A2 REVISION: BUSINESS AND THE ENVIRONMENT

Question: What should I study in UNIT 1 for my A2 Business Studies exam?

Upon analysis of the past year questions from 2012 to 2015, I have grouped the topics to be studied in five major categories.

• Inflation, economic policies and exchange rate
• Entrepreneurship
• Business growth
• Business ethics, corporate social responsibility (CSR), and stakeholders' interest
• The business environment and the consideration of the different environment condition affecting strategic analysis and strategic decision-making

Question: What should understand in topic of inflation, economic policies, and exchange rate?

It appears that on many occasions, the case study may present a scenario where the government is implementing some economic policies to address the high rate of inflation faced by its country.  This will call for measures to be taken in the form of monetary policies and fiscal policies.  Fiscal policies addresses the tax rate whereas monetary policies deals with the issue of interest rate .  

In order to curb rising inflation, the case study will often state how government will increase the tax rates.  This can have a significant effects to the consumer behaviour of individual and household consumers as increased tax rate will reduce their disposable income.  Businesses which sells luxury and premium product may suffer due to declining sales (however, this may not necessary be true in all cases especially if the product has high income inelasticity in demand).

Furthermore, companies may find their retained earning reduced as they have to pay higher tax to the government.  This can have a significant impact to a companies' decisions to spend for the purpose of growth as they will limited funds internally.

Government can also increase interest rates to control high rate of inflation.  This will result in higher interest payment for any consumers who borrow money to support their spending.  As such, businesses which depends on consumers to take loan to make purchases may see their revenue fall.  Business enterprises will also be wary in seeking debt financing to support any of their strategic ventures.

For exchange rate, students need to assess the effects of the appreciation (strengthening) and depreciation (weakening) of the value of local currency.  Not all industries will have the same experience when a currency value appreciate or depreciate.  Some may suffer.  Some may benefit.  They have to be able to differentiate how the movement of the local currency value may affect the following: (1) tourist industry, (2) education, (3) exporters, (4) importers, and (5) businesses who wish to expand their operation to another country by acquiring or building assets.

Below is a list of the past-year examination questions from 2012 to 2015 with each organised into the specific categories of the above stated topics.

INFLATION, EXCHANGE RATE, AND ECONOMIC POLICIES

1. Analyse the effects on FFF of a depreciation in the exchange rate of country A's currency. [20 marks] (Farah's Fruit Farm Q1, 9707/33/O/N/15)
2. Analyse the likely impact on SC of an increase in direct taxes in country X. [10 marks] (Senbo Construction Q1,9707/33/O/N/14)
3. Analyse how the Government's policies to cut the rate of inflation are likely to affect GC. [10 marks] (Global Construction Q1, 9707/32/M/J/15) 
4. Refer to the data in Appendix B.  Evaluate how the forecast changes in country A's macroeconomic performance might influence PA's future profitability. [16 marks] (Platypus Accessories Q5, 9707/33/M/J/14)
5. Analyse the likely impact on PC's profitability of the economic changes referred to in lines 10-17 [10 marks] (Pop Cool Q1, 9707/33/O/N/13)

ENTREPRENEURSHIP

1. Analyse the strengths of MT during its early years of trading. [10 marks] (Mountain Tour Q1, 9707/32/M/J/13)
2. Analyse Leo's role in the success of LFF in its first year. [10 marks] (Leo's Fantastic Flowers Q1, 9707/33/O/N/12)

BUSINESS GROWTH

1. Analyse the benefits to GCC of being a widely diversified conglomerate. [10 marks] (Global Conglomerate Company Q1, 9707/32/M/J/12)
2. Analyse two possible effects further vertical integration could have on CAL's future success. [10 marks] (Chilled Air Limited 9707/33/M/J/13)

BUSINESS ETHICS, CSR AND STAKEHOLDERS' INTEREST

1. Analyse the benefits of corporate social responsibility (CSR) to BAS. [10 marks] (BAS Q1, 9707/31/O/N/15)
2. Discuss the importance to CCF of corporate social responsibility when aiming to maximise shareholder value. [16 marks] (Chicken Chan Farm Q4, 9707/31/M/J/15)
3. Discuss whether MF should 'always consider the interests of stakeholders as more important than profit'. [14 marks] (Mbella Farm Q5, 9707/32/M/J/5)
4. Discuss the extent to which LF should consider corporate social responsibility in its decision making. [16 marks] (9707/33/M/J/15)
5. Analyse the likely benefits to RSC of operating ethically towards its stakeholders. [10 marks] (Ramos Sugar Corporation Q1,9707/31/M/J/14)
6. Discuss whether GC should be more accountable to its stakeholders by reporting on its CSR activities in its Annual Report. [16 marks] (Global Construction, 9707/32/M/J/14)

THE BUSINESS ENVIRONMENT

1. Analyse the likely impact on JCL of increased competitive rivalry. [10 marks] (Johnson Couriers and Logistics Q1, 9707/32/O/N/13)
2. Analyse the likely impact of CC of increased competitive rivalry. [10 marks] (Cloud Catering Q1, 9707/32/M/J/13)

OTHERS

1. Using Appendix 1, Appendix 2, and other information, recommend to the Board of FFF whether they should choose growth strategy 1 or growth strategy 2. [20 marks] (Farah's Fruit Farm Q6, 9707/33/O/N/15)
2. Evaluate the usefulness of SWOT and PEST techniques to CCF's directors when undertaking strategic analysis before deciding on the future direction of the business. [20 marks] (Chan Chicken Farm Q6, 9707/31/M/J/15)
3. Evaluate whether the data in Appendix D is sufficient to enable LF to develop an effective strategic plan for the business. [20 marks] (LemonFizz Q7, 9707/33/M/J/15)
4. Evaluate the usefulness of the information in Appendix 1 and Appendix 2 to TC's strategic analysis. [20 marks] (Timtang Corporation Q6, 9707/32/O/N/14)

PEOPLE IN ORGANISATION (A2): TESTED TOPICS & IDEAS FOR ANSWER

If we were to analyse past year examination papers, the topics covered in the People in Organisation units that can be tested are varied. Look at the following based on the past year Paper 3 from 2012 to 2015.

• Employee Participation - Building Supplies Limited Q1 (9707/32/M/J/12)
• Improving Employee Performance - Mountain Tour Q5 (9707/32/M/J/13)
• Employee Efficiency and Labour Productivity - Ramos Sugar Corporation Q3
• High Labour Turnover - Timtang Corporation Q5
• Remuneration (discussing on the decision to increase pay) - Platypus Accessories Q4 (9707/33/M/J/14)
• Workforce Planning - Pop Cool Q5 (9707/33/13) Farrah's Fruit Farms Q5 (9707/33/O/N/15); Chan Chicken Farm Q5 (9707/31/M/J/15)
• Effective Internal Communication - Lemonfizz Q1 (9707/33/M/J/15)
• Effects of Leadership Style on Employee Performance - Chilled Air Limited Q5 (9707/33/M/J/12)
• Evaluating Appropriateness of Leadership Style on Given Contexts - Patel Bicycles Q3 (9707/31/M/J/12)
• Recruitment - Senbo Construction Q5

Some questions are quite straightforward as they required students to identify the current HR practices such as in Shoe Style International Q1 (9707/31/O/N/12) and perhaps ask for recommendations on how to solve the HR problems in the cases as required in Leo's Fantastic Flower Q3 (9707/33/O/N/12).

However, in Active Fitness Q4 (9707/31/O/N/14), some students appear to be dumbfounded by a HR question asking students to evaluate the enterprise's approach to HRM as all the identified HR practices appear to be positive.  Students have a difficult time to engage in a discussion because they could not find the weaknesses of those HR practices.  In such case, what students need to do is to be able to elaborate on how the current HR practice can benefit the organisation and relate to other relevant concepts.

Other HRM questions deal with the issue of managing industrial disputes which may be resulted from certain decisions or conditions that adversely affect the non-managerial employees.  In these cases, students should consider and make discussion on the following three options

• Abandon the proposed decision
• Compromise
• "My Way or the Highway"

Abandon the proposed decision
This can effectively appease the ill feelings among the workers but students need to evaluate what is the future consequences that will affect the organisation as a whole and whether the well-being of the organisation and the (economic) interests of the shareholders will be taken care of.  

For example, in certain cases, the management may propose a plan to downsize in order to reduce labour costs or to replace workers with the use of automation or other sophisticated technologies like investing in new production machines.  In these situations, some workers will most likely be retrenched and they will most likely be unhappy with the proposal.  Subsequently, this will compel them to seek the aid of their respective labour unions to fight in protecting their welfare.

However, if an organisation is to acquiesce (adhere) to the demands of the workers for not changing, this can jeopardize the long-term sustainability of the business as the enterprise cannot longer operate profitability in a highly competitive market.  As such, it can be argued there is a danger for the whole organisation may collapse and it is much better to sacrifice  some workers and having whole organisation to fail and shut down.

Compromise
If the compromise option is chosen, students should specifically provide a suggestion of what conditions within the proposed change the management is willing to relinquish (let go) and what conditions to maintain.  

However, students can argued whether this may make the management to appear weak in the eyes of the worker and therefore making them vulnerable to future pressure from the trade union and the workers.  Yet, we can counter-argue on whether the management is willing to risk having the workers to engage in protect which will adversely affect the operation.

"My Way or the Highway"
Students are often surprised about this option as it portrays the management and the enterprise as cold-hearted entities.  However, reality can be such that management of the organisation must stand firm in their decision and refuse to give in to any of the employee or trade union demands.  Yet, students should further elaborate that if such option is taken, the enterprise will risk having the workers engage in protests.  This can have severe negative impact in terms of the following (in which some ideas may relate to another).

• Disruption in the business operation
• Failure to meet deadline (which can have legal implications and create dissatisfaction among clients or customers)
• Reputation of the enterprise will be jeopardized
• Future employees  will be apprehsive of seeking employment in such enterprise as they will be worried of ill-treatment and exploitation from the management
• Value of share may reduce due to negative publicity resulting in lack of shareholders' and investors' confidence

Management Attitude
I personally find a good (and excellent) answer is where students discuss about the attitude of the management in managing industrial disputes.  For example, as we look at the case of LeBlance Kitchen Equipment, the CEO appeared to be very aloof and his management team seems to be taking the Taylor's Theory-X perspective in dealing with their production workers (as evidenced in line 46-47).  As such, despite suggestions of being employee-orientated and perhaps to engage the workers to negotiate a compromise, these recommendations will not be considered seriously if the management do not change their attitude.

Following are the cases with questions on trade unions and industrial disputes

• LeBlanc Kitchen Equipment Q3 (9707/31/O/N/13)
• Johnson Courier and Logistic Q3 (9707/32/O/N/13)
• Cloud Catering Q5 (9707/33/M/J/13)
• BAS Q5 (9707/31/O/N/15)

AS BUSINESS STUDIES REVISION: OPERATION MANAGEMENT

Short Answer Questions
1. (a) Distinguish between capital intensive production and labour intensive production. [2 marks]
    (b) Briefly explain two factors that could influence a decision to change to more capital intensive production methods. [3 marks]

(9707/11/O/N/13)

2. (a) Define the term 'added value'. [2 marks]
    (b) Briefly explain two ways in which operation management decisions might add value to a product. [3 marks]

(9707/11/M/J/13)

3. (a) Define the term 'productivity' [2 marks]
    (b) Briefly explain two ways in which a busines could increase levels of productivity in its operation. [3 marks]

(9707/12/M/J/13)

4. (a) Define the term 'process innovation' [2 marks]
    (b) Briefly explain two advantages to customers of job production. [3 marks]

(9707/11/O/N/14)

5. (a) Define the term 'diseconomies of scale' [2 marks]
    (b) Briefly explain two reasons why a business could experience diseconomies of scale. [3 marks]

(9707/12/O/N/14)

6. (a) Define the term 'operations management' [2 marks]
    (b) Briefly explain how changes in technology could affect the operations management a business. [3 marks]

(9707/11/M/J/14)

7. (a) Define the term 'value added' [2 marks]
    (b) Briefly explain two ways operations management could contribute to the success of a business. [3 marks]

(9707/12/M/J/14)

8. Explain the differences between efficiency and effectiveness in business operations. [5 marks]

`(9707/13/O/N/13)

9. Explain the 'transformation process' in the production of goods and services. [5 marks]

(9707/13/M/J/13)

Essay Questions
1. Discuss the important factors that will need to be considered by a business in deciding where to locate a new adventure and amusement park. [20 marks]

(9707/12/O/N/13)

2. (a) Explain the importance of inventory management to a retail business. [8 marks]
    (b) Discuss the factors which could influence the successful operation of Just-In-Time inventory management. [12 mark]

(9707/13/O/N/13)

3. (a) Explain why it is important for a business to be able to identify and calculate its costs. [8 marks]
    (b) Discuss how break-even analysis could be useful for a business decision on introducing a new product. [12 marks]

(9707/13/O/N/13)

4. (a) Explain the differences between batch production and flow production methods. [8 marks]
    (b) Discuss the implications for a manufacturing business of changing from batch production to flow production. [12 marks]

(9707/11/M/J/14)

5. Discuss the factors a large manufacturing business should consider before relocating its operation to another country. [20 marks]

(9707/13/O/N/14)

6. (a) Explain how the effectiveness of the operations management function can be influenced by human resource management. [8 marks]
    (b) Discuss how the actions of competitors could influence the operations management decisions of a car manufacturer. [12 marks]

(9707/12/M/J/14)

PEOPLE IN ORGANISATION: ORGANISATIONAL STRUCTURE, CENTRALISATION & DECENTRALISATION

When studying the topic of organisational structure, students need to focus on the following.

• Know the different types of organisational structure - hierarchical (which refers to functional and divisional structure) and non-hierarchical (which matrix structure)
• Appreciate what tall and flat organisational structure are and their effects on business responsiveness
• Understand the advantages and disadvantages of each organisational structure
• Understand how hierarchical structure can become a barrier to effective communication
• Understand the advantages and disadvantages of centralisation and decentralisation 
• Understand the concepts of chain of command, line of reporting, and span of control

Questions on organisational structure: Ramos Sugar Corporation Q5 (9707/31/M/J/14), Global Media Corporation Q1  (9707/31/M/J/13), Patel Bicyles Q1 (9707/31/M/J/12)

ADVANTAGES OF CENTRALISATION

One significant benefit of centralisation is its potential to achieve operational efficiency by eliminating redundancy.  This can subsequently cost saving benefits.

The other advantage of centralisation is to provide consistency to the organisation.  This is necessary for brand building purposes as consistent marketing practices help the target audience to easily become familiar with the company's brand and create strong reinforcement into the their memory.

Furthermore, if centralisation is used for the purpose to achieve standardisation, it is possible for the company to gain the benefits of economy of scale such as centralising the procurement function which allows a company to order at a larger quantity of supplies that can later be distributed to factories or retail outlets situated at different countries.

To understand better on the benefit of centralisation, read this - Nestle: Daring, defying, to grow (Economist.com, 2004).  Do let me know what you think after reading this article.

ADVANTAGES OF DECENTRALISATION

Very much like delegation, decentralisation can have the potential to promote motivation and satisfy the ego and self-actualisation needs of individuals at the lower level of the organisational hierarchy.  In addition, it can provide job satisfaction to managers within the lower layer by giving them recognition (which is resulted from the acknowledgement of the top management of the lower level managers' capability to handle additional responsibility) and responsibility (which they can express their potential). Also, through decentralisation, it make the work itself more challenging and interesting for the lower level managers to perform which subsequently help provide greater job satisfaction and help promote employee retention.

Note: Recognition, responsibility and work itself are considered motivator factors under Herzberg's Two Factor Theory.

In addition, decentralisation can help make the business more responsive as decision can be made faster without having it go through a long communication channel to get the attention and approval of the top management.  It overcomes the problem of bureaucracy which is often inherent in large organisations as more layers of management will have to be incorporated as the organisations grow. 

Another benefit of decentralisation is allowing those who are closer to the operational environment Ii.e. the local or junior manager) to make decisions which may be more relevant when compared to the managers on top who may be lacking in awareness.  Moreover, decentralisation is particularly helpful when practiced by multinational companies operating in a heterogeneous market in order to support their localisation approach.  The local country managers will have more knowledge about their market environment of the country they are operating in.

Furthermore, as decentralisation provides the opportunity for lower level managers to have the power to make more decisions independently, this can help groomed them to take on higher positions in the future. As such, decentralisation can help prepare managers to move upward in their career path and have an easy transition.

Note: To discuss the disadvantages of decentralisation, just consider reversing the advantages of centralisation to find the negatives.

Additional References:

• The Advantages of Centralized Organizational Structure (Chron)
• The Advantages of Decentralized Organizational Structure (Chron)
• Centralised versus Decentralised Structures (Tutor2u)

ASSIGNMENT

Do this question - Genco Oven Q5 (9707/32/O/N/15). 

Tips: To effectively answer this question which require students to discuss the appropriate change to Genco Oven's (GO) organisational structure, they have to take into account of the GO's decision to enter into the consumer market (where the firm was mainly producing ovens to sell to business customers) and expand into Country Y.  

Divisional structure will most likely be the appropriate choice but the question is what to be divided.  It is possible for students to draw the proposed organisational structure to support their answer; however, they should not spend too much time in doing this.

A good answer may see students making discussion of whether the external environment of Country Y is similar to or different from the country which GO is currently operating in.  This can have a significant influence on your proposed change of the organisational structure.  Try to make reference to the concept of standardisation and localisation (which are concepts covered in International Marketing).

In order to show effective application, students are encouraged to make reference to the information provided in Appendix 2.

The other consideration is whether GO should retain the practice of centralised authority or whether it should decentralise.  Whatever answer you give, you have to give justification based on the context of the case.  Here you can use your understanding of the advantages and disadvantages of decentralisation and centralisation.  

Do take note that not everything has to be decentralised.  As such, you should specifically state what decisions can be made by the managers at the lower hierarchy of the organisational structure and what decisions should be retained by the top management.

PEOPLE IN ORGANISATION: DELEGATION

For the topic of delegation, students need to have the understanding of the following.

• Benefits of effective delegation (where the ideas to the answer can also be used for questions on the reasons, outcomes, usefulness, and importance of effective delegation)
• Barriers to effective delegation (which can also be understood as limitations to delegation)

BENEFITS OF EFFECTIVE DELEGATION

There are several benefits of effective delegation and these are listed below.

PROMOTING MOTIVATION

Delegation can effectively motivate workers as it can fulfill the subordinates' ego needs (as defined in Maslow's theory). Whenever the superiors delegate a task, they are recognising the ability of their subordinates to perform.  Such recognition will enable the ego needs to be satisfied.  And recognition is also known to be a motivator factor under Herzberg's Two Factor Theory which helps promote greater job satisfaction.

In addition, delegation can satisfy self-actualisation needs which occurs when a subordinate is given additional responsibilities.  Through these responsibilities, he or she can learn and obtain new experience which in turn add value to themselves.  It also enables them to express their potentials as they are provided the opportunity to do something more beyond their immediate job scope via delegation.

Furthermore, by providing new responsibilities to the subordinates, the subordinates may find their work less boring and more challenging.  It provides them with novelty which helps to make their jobs more interesting and can help contribute to greater job satisfaction by making the work itself (which is another motivator factor under Herzberg's theory) more interesting

When the subordinates are motivated, it will lead to better work performance since employees will have higher commitment in doing their job.  Furthermore, by being able to motivate workers, it allows the company to create greater job satisfaction which leads to company achieving higher employee retention to subsequently reduce labour turnover.

GETTING THE BEST PERFORMANCE FROM PEOPLE WHO KNOW BETTER

It must be noted that not every individual is perfect and this includes the superiors within the business organisations.  As such delegation is a good practice whenever a task is delegated to the relevant person with the right skill set or relevant knowledge to ensure the 'best' output can be achieved.

ALLOWING THE SUPERIORS TO FOCUS ON OTHER TASKS AND RELIEVING THEIR BURDEN

By delegating, the superiors can free themselves from doing some tasks, allowing them to focus on other matters such as strategic planning.  Furthermore, this helps to eliminate any unnecessary stress which may occur when the superiors attempt to do everything themselves which can potentially lead to the problem of 'burnout'.  In addition, effective delegation help promote efficiency when the superiors are free to attend to their other responsibilities, as this allows them to save time when other jobs can be concurrently done by other subordinates.

BARRIERS TO EFFECTIVE DELEGATION

Barriers to effective delegation are as listed below.

DELEGATING TO THE WRONG PEOPLE

Delegation demands the superiors to have a good knowledge of the capabilities AND also the interest of their subordinates.  Often delegation becomes ineffective if tasks are simply assigned to any available persons without taking into account whether their capability and interests.  As such effectiveness of delegation relies on the sensitivity of the superiors in being aware of the level of competency and also commitment in a certain task.

OBJECTIVES AND INSTRUCTIONS ARE UNCLEAR

Delegation can become ineffective if the objectives and instructions with the delegated task are unclear.  The subordinates may face with great deal of apprehension in determining what they should (and should not) do.  In addition, the subordinates may feel frustrated if they later get to be blamed for failed performance as this is not their fault that mistakes are made since the objectives and instructions given are either vague or ambiguous.

GIVING MORE THAN WHAT A PERSON CAN TAKE

Delegation will fail to motivate whenever subordinates feel that they are being given too many responsibilities.  This can lead them to suffer stress which can undermine their individual concentration, subsequently affecting their overall performance and thereby resulting in poor quality performance.

ASSIGNING 'UNWANTED' TASKS

Delegation will also fail to promote motivation if the superiors frequently delegate tasks which are boring and tedious that the superior themselves do not wish to do.  The subordinates may see their superiors as merely exploiting them via delegation.  This may cause the employees to have a negative attitude towards their respective superiors.  Job dissatisfaction will occur and this can result in labour turnover.

OPERATING UNDER A RIGID RULE AND STRUCTURE

It will be difficult to practice effective delegation if the subordinates have to operate in an environment with rigid rule and structure.  This gives little room for them to freely make their own decision and express their creativity in performing the delegated tasks.  When this happens, motivation cannot be achieved from delegation practice. As we learn that a benefit of effective delegation is to promote motivation by satisfying self-actualisation needs, employees when forced to worked with much constraints will not be able to express their potential freely and this defeat the purpose of delegation if the management which to use it to motivate the workforce.

LACK OF ACCESS TO RESOURCES

Subordinates who are given the delegated tasks can feel frustrated if they are not given access to the needed resources to support their performance.  As such, as responsibilities are given to those subordinates, adequate authority needs to be passed down to the subordinates in terms of being able to access the relevant resources required to supported the performance of the delegated tasks.

NO PRAISE, NO FEEDBACK

When there are no praise or positive feedback provided after the subordinates performed the delegated tasks, this will most likely create dissatisfaction among the employees.  These subordinates may see that the their effort has gone unrecognised which lead them feeling used and unappreciated.

TAKING CREDIT OF GOOD PERFORMANCE AND PUSH THE BLAME

If at the moment when the outcome of the delegated performance is evaluated, the superiors take credit for good results or blame the subordinates of poor performance outcome, the subordinates will feel resentful of such act and this will render the objective of using delegation to promote motivation as null.  

FAILURE TO MONITOR

Delegation does not mean that the superiors relinquish their responsibilities to monitor their subordinates' performance.  The right amount of monitoring is needed to ensure that the subordinates are performing their job correctly.  Feedback should be given when the subordinates' performance is found to to deviate from achieving the established objectives.

SUBORDINATES NOT TRAINED

Sometimes, the subordinates need to be given the proper training before additional responsibilities are assigned to them.  Without such training, there can be a risk of them failing to perform.  This can lead to various adverse outcomes such as wastage of time and resources and engendering the feeling of frustration among subordinates due to failure to achieve.

SAMPLE ANSWER AVAILABLE

A question that touches the topic of delegation can be seen in Mbella Farm Q1 (9707/32/M/J/15).  Answer this question.  It must be noted that the above given ideas may not fit into the context of the case.  As such, students have to make adjustments to some of the ideas provided above and create their own ideas if necessary.

Submit your answer to me either by hand or via email stating your full name, intake, and email address.  I will send a copy of a sample answer to your email.

Additional Reference:

Here are some additional articles you can refer to.

• The Delights of Delegation (Management Today)
• 6 Steps for More Effective Delegation (Fast Company)