) reflecting the image of the company and (c) showing a capability to undergo
training, etc. Trustworthiness is an important quality for an associate to possess and there will be
a need for suitable selection procedures to be devised including interviews and the supply of
satisfactory references.

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Training of associates. E88 has announced that anyone can apply to be approved as an
associate but will need to undertake 'initial training'. The precise nature of this training will need to
be carefully determined and is likely to include communication skills, sales techniques and how to
arrange parties. Further training once an associate is in position may also be necessary.

Remuneration of associates. The overall remuneration package that E88 devises needs to be
sufficient to both attract and retain 'good' associates. Orders for products will be charged at a 'list
price' and associates will receive a commission based on sales. In the apparent absence of a
basic flat rate payment, this commission must be sufficient an incentive to make the job
financially attractive.

Motivation and retention of associates. Although pay is not the only motivator of employees,
E88 needs to consider whether motivation from a commission only remuneration scheme would
be sustained over a period. High turnover rates caused by disenchanted and demotivated
associates leaving may involve some risk to E88s reputation and would mean that past costs of
selection and training would be wasted.

Supervision, monitoring and control. Given E88s high brand awareness and associated
ethical trading practices, it is important that its reputation and brand are not damaged by this
venture. It follows therefore. that there needs to be effective supervision, monitoring and control
of associates. This may necessitate the appointment of supervisors and the establishment of
effective monitoring and control systems (possibly involving customer questionnaires, etc.).

Flexibility. E88s proposed approach is likely to produce a flexible workforce possibly


comprising part-time workers operating flexible working hours and patterns. The fact that
associates can arrange to work hours that are most convenient to them means that the initiative
is likely to extend the countrys workforce by allowing those with child care and other
responsibilities to join the labour force and earn money.

(Other valid responses are possible and these will also receive credit).

b) Explain the advantages to E88 of using an online direct marketing approach for its new
cosmetic care range.
(10 marks)

Requirement (b)
When a business supplies its ultimate end customers a 'zero level channel' is said to operate. E88s
direct marketing approach reflects this through interactive online marketing and the use of cosmetic
associates.
Direct selling online is now commonplace for a variety of goods and services and there are many current
successful examples of companies using an on-line approach (such as Amazon.com). To achieve scale
economies, firms need to develop new markets and e- marketing including online selling has allowed
organisations to trade more easily globally and seek out and exploit new markets.
Sales through parties, in this case by associates, have a longer history but they are not currently as
popular an approach as selling online. It nevertheless underlines E88s determination not to use more
traditional retail outlets to make sales.

There are many advantages of E88 using a direct marketing approach

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Builds on a E88 'fun' philosophy


Direct marketing impacts upon an organisations marketing mix significantly, not least its implications for
place mix. 'Place' involves getting the right products into the right places at the right time. In this case
the use of associates making sales at parties means that 'place' is customers own homes;
the use of the internet means that 'place' is not physical, it is cyberspace.
As E88s philosophy is based on sense of fun, these approaches may be seen as compatible with this
notion.
Flexibility
Both approaches to direct marketing offer flexibility, whether promoting the company brand,
answering customer queries, making direct sales, or, conveniently, displaying E88's full product
range. In terms of promoting a companys goods and services:
A physical demonstration at parties occurs.
The ability to display videos and profile customer reviews as well as static pictures underlines the
flexibility of the internet. Furthermore the use of independent review sites and search engines
should offer further flexible means of E88 reaching potential customers.
Convenience for customers
There is a convenience of place under direct marketing. Both approaches offer convenience for E88
customers or prospective customers:

The on-line facility is constantly open ('24/7') and this means that shopping can take place at a
time and place that is the most convenient for the individual buyer concerned. For the user this
also offers the attraction of time saving over traditional shopping and offers a convenient means
to compare and contrast prices etc. with rivals 'online'.
The party approach offers a relaxed atmosphere in which to get the opinion of friends when
making a purchase.

Lower prices
This direct marketing approach shortens any supply chain by dispensing with the need to supply retailers
and so potentially removes costs from the value system. The E88 cosmetic care range will not be
available in shops and will be competitively priced against high street brands. This aspiration is perfectly
feasible as there is potential for lower prices as costs are lower than physical stores with their associated
capital and running costs.
Good customer relationships
E88 has an opportunity to develop good customer relationships through direct marketing including
direct communication over issues of delivery and dealing with complaints.

With the incredible uptake of use of the internet a number of benefits present themselves in
marketing terms (for example, in terms of data collection and providing enhanced value to
customers and suppliers). One advantage of E88 using the internet as a part of a direct
marketing approach is the speed of transaction and communication (of for instance, changes to
product range, delivery times, prices, etc.) Online trading means that there is a potential for
companies to develop databases of customers, those making enquiries for further sales
promotions as well as developing direct relationships with customers.

Parties mean that associates can make sales personally and can enhance customer relations by
presenting 'a human face' to E88s operations.
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Synergies to other E88 operations: distribution


Both forms of trading as a part of a direct marketing approach demand efficient distribution systems
once an order is placed and there is some synergy with E88s (carbon neutral) package distribution
service.
Synergies to other E88 operations: mobile telephones
The company already has an interest in mobile telephones as part of its diverse range of operations.
Smart phone technology now means that with internet access, browsing and purchasing on line can
occur conveniently. The use of mobile telephones (M-marketing) could also be used to arrange a follow
up by passing details on to associates. To stimulate product interest, there is a potential through E88
mobiles to operate text alerts, etc.
Increased promotional opportunities
E88 has high brand awareness thanks to good public relations. This can represent an effective solution to
promotion and avoids paying for potentially expensive advertising in traditional media. With this new
venture, personal promotion is possible at sales parties and promotion is also possible in electronic form
using for example web banners, affiliation web sites, collaboration with other web sites and search
facilities. In this way E88 will increase its range of promotional tools.
(Other valid responses are possible and these will also receive credit).

c) Describe the advantages to E88 of using social media for promotional activities.
(5 marks)

Requirement (c)
Social media marketing is a form of internet marketing using established, pre-existing social network
websites (such as Facebook, Linkedin and Twitter) as a marketing tool. The opportunities offered by
social media marketing vary from the more expensive advertisements on sites (e.g. through web
banners) to reliance on users themselves to spread a corporate message. The interest shown by
organisations of all sizes in social media also means that E88 may miss out and lose ground to its
competitors unless it seriously considers its potential.
There are potential advantages of E88 using social media in the promotion of its brand, products and
services.
Cost of promotion
Social media serves as a relatively inexpensive platform for E88 to implement marketing campaigns.
E88s current promotional strategy to achieve brand awareness relies on good public relations. The low
cost exploitation of social networking sites rather than paid for advertising in traditional media is
consistent with E88s existing approach.
Scale of promotion
When compared with other forms of advertising (e.g. posters or advertisements in magazines which
may have a modest audience reach) the potential scale and audience reach through social networks is
vast. The share of adult internet users with a profile on social network sites has increased four or five
fold over the past few years and the use of viral videos can lead to exponential exposure.
Trusted source for promotion
Social media marketing can involve creating content that attracts attention and encourages viewers to
share it within their social networks. In this way a corporate message spreads from user to user. As the
message appears to come from a trusted, third-party source, as opposed to the brand or company itself,
the potential for E88 to promote itself in a credible way is apparent.

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Consistency with E88s image


E88s image for being creative, entrepreneurial and its approach of doing business 'with a sense of
fun' is well known and the use of social media fits this thinking well.
Ability to reach target demographic
The advantage of social media for E88 is the potential for a more precise targeting of promotion to a
particular market segment. E88 can target advertisements to precise audiences on certain network
sites based on the audience's profile (e.g. in terms of age, gender and career, etc.) Currently the
company enjoys high brand awareness particularly for those in the 18-30 age group which also happen
to be the heaviest users of social media.
(Other valid responses are possible and these will also receive credit).

CIMA QUESTIONS & ANSWERS


MARGED BY
TOWHIDUL ISLAM (TAMAL)
JULY15 BATCH
tamaltowhid@gmail.com
Facebook:

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