Business Management
Sample Paper 2
Questions and Suggested Solutions
NOTES TO USERS ABOUT SAMPLE PAPERS
Sample papers are published by Accounting Technicians Ireland. They are intended to provide guidance
to students and their teachers regarding the style and type of question, and their suggested solutions, in
our examinations. They are not intended to provide an exhaustive list of all possible questions that may
be asked and both students and teachers alike are reminded to consult our published syllabus (see
www.AccountingTechniciansIreland.ie) for a comprehensive list of examinable topics.
There are often many possible approaches to the solution of questions in professional examinations. It
should not be assumed that the approach adopted in these solutions is the only correct approach,
particularly with discursive answers. Alternative answers will be marked on their own merits.
This publication is copyright 2015 and may not be reproduced without permission of Accounting
Technicians Ireland.
© Accounting Technicians Ireland, 2015.
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INSTRUCTIONS TO CANDIDATES
Answer FOUR questions in total
Answer
Answer
Answer
Answer
at least ONE question from Section A
at least ONE question from Section B
at least ONE question from Section C
ONE additional question from ANY section (A, B or C).
If more than the requisite number of questions are answered, then only
the requisite number, in the order filed, will be corrected.
Candidates should allocate their time carefully.
Answers should be illustrated with examples, where appropriate.
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Section A
(Answer at least ONE of the questions in this section)
Question 1
(a) Human Resource Management (HRM) deals primarily with the following functions:

Human Resource Planning

Recruitment/Downsizing & Selection

Employee Induction, training and development

Performance Appraisal
Describe, in detail, any two (2) of the four primary functions above.
(16 marks)
(b) Outline the role of the IT function in an organisation.
(9 marks)
Total: 25 Marks
Question 2
(a)
Explain the following marketing terms:

Market segmentation

Market targeting

Market positioning.
(6 marks)
(b)
Explain each of the following terms that are used in the context of a
'Segmentation, Targeting, Positioning' (STP) process:

Market segmentation variables;

Targeting strategies.
(12 marks)
Total: 25 Marks
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(c)
You recently opened a bookshop in Cork city centre. Business has not been as
good as you had hoped. On investigation, you conclude that you have not
applied any form of STP process.
Identify three (3) market segmentation variables that you would consider
relevant to increasing sales revenues.
(7 marks)
Total: 25 Marks
Section B
(Answer at least ONE of the questions in this section)
Question 3
(a) Explain the difference between the terms 'micro-environment' and 'macroenvironment'.
(10 marks)
(b) Discuss how the macro-environment impacts on the financial services industry,
making references to specific examples.
(15 marks)
Total: 25 Marks
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Question 4
You have recently been promoted to a managerial position in your organization. Some
friends have advised you that communications will be important in your new role.
(a) Illustrate the Communications process.
(5 marks)
(b) Describe the barriers to communication that a manager can face.
(10 marks)
(c) Describe how managers can overcome these communication barriers
(10 marks)
Total: 25 Marks
Section C
(Answer at least ONE of the questions in this section)
Question 5
(a) Discuss the role of demographics in management today.
(10 marks)
(b) Management is no longer constrained by national borders. The world has become
a global village, a world without boundaries where goods and services are
produced and marketed worldwide.
Describe the globalization process an organisation may follow.
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(10 marks)
(c) Outline the different type of global organisations that exist.
(5 marks)
Total: 25 Marks
Question 6
Proper governance has become increasingly important in the modern business world.
(a) Outline the advantages and disadvantages of two (2) different governance models.
(14 marks)
(b) Describe, with use of an illustration the governance chain for a large publicly
quoted organization.
(11 marks)
Total: 25 Marks
REMINDER TO STUDENTS – You are required to answer FOUR questions in
total.Makesurethatyouhavecompletedtherequirednumberofquestions.
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Suggested Solutions
DRAFT ONLY
SECTION A
Question 1
Human Resource Planning
Robbins et al (2013) define Employment planning as the process by which
management ensures that it has the right number and kinds of people in the
right places at the right times, who are capable of effectively and efficiently
completing those tasks that will help the organisation achieve its overall
objectives.
Employment planning translates the organisational mission and objectives into
a personnel plan. (a) Assessing current and future human resources needs. (b)
Developing a plan to meet those plans.
Dessler (2008) defines human resource (HR) planning simply as ‘the process of
deciding what positions the firm will have to fill, and how to fill them’. It is the
process therefore that determines the current and future HR needs of the
organisation.
The advantage of HR planning is that it minimises the costs of employee
turnover and ideally achieves better utilisation of staff.
HR planning has four stages; demand analysis, supply analysis, estimating
deficits and surpluses, and developing an action plan.
Recruitment and Downsizing
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Examples of techniques that firms use to recruit include trade fairs, traditional
advertising and recruitment from third level institutions. Once managers know
their current staffing levels—whether they are understaffed or overstaffed—they
can begin to do something about it.
To fill vacancies, they use recruitment—the process of locating, identifying, and
attracting capable applicants. If employment planning indicates a surplus,
management will want to reduce the labour supply and initiate downsizing or
layoff activities.
Recruitment is the process of attracting people to apply for positions in an
organisation. There are essentially three stages to the recruitment process: •
Job Analysis • Job Description • Job or Person Specification
Downsizing has become a relevant means of meeting the demands of a
dynamic environment. There are a number of downsizing options; See Exhibit
6.4. Regardless of the method chosen, employees may suffer.
The objective of the selection process is to pick the best person (or who is
perceived to be the best person) for the job. This is a very difficult and timeconsuming activity that is occasionally very speculative. Moreover, the costs of
making a mistake are high.
The initial phase is to complete a short-listing process; this is done with a
review of the application forms and CVs. Generally speaking, the decision to
select should be based on the person specification; as noted, the person
specification identifies the knowledge, skills and abilities to perform the job.
The selection process is a prediction exercise—it seeks to predict which
applicants will be “successful” if hired. Successful in this case means
performing well on the criteria the organisation uses to evaluate its employees.
Any selection decision can result in four possible outcomes. The next phase is
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to use tools to help select the candidate from the short-list. The best-known
devices include interviews and written and performance-simulation tests.
Employee Induction, training and development
Once selected, the job candidate needs to be introduced to the job and
organisation—Induction. The major objectives of orientation/induction is to
Reduce the initial anxiety; Familiarize new employees with the job, the work
unit, and the organisation and to Facilitate the outsider-insider transition. Job
induction expands on the information the employee obtained during recruitment
and selection.
A Work-unit induction familiarises the employee with the goals of the work unit.
It makes clear how his/ her job contributes to the unit’s goals and provides an
introduction to his/her co-workers.
Organisation orientation/induction informs the new employee about the
organisation’s objectives, history, philosophy, procedures, and rules. It should
also include relevant personnel policies such as work hours, pay procedures,
overtime requirements, and benefits, as well as a tour of the organisation’s
physical facilities.
Management has an obligation to make the integration of the new employee
into the organisation as smooth and as free of anxiety as possible.
Training refers to a planned effort to modify or develop knowledge, skills and
attitudes through learning experiences. It is a critical component of the HR
management programme. Employees need to be more highly skilled, and this
includes both technical and soft (or interpersonal) skills. Employee training is a
learning experience in that it seeks a relatively permanent change in employees
such that their ability to perform on the job improves. It involves changing skills,
knowledge, attitudes, or behavior. Training has benefitted as e-learning
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techniques are utilized to develop employees’ skills, knowledge and abilities. IT
is applied to help company’s productivity and the way they conduct business.
For training to be successful, employees must be involved in the training
process and they must have the necessary motivation and willingness to learn.
Also the material must be relevant and meaningful.
HRM advocates the adoption of a Systematic Training approach.
Managers need to ensure that training is working. They can do so by Measuring
results—evaluate the training program.
Employee Development;
Gunnigle et al (2011) define employee development as ‘any attempt to improve
managerial effectiveness through a planned and deliberate learning process’.
Essentially employee development deals with the following: • The improvement
of individual manager’s performance • The improvement of management
performance as a whole • The improvement of organisational effectiveness.
Employee development deals thus with the design and delivery of learning to
improve performance, skills or knowledge within a company.
Performance Appraisal
Gunnigle et al (2011) define performance appraisal as ‘a systematic approach
to evaluating employee performance, characteristics and/or potential, with a
view to assisting decisions in a wide range of areas such as pay, promotion,
employee development and motivation’.
Partly accounting for the popularity of adoption is the many advantages
associated with performance appraisal.
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From an employer’s perspective, it facilitates the assessment of an individual,
facilitates objectives setting, and can be used with good effect in promotional
and training decisions.
From the employee’s perspective, performance appraisal has many advantages
including providing an opportunity for an employee to have real input into a job,
as well as offering the potential to clarify important issues relating to the job.
In summary performance appraisal systems help to develop commitment in an
organisation.
The different methods of performance appraisal are listed in the following table.
Methods of Performance Appraisal Graphic rating scales Scales containing a
list of qualities against which all employees are measured. They are easy to fill
out but if characteristics are not clearly defined, it can cause significant
drawbacks. 360° degree feedback This is feedback collected from an
employee’s manager, peers and subordinates. It is an appraisal from various
viewpoints (hence 360° degrees) and offers a holistic view. They are timeconsuming. Self-assessment This is where employees analyse their own
performance as the basis for discussion and action.
The factors that affect the success of performance appraisal include: • The
context in which it is introduced • The values and attitudes of employees • The
ease or difficulty with which performance can be measured • Perceptions as to
fairness in assessments •
(b) Information Technology;; It would be difficult to think of a business role that
does not involve the use of computers. Technology assists in the management
of HR, in the finance function, with sales and marketing and just about any role
in business can be automated to a point. Computers abound in offices and
shops, factories and homes to the point that they are common place today. The
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government is committed to bringing high speed broadband to all primary
schools in Ireland, and most homes in Ireland are connected to the internet. In
business terms, it is expected that computer technology will become more
pervasive and there is pressure on all organisations to automate more and
more processes. With this is mind, it is critical to have a working knowledge of
the uses of both Information Technology (IT) and Information Systems (IS) in a
business context. The internet is a growing influence as organisations today
need both an online and off line presence. Cloud computing and social
networking are the latest in a line of technological developments that affect
businesses. The financial sector is a clear example of change; more and more
processes are automated as online banking flourishes, and companies are
increasingly using social networking sites, such as Facebook and Twitter, to
reach out to customers. Chapter 1 : Functional Areas of Business 11 Business
Management Information technology provides a valuable source of competitive
advantage and allows organisations to integrate their core functions to create
efficiencies and reduce costs. For example, many financial institutions use
highly complex IT systems to analyse and predict stock market trends and
outcomes; similarly the educational sector has moved to embrace online and
blended learning.
Question 2
Solution
(a) Market segmentation is the grouping of consumers by some criteria, such
that those within a group will respond similarly to a marketing action and those
in a different group will respond differently.
Market positioning is based around how customers view the firm and its product
and changing the position, to get better reaction.
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It is a marketing strategy that emphasises serving a specific market segment by
achieving a certain position in buyers’ minds.
Market targeting is identifying a specific segment of consumers most likely to
purchase a particular product, evaluating the segments and deciding how many
to serve best.
(b) Market segmentation variables examples are gender, age, race, education
and income levels. A market is segmented by variables so that it can be
measured and therefore is identifiable. The market must also be accessible: the
segments must be reachable through communication and distribution channels.
Variables are used to ensure that the segments are sufficiently large to justify
the resources required to target them. They also help to justify how the market
may respond differently to the different marketing mixes. A good market
segmentation will result in segment members that are as similar as possible
within the segment and as different as possible between segments.
The variables are critical to ensure appropriate segmentation.
Targeting strategies follow once a firm has successfully identified the segments
within a market. The next step is to target these segments with products that
closely match the needs of the customers within that segment.
There are a number of targeting strategies, including:
Niche/concentration marketing – this is concerned with targeting one particular,
well-defined group of customers (a niche) within the overall market.
Mass/undifferentiated marketing – this is concerned with selling a single product
to the whole market. This strategy is based on the assumption that, in respect
to the product in question, customers’ needs are very similar if not identical.
Differentiated/selective marketing – this is concerned with targeting each
segment with a product with its own marketing mix designed to match the
needs of the consumers within the segment.
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The business should target the most attractive and suitable segment.
(c) There are multiple categories of variables to investigate such as geographic,
demographic, psychographic and behavioural.
The three that should be most relevant to review are firstly within the
demographic section and include variables such as the age of the customers
who would purchase books in the area, the level of income that they normally
spend on book purchases, and the general education levels in the area.
Another is to group the customers according to their lifestyles such as activities
in the area, the general interest of readers and their opinions.
These psychographic elements will determine what type of books should be
sold.
Question 3
(a) The micro-environment deals with the factors, people and business that this
business must interact with on a daily basis.
It focuses on customers, employees, suppliers, shareholders, media and
competitors. The micro-environment focuses on where the business itself can
influence the environment and affects daily procedures and operations.
The macro-environment concentrates on political, economic, socio-cultural,
technological, legal and environmental issues.
The macro-environment is where the business is more influenced by factors
outside its direct control. It influences how business behaves/operates and sets
boundaries for the business.
The model appropriate to understanding this environment is the PESTLE
model.
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(b) The macro-environment refers to the external factors that affect a
company’s planning and performance. Many of those factors are beyond the
control of the business. It encompasses many dynamic and continuouslyevolving variables including political, economic, social, technological, legal and
environmental issues (PESTLE).
Financial services refers to services provided by the finance industry that deal
with the management of money, including banks, credit companies, insurance
companies, consumer finance companies, stock brokerages, investment funds
and some Government-sponsored enterprises.
The impact of the macro-environment on financial services are:
Political - such as influence in current financial mechanisms;
Economic – the impact of interest rates, inflation and tax, particularly corporate
tax, and income on
investments;
Social – the downturn in the economy influences monies available and
expectations by customers to available financial products;
Technological – affects the speed at which financial transactions can be carried
on in the financial markets and the influence that global movements have on
financial returns;
Legal – the regulations (including ethical guidelines) imposed on the sector;
Environmental – The financial services industry is mainly information based
and, therefore, has little negative environmental issues except in relation to the
technology power usage and disposal.
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Question 4
(a) Communication requires a purpose, expressed as a message conveyed
between a source (the sender) and a receiver. It is encoded and is passed by
some medium to the receiver, who re-translates the message initiated by the
sender. The result is a transference of meaning from one person to another.
Candidates should illustrate the process with a diagram similar to the one
shown in the core text.
(b) A number of interpersonal and intrapersonal barriers affect the decoding of a
message.
Filtering The deliberate manipulation of information to make it appear more
favourable to the receiver.
Selective Perception Receiving communications on the basis of what one
selectively sees and hears depending on his or her needs, motivation,
experience, background, and other personal characteristics.
Information Overload When the amount of information one has to work with
exceeds one’s processing capacity.
Emotions How the receiver feels when a message is received. Language
Words have different meanings to different people. Receivers will use their
definition of words being communicated
Gender How males and females react to communication may be different, and
they each have a different communication style.
National Culture Communication differences arising from the different
languages that individuals use to communicate and the national culture of which
they are a part.
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(c) How Can Managers Overcome Communication Barriers?
Use Feedback Check the accuracy of what has been communicated – or what
you think you heard.
Simplify Language Use words that the intended audience understands.
Listen Actively Listen for the full meaning of the message without making
premature judgment or interpretation – or thinking about what you are going to
say in response.
Constrain Emotions Recognise when your emotions are running high. When
they are, don’t communicate until you have calmed down.
Watch Nonverbal Cues Be aware that your actions speak louder than your
words. Keep the two consistent.
Feedback; Many communication problems can be directly attributed to
misunderstandings and inaccuracies. These problems are minimized if the
manager uses the feedback loop. Feedback can be verbal or nonverbal.
Because language can be a barrier, managers should choose words and
structure their messages in ways that will make those messages clear and
understandable to the receiver.
Effective communication is achieved when a message is both received and
understood. Jargon can facilitate understanding when it is used within a group
of those who know what it means, but it can cause innumerable problems when
used outside that group.
Question 5
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(a) The Role of Demographics; The size and characteristics of a country’s
population can have a significant effect on what it’s able to achieve.
Demographics, the characteristics of a population used for purposes of social
studies, can and do have a significant impact on how managers manage.
Demographic characteristics of concern to organisations include: age, income,
sex, race, education level, ethnic makeup, employment status, and geographic
location. Age is a particularly important demographic for managers since the
workplace often has different age groups all working together, the Grey market;
those born pre 1946 who are usually retired but have considerable disposable
income and want to spend it on supporting their next generation families or on
leisure. a) Baby Boomers are those individuals born between 1946 and 1964.
The sheer numbers of people in that cohort means they’ve had a significant
impact on every aspect of the external environment. b) Gen X is used to
describe those individuals born between 1965 and 1977. This age group has
been called the baby bust generation since it followed the baby boom and is
one of the smaller age cohorts. c) Gen Y (or the “Millennials”) is an age group
typically considered to encompass those individuals born between 1978 and
1994. As the children of the Baby Boomers, this age group is large in number
and making its imprint on external environmental conditions as well. d) PostMillennials—the youngest identified age group, basically teens and middleschoolers. One thing that characterises this group is that “many of their social
interactions take place on the Internet, where they feel free to express their
opinions and attitudes.”
(b) The Globalisation process An organisation going global typically proceeds
through stages as shown below. The first step toward going international may
start with global sourcing (also called global outsourcing), which is purchasing
materials or labour from around the world wherever it is the cheapest. The next
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step may involve exporting - making products domestically and selling them
abroad. An organisation might do importing, or acquiring products made abroad
and selling them domestically. Both usually entail minimal investment and risk.
Licensing or franchising, involve one organisation giving another organisation
the right to use its brand name, technology, or product specifications in return
for a lump sum payment or a fee. This approach is used widely by
pharmaceutical companies and fast food chains. Direct investments may
include: A global strategic alliance - a partnership between an organisation and
a foreign company partner or partners. Joint ventures are a specific type of
strategic alliance in which the partners form a separate, independent
organisation for some business purpose. These partnerships provide a fast and
less expensive way for companies to compete globally than they would do on
their own. A foreign subsidiary is a separate and independent facility or office.
The greatest commitment (and risk), occurs when the organisation sets up a
foreign subsidiary.
c) Different types of Global Organisations? Multinational companies or MNCs
are any type of international company that maintains operations in multiple
countries. Companies such as Microsoft, Ford and Honda are examples.
Types of MNC’s:
A multidomestic corporation - decentralises management and other decisions to
the local country where it is doing business.
Transnational or borderless organisation - companies that use an arrangement
that eliminates artificial geographical barriers. IBM reorganised into industry
groups.
Global Corporation - centralises its management and other decisions in the
home country.
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Question 6
(a) Different Governance models’;
Shareholder model
Stakeholder model Advantages
• Higher rates of return
• Reduced risk
• Increased innovation and entrepreneurship
• Better decision making
• Long term horizons
• Less reckless risk-taking
• Better management
Disadvantages
• Diluted monitoring
• Vulnerable minority shareholders
• Short termism
• Weaker decision-making
• Uneconomic investments
• Reduced innovation and entrepreneurship (Johnson et al, 2010)
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(b) (Students see illustration in core text; a similar diagram could be included
with your answer as this will help you explain your answer). THE
GOVERNANCE CHAIN
The governance chain shows the roles and relationships of different groups involved in
the corporate governance of an organisation. In large business, influence on
governance can be complex. The diagram shows a governance chain for a typical
large, publicly quoted organisation. Individual investors (the ultimate beneficiaries)
often invest in public companies through investment funds, for example unit trusts or
pension funds, which they invest in a range of companies on their behalf. Such funds
are of growing importance. The relationships in such governance chains can be
understood in terms of the principal-agent model. (Johnson et al, 2011) In the diagram
the beneficiaries are the ultimate principals. Principal agent theory assumes that
agents will not work diligently for principals unless incentives are carefully and
appropriately aligned. The result may be that decisions are taken that are not in the
best interests of the final beneficiary. In this context the governance chain helps to
highlight important issues that affect the management of strategy. The principal agent
model, Governance can be seen in terms of the principal–agent model. Principals pay
agents to act on their behalf (e.g. beneficiaries/trustees pay investment managers to
manage funds, boards of directors pay executives to run a company). Without
appropriate rules, sanctions (and incentives). Agents may act in their own self-interest.
The key challenges are Knowledge imbalances: agents typically know more about
what can and should be done. Monitoring limits: it is very difficult for the principal to
closely monitor the agent’s performance especially if they have diverse interests.
Misaligned incentives: without appropriate incentives agents may pursue their own
objectives.
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