Business Management (Old Syllabus) - · PDF fileBusiness Management (Old Syllabus) ... the PESTEL model. ... Explain the above statement drawing on Trait theory and Fielder’s contingency

Business Mgmt Old May 2016 1st Year Paper

Page 1 of 26 Business Management (BM) S2016

Business Management (Old Syllabus) 1

st Year Examination

May 2016

Solutions & Marking Scheme & Examiner’s Comments



NOTES TO USERS ABOUT THESE SOLUTIONS

The solutions in this document are published by Accounting Technicians Ireland. They are intended to provide

guidance to students and their teachers regarding possible answers to questions in our examinations.

Although they are published by us, we do not necessarily endorse these solutions or agree with the views

expressed by their authors.

There are often many possible approaches to the solution of questions in professional examinations. It should not

be assumed that the approach adopted in these solutions is the ideal or the one preferred by us. Alternative

answers will be marked on their own merits.

This publication is intended to serve as an educational aid. For this reason, the published solutions will often be

significantly longer than would be expected of a candidate in an examination. This will be particularly the case

where discursive answers are involved.

This publication is copyright 2016 and may not be reproduced without permission of Accounting Technicians

Ireland.

© Accounting Technicians Ireland, 2016.



Accounting Technicians Ireland

1st Year Examination: Summer 2016

Paper: BUSINESS MANAGEMENT

(OLD SYLLABUS)

Thursday 12th May 2016

9.30 a.m. to 12.30 p.m.

INSTRUCTIONS TO CANDIDATES

Answer FOUR questions in total. QUESTION 1 IN SECTION A IS COMPULSORY AND MUST BE

ANSWERED. Answer ANY THREE questions in Section B. If more than the required number of

questions is answered, then only that number, in the order filed, will be corrected.

Candidates should allocate their time carefully.

Answers should be illustrated with examples, where appropriate.

Question 1 begins on page 2 overleaf.



SECTION A

Answer QUESTION 1 (Compulsory) in this Section.

QUESTION 1 (Compulsory)

A colleague of yours works with Tourism Ireland, a body responsible for marketing Ireland as a tourist

destination overseas. He has been asked to prepare a report on the impact of macro environmental factors on the

tourist sector over the last five years. He approached you for assistance. You suggested he should consider using

the PESTEL model. He was not familiar with the model and asked if you could explain it to him and describe

how it might be applied to the tourist sector.

You are required to:

(a) Explain the PESTEL model and describe any FOUR of the variables within the model.

10 Marks

(b) Using the PESTEL model identify and describe FOUR macro-environmental factors which impacted the

tourist sector significantly over the last five years.

10 Marks

(c) Describe TWO ways in which Tourism Ireland may be able to use recent developments in technology to

promote Ireland as a tourist destination.

5 Marks

Total 25 Marks

SECTION B

Answer any THREE of the six questions in this Section.

QUESTION 2

(a) “Some theorists suggest leaders possess distinct traits; others suggest style and situational factors

predominate”.

Explain the above statement drawing on Trait theory and Fielder’s contingency theory of leadership.

15 Marks

(b) Explain what is meant by a matrix form of organisational structure. Outline TWO benefits and TWO

limitations of this form of structure.

10 Marks

Total 25 Marks



QUESTION 3

“Market positioning is a central element in developing a marketing strategy”.

You are required to

(a) Describe what is meant by market positioning.

7 Marks

(b) Explain TWO roles fulfilled by perceptual diagrams in market positioning, giving examples in support

of your answer.

10 Marks

(c) Describe TWO characteristics of services which distinguish them from products.

8 Marks

Total 25 Marks

QUESTION 4

“Motivating a workforce can lead to gains in productivity, innovation and employee retention”.

(a) Describe the following theories of motivation

(i) Maslow’s Hierarchy of Needs theory of motivation

(ii) Herzberg’s Two-Factor theory of motivation.

14 Marks

(b) Comment on the extent to which the theories in part (a) above are relevant in the present business

climate.

6 Marks

(c) Explain what is meant by the “storming” stage in Tuckman’s theory of team development.

5 Marks

Total 25 Marks

QUESTION 5

(a) “Consumer markets may be segmented in various ways”. Describe FOUR categories of variables that

are commonly used to segment markets, giving examples in support of your answer in each case.

10 Marks

(b) Explain how the market for magazines might be segmented using the four categories of variables

outlined above and explain how this information might be used in tailoring marketing effort.

10 Marks

(c) “Branding is simply a means of recognising a product or service and has no other benefit to either the

buyer or the seller”. Do you agree? Give TWO reasons in support of your answer.

5 Marks

Total 25 Marks



QUESTION 6

(a) “Cyber-crime is a major risk for businesses”.

(i) Explain what is meant by the following acronyms in relation to e-commerce: B2C; B2B;B2E;

and C2C.

10 Marks

(ii) Identify and explain FOUR intentional threats to computer security.

10 Marks

(b) “Feasibility studies are important in developing new information systems” Do you agree? Give TWO

reasons in support of your answer.

5 Marks

Total 25 Marks

QUESTION 7

(a) “The financial manager fulfils many important roles in business organisations”.

Describe four roles fulfilled by financial managers.

10 Marks

(b) Identify and explain TWO long term sources of finance available to organisations

10 Marks

(c) Explain how profitability should be monitored in organisations.

5 Marks

Total 25 Marks



1st Year Examination: May 2016

Business Management (Old Syllabus)

Suggested Solutions

and

Examiner’s Comments

Students please note: These are suggested solutions only; alternative answers may also be deemed to be correct

and will be marked on their own merits.

Statistical Analysis – By Question

Question No. 1 2 3 4 5 6 7

Average Mark (%) 70% 61% 57% 57% 64% 57% 60%

Nos. Attempting 27 12 11 18 14 16 10

Statistical Analysis - Overall

Pass Rate 92%

Average Mark 62%

Range of Marks Nos. of Students

0-39 2

40-49 0

50-59 9

60-69 7

70 and over 9

Total No. Sitting Exam 27

Total Absent 33

Total Approved Absent 3

Total No. Applied for Exam 63

General Comments:

GENERAL COMMENTS ON THE PAPER AS A WHOLE

Overall the standard of answers was satisfactory with students demonstrating high levels of engagement

with the themes and a good understanding of the concepts and issues examined



Examiner’s Comments on Question One

Solution One (COMPULSORY)

PART A

PESTEL analysis is a technique for analysing the macro environment of an organization under the following

headings – political, economic, socio-cultural, technological, legal and environmental considerations.

Analysis of the Political environment involves considering the impact of changes in Taxation requirements,

Safety regulations, Consumer protection legislation, Parties in Government, EU Developments etc.

Consideration of the levels of demand within the economy, interest rates, foreign exchange rates, grants, inflation

etc. are indicative of the economic variables to be monitored and considered.

The Socio-Cultural environment encompasses issues of a demographic nature, such as, changes in the structure

of the population – age, gender, income distribution, emigration etc. and issues of a cultural nature, such as,

language, customs, religion etc.

The Technological environment includes consideration of the threats and opportunities arising from IT and

scientific developments in various areas.

Organisations must be aware of the legal parameters of their markets and operating environments including

issues related to employment law, contract law etc.

Increasingly organizations are developing strategies to minimize the effects their operations have on the

ecological systems etc.

The PESTLE model uses a wide lens to assess how broader or more general developments in the Political,

Economic, Socio-cultural, Legal, Technological and Environmental landscapes might impact an industry. Its

effects tend to be the same for all entities in the industry whereas Porter’s model provides a more focused and

tailored analysis of the specific effects of developments on the relative competitive position of major players

within an industry.

Marks Allocated

2 Marks for description of four PESTLE elements

2 Marks for overall quality and presentation 10 Marks

PART B

Many environmental factors have influenced the development of the tourism sector / industry over the last five

years. A number of these are set out below:

Political

Developments in the political field – such as travel restrictions on visa’s, terrorist activities etc.

Technology

This question was very well answered by the majority of students. Students were well able to identify

the variables within the model and to relate them to the scenario presented and to offer real life

examples in support of their answers. Students were also able to elaborate on the potential uses of

recent developments in technology in this sector.



Actual developments in the capacity of IT devices (in particular smart phones) have greatly enhanced the range

of services they provide and facilitated booking of flights, accommodation and car rental. All of these

developments has facilitated the promotion of tourism.

Economic

The recession has impacted most industries negatively and this is one industry that appears to have suffered but

is recovering. People’s disposable income and capacity to save money to enable them to travel abroad has been

greatly reduced. Changes in exchange rates etc. also impacts tourism directly.

Socio Cultural factors

Socio cultural factors such as attitudes and perceptions and patterns of behaviour have changed as a result of the

recession etc. Attitudes to spending in particular have hardened since the recession with people being cautious

and circumspect with what they do with their money

Marks Allocated

2 Marks per influence (maximum of four influences)

2 Marks for overall quality and presentation 10 Marks

PART C

Tourism Ireland is able to promote and show case Ireland abroad through the extensive use of digital marketing

techniques. Hotels and transport operators are in a much better position to bundle their offerings and target

specific sectors abroad.

Marks Allocated

2 Marks per area of activity (Max of two activities)

1 Mark for overall quality

5 Marks



Examiner’s Comments on Question Two

Solution Two

PART A

Trait Theory of Leadership

Trait theory is one way to describe who leaders are. Trait theory suggests that effective leaders possess a similar

set of traits or characteristics. Traits are relatively stable characteristics, such as abilities, psychological motives,

or consistent patterns of behaviour. Trait theory is also known as the ‘great person’ theory because early versions

of the theory stated that leaders were born not made.

For some time it was thought that trait theory was wrong and that there are no consistent trait differences between

leaders and non-leaders, or between effective and ineffective leaders. However, more recent evidence shows that

‘successful’ leaders are not like other people, that successful leaders are indeed different from the rest of us.

More specifically leaders are different from non-leaders in the following traits; drive, the desire to lead, honesty /

integrity, self-confidence, emotional stability, cognitive ability, and knowledge of the business. There is much

debate as to whether traits are biologically inherent in some people or whether people develop them over time

and situations.

Whilst the trait approach has become somewhat discredited, more recent research has examined traits which are

conducive to leadership. These include the following:

Demonstrated emotional composure and stability

Capacity to remain calm and confident during crisis rather than angry or moody

Ability to admit and try to correct mistakes rather than blaming others

Strong interpersonal skills that prevent problems arising in the first instance

Traits alone however, aren’t enough for successful leadership. Leaders who possess these desirable traits (or

many of them) must also behave in ways that encourage people to achieve group or organizational goals. Two

key leadership behaviours are (i) initiating structure, which improves subordinate performance, and (ii)

consideration, which improves subordinate satisfaction. Some argue there is no ‘best’ combination of these

behaviours.

Contingency theorists argue that the ‘best’ leadership style depends on the situation. Fiedler’s contingency theory

was the first to specify how situational factors interact with leader traits and behaviour to influence leadership.

For example, Fiedler assumes that leaders will be more effective when their leadership styles are matched to the

proper situation. More specifically, Fiedler defined situation favourableness as the degree to which a particular

situation either permits or denies the leader the chance to influence the behaviour of group members. In highly

favourable situations, leaders find that their actions influence followers, but in highly unfavourable situations

leaders have little or no success influencing the people they are trying to lead.

Fiedler developed an index called the least-preferred co-worker (LPC) scale. This scale asked a leader to think of

all the persons with whom he has ever worked, and then describe the one person with whom he worked with least

well. The person could be someone from the past or someone he was currently working with. Summarising and

averaging the findings from the study he was able to assess whether respondents had a human relationship

orientation or a task orientation.

Students were able to explain the Trait Theory and Fielder’s contingency theory of leadership and to

engage with the assertion presented.

Students demonstrated a good understanding of the matrix form of organisation structure and were

able to identify relevant benefits and limitations of this form of structure.



Matching this information with variables about situation favourableness allowed Fiedler to propose that

relationship-orientated leaders were better as leaders under moderately favourable conditions, while task-

orientated leaders were better as leaders under highly favourable and highly unfavourable situations.

Marks Allocated

6 Descriptions X 2 Marks

3 Marks for overall quality of description 15 Marks

PART B

The Matrix Approach

Functional and divisional chains of command are implemented simultaneously and overlay one another in the

same department. Two chains of command exist and two employees report to two bosses.

Managing Director / CEO

Marketing Production Personnel Accounting

Product A

Product B

This approach attempts to capture the best of both worlds, functional specialisation and expertise and primary

activity / product grouping focus.

Naturally the approach looks well on paper but implementation in the real world may prove a little more

problematic as individuals experience divided loyalties between individual bosses. It is mainly used in large

manufacturing environments.

Marks Allocated

6 Marks for description, 2 for merits, 2 for limitations

10 Marks



Examiner Comments on Question Three

Solution Three

PART A

Market positioning considers the perceptions of the consumer about the product or service, relative to other

products and services in the market. It explores how you want your customers to perceive your product or service

particularly in relation to those of your nearest competitors. It is the place the product or service occupies in

consumers’ minds relative to competing products or services. The marketer seeks to position the product so it is

perceived to possess the key variables or attributes considered important by customers. Re-positioning involves

moving the product away from its current position to a point that improves its market appeal. Lucozade is a

product that was re-positioned from a drink for people who were feeling unwell to a high energy sports drink.

Positioning examines the associations an organisation wants potential customers to infer about its product or

service. For example, we associate Ryan with low cost flights. Consumers are overloaded with information about

products and services. They cannot re-evaluate products or services every time they make a buying decision. All

products and services will have a position in the mind of the consumer (and this can be positive or negative). It is

a complex set perceptions, impressions and feelings that consumers have for the product or service compared

with competing products or services. It is best not left to chance.

Marks Allocated

4 Marks for the quality and description

1 Mark for overall quality and presentation 5 Marks

PART B

An interesting way of seeing market positioning is to consider a perceptual diagram which maps the brand (i.e.

product or service) on an axis according to certain criteria. It is used to locate or situate the brand in relation to

its competitors.

For example, it may be used to situate customers perceptions of the positions of various brands and organisations

in the retail sector in terms of quality and price. (Lidl, Aldi, M&S, House of Frazer).

These perceptual diagrams can be used to map consumers perceptions of their brands versus competing products

on important buying dimensions. To the extent that a company can position itself as providing superior value, it

gains a competitive advantage. For example, House of Frazer continually strives to position its products as

superior to its competitors on various criteria.

In the case of Motor vehicles a perceptual diagram could be prepared based on consumers perceptions of various

motor vehicles based on the two dimensions of price and quality. A range of other dimensions, such as functional

characteristics, symbolic projections and other experiential attributes may be used to map customers perceptions

of the brand, product or service. In the case of motor vehicles we would probably place the luxury car market

(e.g. BMW’s , Mercedes and Lexus and Porches) in the high quality / high price quadrants, while other lower

end models of motot vehicles (various Ford, Toyota, Fiat models etc.) would all occupy various locations in the

remaining quadrants.

The full positioning of a brand is called the brand’s value proposition. That is, the full mix of benefits upon

which the brand is positioned. Many organisations in the motor sector are striving to differentiate their offerings

from their competitors on the basis of price and quality. (e.g. luxury /special features at an affordable price).

Students demonstrated a good understanding of market positioning and were able to support their

answers with a solid understanding of the perceptual diagrams and the roles they fulfil.

Students demonstrated a strong understanding of the characteristics that distinguish services from

products.



Marketers do not want to leave their products’ positions to chance. Positioning helps the marketer develop

products that better match customer needs and wants, define customer priorities and develop competitive

strategies through differentiation. To build profitable relationships with target customers, marketers must

understand customer needs better and deliver more value than competitors do. Marketers must plan positions that

will give their products the greatest advantage in selected target markets.

Some firms find it easy to choose a differentiation and marketing strategy. In other cases two or more firms may

be going after the same position. Each will have to find ways to set itself apart. This may involve drawing on all

elements of the marketing mix for products or services to devise an effective marketing strategy. To the extent

that a company can position itself well, such as providing superior value, it gains competitive advantage.

It is important to remember that solid positions cannot be built on empty promises. Companies must do more

than simply shout out their positions with slogans and taglines. They must deliver on the promised quality and

service.

Marks Allocated

10 Marks for the quality of the explanation with examples

2 Marks for overall quality and presentation

12 Marks

PART C

A large number of businesses offer services – airlines, banks, hotels, insurance companies, consulting firms,

medical and legal practices, entertainment and telecommunications companies, real estate firms and others.

Although services are ‘products’ in a general sense, they have special characteristics that separate them from

manufacturing.

Intangibility

Services are intangible: Unlike physical products they cannot be seen or touched before they are bought. Services

are difficult to describe, to demonstrate to the buying public, or to illustrate in communications and promotional

material. An organisations reputation and that of its sales people are essential to service marketing. Airline

passengers have nothing but a ticket and a promise that they and their luggage will arrive safely at the intended

destinations, hopefully at the same time. To reduce uncertainty, buyers look for signals of service quality. Many

factors influence the experience of a service. This is particularly true of hotels where the ambiance and décor and

overall quality of the surroundings and service levels influence the consumer’s perceptions and their

interpretation of the experience. The service provider’s task is to make the service tangible in one or more ways

and to send the right signals about quality.

Inseparability

Services are purchased and consumed simultaneously. The buyer provider interaction is a special feature of

services marketing. Services cannot be separated from their providers. Customers and service providers

participate in and affect the transaction. It is a once off experience. The impressions created by hotel staff cannot

be inspected like the products at the end of an assembly line.

Perishability

Services cannot be stored or inventoried. The perishability of services is generally not a problem when demand is

steady. When demand fluctuates service firms may experience problems. It is difficult to synchronise supply and

demand. Hotels have to strive to ensure they recognise service experiences as one-off and that damage done at

one point in time may be difficult to rectify later.

Heterogeneity / Variability



Because services depend on who provides them, (as well as when and where they are provided), service quality

is highly variable. Many services cannot be provided by machines and therefore the human factor is of great

importance in the maintenance of service quality.

There can be a great deal of variability in the output of a services organisation. This arises, as it is more difficult

to establish standards for output and even harder to ensure standards are being met each time the service is being

delivered. For example, hotel employee’s reactions to customers may vary with their levels of tiredness and

fatigue. Even the quality of a single hotel employee’s service varies according to his or her energy and frame of

mind at the time of each customer encounter.

Marks Allocated

4 Marks for the quality and description of each distinguishing characteristic of services

8 Marks

Examiner Comments on Question Four

Solution Four

PART A

One popular content theory of motivation is Maslow’s Hierarchy of Needs. This theory states that human

motivation is dependent on the desire to satisfy various levels of needs and that the type of behaviour results

from the nature of the particular need to be fulfilled at a given time. According to Maslow, five basic needs exist

in a hierarchy from lower level deficiency needs to higher growth level needs. The five basic needs are;

Physiological needs: These needs relate to the basic survival needs which allow for continued existence, such as

food, water and adequate shelter.

Safety needs: These needs relate to physical and psychological safety from external threats to our well-being,

such as the need for security and protection. These needs take effect when physiological needs have been met.

Social needs: This level of need relates to the need for company and companionship, and for a sense of personal

belonging. These needs for personal contact and interaction with other people are triggered once physiological

and safety needs have been met.

Esteem needs: This is the first level of growth needs, which relates to the need for a sense of self-esteem and a

feeling of personal self-worth. They become salient once the first three levels of deficiency needs have been

satisfied.

Self-actualisation needs: The final level in the hierarchy refers to the need for personal growth, and the

development of one’s full potential and capabilities. This need level is different from others in that such needs

can rarely be fully satisfied or fulfilled. The more they are satisfied the stronger the needs become.

Actualisation

Esteem

Social

Students were well able to describe Maslow’s Hierarchy of Needs theory of motivation and Herzberg’s

Two-Factor theory of motivation in detail and to comment on their relevance in the present business

climate.

Most students clearly understood the “storming” phase in Tuckman’s theory of team development.



Safety

Physiological

Frederick Herzberg was concerned with the impact of the job and the environment on an individual’s motivation.

Thus rather than needs, Herzberg focused on job satisfaction. He asked ‘what aspects of a job satisfies, and what

aspects of work dissatisfies. To answer this question, he interviewed two hundred engineers and accountants in

Pittsburgh. They were asked to describe what was satisfactory and what was unsatisfactory about their jobs.

From this, Herzberg deduced that certain factors tended to lead to job satisfaction, while others led to

dissatisfaction. He then classified the answers into two categories: one he termed motivators or satisfiers, the

other, hygiene factors or dissatisfiers. What is important to understand in this approach is the idea that what

dissatisfies a person in a job, once removed, does not necessarily satisfy him or her. In other words satisfaction

and dissatisfaction are very different concepts.

The motivators (satisfiers) included:

Achievement

Recognition

The Work Itself

Responsibility

Advancement and Growth

The second classification included those hygiene factors (dissatisfiers). These served to de-motivate employees

and generally lead to dissatisfaction. These included:

Company's Policies and Administration

Quality of Supervision

Working Conditions

Interpersonal Relations

Salary and Job Security

This classification is comparable to the division between intrinsic and extrinsic factors. . Intrinsic factors relate to

things which individuals generally can control themselves. This includes the job itself, and the feelings that an

individual has about his or her job. Factors which lie outside the control of an individual are termed extrinsic

factors, and include such factors as the rewards given to the job and the style of management.

Marks Allocated

6 Marks for the description of theory X 2

2 Marks for the overall quality and presentation 14 Marks

Part B

Maslow’s theory is a general theory not specifically designed for organizations. However it has relevance to

understanding people’s motives within organizational settings.

The theory is universalistic in nature. It assumes that people move from one level to the next. However in reality

people may have a number of unfulfilled needs at a number of levels concurrently.

The theory does not reflect how the motivational process is played out. Different people may construct or

perceive their needs differently. It does not reflect how expectancy and equity interact with people’s needs and it

makes no mention of the impact of people’s perceptions of power differentials.

In summary the model has the following merits and limitations



Merits of the model Limitations of the model

Allows mangers to identify the motivations

of employees

Allows for the classification of biogenic

versus hedonic needs – i.e. separates

physical and emotional needs

Allows the self-actualization concept to be

applied in workplace scenarios through

career and personal placement

The model is quite simplistic and

generalized

The model looks at basic needs but does

not consider in great depth how other facets

of human experience evolve (i.e.

aesthetics)

Model makes no direct reference to cultural

issues or situational factors (e.g. parity

issues etc.)

Model is overly sequentialised (i.e. one

must satisfy one level before progressing to

the next).

Although criticised, it is easy to apply Herzberg’s theory. In fact his research approach has been applied to

various groups of workers, including manual workers, and the results have been similar. It is generally accepted

that recognition is a better motivator than money in most situations - that is, people are motivated in a positive

direction to equal or better the work that they are recognised for. That said, money remains problematic as a

motivator; it could be argued that in a consumerist society, money is an important motivator.

The benefits and limitations of the model are outlined next.

Benefits Limitations

Very applicable to management and the

workplace.

Managers can easily determine the

motivators and de-motivators in the

workplace.

Initiatives to develop motivations can be

put in place and policies designed to reduce

de-motivation can be implemented.

No attempt to measure the relationship

between satisfaction and performance.

Some factors are ‘bipolar’ - that is they

may serve to both motivate and/or de-

motivate.

No evidence that satisfied workers improve

productivity.

Marks Allocated

6 Marks for the quality of the discussion on relevance 6 Marks

PART C

Group / Team development is not random, but evolves over definitive stages. The five generic stages of group /

team development are forming, storming, norming, performing and adjourning.

Forming

This stage of team development is characterised by initial orientation and acquaintance. The team is formally

introduced and given its task or brief. Team members typically start “testing the water” with other team members

to understand; what exactly is required from them? What the other team members are like etc.? The first steps in



“jockeying for position” emerge at this stage. The team leader should focus on the facilitation of social

interaction and the clear statement of objectives and roles / requirements.

Storming

This is a stage of team development in which individual personalities and roles emerge, and the potential for

conflict or misunderstanding of individual roles becomes an issue.

At this stage a team may break into factions if not properly managed, and this has a serious effect on the overall

cohesiveness of the group. At this stage a team leader must ensure healthy participation by all members, to

ensure that ideas are proposed, disagreements are minimised, and conflicts are dealt with appropriately.

Norming

This is the stage of team development when many of the conflicts that emerged during the earlier stages are

resolved and team harmony and unity evolves. (e.g. boundaries are clearly established). A team leader at this

stage should focus on the team rather than individual performance and assist in the clarification of team roles,

norms and values if any confusion or conflict still exists.

Performing

The focus moves from the assurance of team cohesion towards problem solving and the accomplishment of the

task at hand, although the socio-emotional roles should not be discarded. The team at this stage is highly co-

ordinated and focused on their individual roles. Team leader activity is heavily focused on the facilitation of high

performance.

Adjourning

In this stage of team development members prepare for the teams disbandment. The brief of the team has been

met and is “put to bed”. Various emotions prevail at this stage from complete satisfaction / elation to depression.

The team leader is focused on task accomplishment and reward where appropriate

Organisations today are re-organising employees into groups or teams sharing out work duties and tasks. Teams

personify groups at their best; team members complement each other and work towards a common objective,

hence the productivity is high. Teams also deliver benefits in terms of flexibility, democratising the organisation,

increased motivation and clarity of purpose. Generally speaking it would be accepted that the benefits of

teamwork far outweigh the limitations.

Marks Allocated

4 Marks for an explanation of the storming stage




Examiner Comments on Question Five

Solution Five

PART A

Marketing management deals with how the different elements of marketing are organised, planned and

controlled. It is rare for a company to target a market in full; instead marketers concentrate on segmenting

markets, and then select the best segments to better position products.

A three-step process is crucial in marketing management. This set of activities – Segmentation, Targeting and

Positioning (or STP) – defines a pivotal managerial decision making process in an organisation’s attempts to

meet its objectives in competitive markets.

The process of segmentation, targeting and positioning enables the marketer to:-

Select the most profitable and viable customers to serve.

Reach them with an offering that has a competitive advantage

To communicate a position that is clearly perceived

Market segmentation involves analysing the total market into segments that share common properties, such as

consumer’s stage of life needs, purchasing power, geographical spread, buyer behaviour, attitudes to

environmental issues etc. The ultimate in terms of market segmentation is “customised marketing” where sellers

design a separate product for individual buyers. Typical segmentation variables include;

Age range – 18 to 30

Gender – male or female

Location – urban, rural, national or international

Family life cycle – single, married no children, married young children, etc.

Socio- economic status – professional, managerial, skilled workers, unskilled etc.

As a general guide, markets are usually segmented along four main variables; demographic, geographic,

psychographic and behavioural variables. Each of these variables is explained below:

Demographic

The intended target audience for a given product or service is divided into

categories based on demographics such as age and life cycle, gender, income,

generation and social class. Demographic variables are easy to measure and

obtain.

Geographic

Intended target audience for a given product is divided according to

geographic units, such as nations, states, regions, counties, cities, or

neighbourhoods. Products and services and communication efforts are

localised.

Psychographic

Psychographics can be defined as the study of consumer lifestyles. This

variable divides the market on the basis of activities (i.e. sports and

entertainment), interests (i.e. level of social interaction) and opinions (i.e.

politics, social and moral issues).

Students demonstrated a clear understanding of Market Segmentation and were well able to relate it to

the scenario presented.

Most students engaged comprehensively with the assertion presented concerning branding.



Behavioural

Examines the relationship between the consumer and the product. Buyers in a

market will differ in their wants, locations, buying attitudes, and buying

practices and any of these variables can be used to divide a market. (i.e. gift

buying, usage rate, loyalty and user status).

Marks Allocated

2 Marks for explaining the variables with examples X 4


10 Marks

PART B

Candidates were expected to demonstrate how the principles of segmentation might be applied to the analysis of

the market in magazines.

In explaining the benefits of market segmentation as a strategy candidates were expected to outline how

appropriate modes of segmentation facilitated the development of related targeting and positioning marketing

strategies for a firm / brand.

For example for a company in the magazine market in Ireland segmentation would involve selecting appropriate

demographic variables for the target segments – age, gender, stage of life cycle. Added to this will be relevant

psychographic variables such as – activities and interests (politics, business, the Arts, sports and entertainment),

nature of interests (i.e. general and specialist) and opinions. Also of relevance but to a lesser extent would be the

geographic and behavioural segmentation variables..

Demographic variables would be particularly relevant. Age and life style variables allow the marketer to

distinguish between youngsters, teens, singles, young families with children and older people. All these groups

would have distinctive reading interests and requirements.

Demographics is just one variable that may be used to segment the market. Others would include Psychographic,

Behavioural and Geographic. Again marketing efforts would need to be tailored to these distinctive markets.

The Company would also need to decide whether it wishes to target several market segments simultaneously and

designing separate marketing mix strategies for each. It would involve decisions around the attractiveness (size,

potential and scope for development) of the target market.

Segmentation would also facilitate the development of appropriate market positioning strategies. This would

involve decisions around the perceptions the company wishes to create in consumers’ minds associated with its

offerings. (e.g. ‘Specialist focus magazines ” etc.)

Marks Allocated

6 Marks for discussion of variables and 3 marks for direction of marketing effort

1 Mark for overall quality and presentation

10 Marks

PART C



A brand is defined as a name, symbol or design that identifies the goods or services of one seller and

distinguishes them from those of competitors. Think of the strength and importance to the firm of brand names

such as Ballygowan, Heinz, Coke-Cola, Guinness and Microsoft.

It can be a letter, a word, a group of words or a symbol. (e.g. Nike). A product manager co-ordinates all the

efforts for a particular product (or product line) or brand. An important part of the brand image of a product is

the packaging that is utilised.

Branding

- Makes goods easily identifiable and gives them a distinctive appearance

- If the quality of goods is maintained, it gives the consumer reassurance that they know what they are buying

- It facilitates advertising and promotion and new product development

Marks Allocated

2 Marks for the quality and relevance of points made in support of the position taken

1 Mark for overall quality and presentation

5 Marks

Examiner Comments on Question Six

Solution 6

PART A (i)

B2C Business to Consumer

This is where a business offers products / services via some electronic means (usually online). For example, most

airlines operate a B2C model by allowing passengers to book flights online. Other common examples of B2C are

online banking facilities, and electronic storefronts. (sometimes called e-tailing, for electronic retailing).

B2B Business to Business

This is where two businesses engage in transactions using electronic means. In a sell-side model, transactions are

conducted on the seller’s website. A simple example of B2B e-commerce would be a supermarket placing orders

with their wholesale supplier. The stages involved in a B2B transaction will generally be the same as B2C,

however it is likely that there would be the addition of a ‘negotiation’ stage, which is less common in B2C.

B2E Business to Employee

This is where businesses offer employees certain services / information electronically. Examples might include a

HR system that allows employees to apply for holidays or reserve spaces on training courses. Some companies

may offer their products for sale with employee discounts, and even offer other products / services, such as travel

offers etc.

C2C Consumer to Consumer

This is where individual consumers buy and sell to each other. Web-sites that offer online auctions, such as e-

Bay and Done Deal are good examples of C2C e-commerce websites.

Students were well able to explain the relevant acronyms and to identify and explain various intentional

threats to computer security.

Most students demonstrated a solid understanding of feasibility studies.



Marks Allocated

2 Marks for quality of explanation of each element

2 Marks for the overall quality and presentation 10 Marks

PART A (ii)

Intentional Threats

There are many ways in which computer systems can be attacked, especially when extensive use is made of e-

commerce. Some of the more common threats include

Theft

stealing physical equipment is difficult because the equipment is likely to be bulky and less valuable.

But laptops, notebooks and disco key storage devices are not. Un-encrypted data on these devices may

be particularly sensitive and vulnerable to theft and misuse.

Hacking

A hacker is a person who tries to gain access to a computer without permission. Usually this would be

done remotely over a network or the internet.

Viruses

A virus is a (usually very small) computer programme that is tacked onto other programmes and is able

to replicate itself (hence the term virus). What the virus does can vary from completely harmless to

extremely destructive (e.g. reformatting the computer hard drive).

Worm

A worm is a self-propagating malware (malicious software) programme that is similar to a virus.

However, worms do not need to be carried by another programme, and are generally more harmful.

Trojan

A Trojan is a programme that appears harmless at first but in time does something illicit without the

user knowing. It is a standalone malicious programme which has the potential to give control of the

infected computer to another computer.

Spyware

Spyware is also a type of malware designed to monitor computer / internet activity. They install

themselves on computers and collect data about the users. For example, some spyware can record

keystrokes (called ‘key logging’) and transfer information over the internet without your knowledge.

Phishing

Phishing is online fraud, usually carried out through e-mail. An e-mail is sent to an unsuspecting user in

order to ‘fish’ for information such as username, password, bank and credit card details by posing as a

trustworthy entity, such as a bank or a well-known website. (Such as EBay or PayPal).

Denial-Of-Service (DOD)

A Denial-Of-Service (DOS) attack is the malicious attempt or attempts by a person or persons to

prevent a website from functioning efficiently, either temporally or indefinitely. If the attack is

successful it generally makes a website or service unavailable to its intended users. DOS attacks tend to

be made against high profile websites.



Trap door (back door)

A trap door (or back door) is a computer algorithm designed to bypass normal authentication. It takes its

name from the fact that it uses a hidden entrance to a computer system to bypass a computer’s security

system.

Anything that causes a loss of data or a corruption of data can be considered a security threat. A number of steps

can be taken within a single site, ranging from limiting physical access to sensitive areas and installing complex,

encrypted codes to deny entry to data to unauthorised personnel etc. Other procedures one would expect are back

up procedures, disaster recovery plans, effective virus protection and password procedures.

Computer security can be considered under two general headings 1) securing the physical assets (i.e. the

machines and associated hardware) and 2) securing the data. Generally data is considered the most valuable

asset, as it is the most difficult to replace and has the most potential value to competitors and fraudsters.

A control is a method or procedure aimed at ensuring that the company’s assets are secure, including data and

other such intangible assets. Effective control procedures (physical controls, access controls, procedural controls

and organisational controls) should be put in place to combat potential intentional threats to the security of

information systems.

Marks Allocated

2 Marks for the description of threats

2 Marks for overall quality& presentation

10 Marks

PART C

A feasibility study is conducted to determine whether a project is fundamentally worthwhile. There are many

areas to consider when assessing the feasibility of a project, these include its economic feasibility, its technical

feasibility, and its organizational and operational feasibility. The feasibility analysis provides a high level snap

shot of the potential costs and benefits of the proposed system and the technical / organisational feasibility of the

project. If the results of the analysis are favourable an explicit decision is made to proceed.

There are many ways to assess the feasibility of a project. Amongst these are:

1. Economic feasibility

The main question here surrounds the costs of acquiring the system versus the benefits of having the finished

system. This is generally determined using a Cost-Benefit-Analysis. All costs (tangible and intangible) and

benefits (tangible and intangible) need to be considered is assessing the economic feasibility of a computer

project.

Tangible costs

These include all those costs that can be predicted and measured to a fairly accurate degree. Typical examples

include

- Hardware / Equipment

- Wages / salaries and consultancy fees

- Ongoing system benefits

Tangible benefits, would include

- Improved efficiency and throughput

- Reduction in errors

- Reduction in costs



Intangible costs, refer to costs that cannot be measured accurately and may always occur – some examples would

include

- loss of employee morale

- disruption to the organisation

Intangible benefits would include

- gaining a competitive advantage

- improved employee morale

- faster decision making

2. Operational and Organisational feasibility

The focus here is on whether the organisation has the necessary skills/ capabilities available to actually operate

the system on a day to day basis. And if not, where these can be obtained in a realistic way.

3. Technical Feasibility

The main issue here is whether the organisation is technically capable of developing/ operating the system, and if

not, whether the necessary technology can be developed or acquired in a feasible manner.

4. Schedule Feasibility

This is an assessment of the time-frame involved. Long projects are more likely to run into problems and / or fail.

Also there may be a critical deadline that must be met for the system to be of use (e.g. end of year or to comply

with new legislation).

Marks Allocated

5 Marks for overall quality 5 Marks

Examiner Comments on Question Seven

Solution Seven

PART A

The responsibility for the financial health of the organisation – ensuring that among other things that it has

adequate cashflow – lies with financial managers. Being responsible for finance they analyse data and produce

financial reports, as well as developing long term strategies that deal with finance. They advise senior managers

on financial matters such as investment decisions and sources of capital, as well as providing commentary on the

financial implications of any decision.

Financial managers are an integral part of the decision-making system within organisations. The information

processed by financial managers includes:

- Cost of raising funds

- Analysing foreign exchange exposures

- analysing the effects of movements in interest rates

- providing information on new investment opportunities

- ensuring financial reports comply with best practice.

- budget preparation and analysis

Answers to question 7 were a little disappointing with some students struggling to provide good

descriptions of the roles fulfilled by financial managers and limited explanations of the different sources

of long term finance available to organisations.

Most students were able to explain how profitability should be monitored.



Marks Allocated

2 Marks for the quality of description of roles (Max of four elements)


10 Marks

PART B

Debentures:

A debenture is a written acknowledgement of indebtedness by a company. Interest is paid at a fixed rate,

normally at half- yearly intervals. Debentures are not part of the share capital of a company and debenture

holders are not members of the company. A debenture holder is a creditor of the company. His interest is a debt

of the company, payable irrespective of whether there are profits or not. Debenture interest is tax deductible.

Debentures may be redeemable or irredeemable. Redeemable debentures maybe an appropriate source of finance

where a company’s needs are temporary. Redeemable debentures must be redeemed by a fixed date or within a

given time period. Irredeemable debentures are repayable only in the event of some specified contingency, such

as the winding-up of a company or default in the payment of interest.

Debentures may be secured or unsecured. Most debentures are secured by a charge on the assets of the

company. This charge may be fixed or floating. In the case of a fixed charge, the security relates specifically to a

particular asset or group of assets. The company is not permitted to dispose of the asset or assets without

providing equivalent security, or without the prior approval of the debenture holders.

The terms of the debenture and the rights and responsibilities of the parties involved are set out in the Debenture

Trust Deed. Matters outlined in this deed must be complied with by the company. The Debenture Trust Deed

will contain, amongst others, the following:-

(1) restrictions on additional lending

(2) matters pertaining to the disposal of assets on which the loan is secured

(3) insurance relating to the property on which the loan is secured

(4) provisions relating to the retention of title deeds of properties on which the loan is secured

In summary

Advantages

- Represents a good source of long term finance

- Providers of debenture capital have no direct involvement in the day to day running of the company (i.e.

it does not affect the balance of power and control between existing shareholders).

- Interest is tax deductible

Disadvantages

- Debentures are normally secured on the fixed assets of the company

- Debentures may have restrictive loan covenant requirements built in to the loan agreement

- Debenture holders may force receivership / liquidation on the company in the event of non payment.

Ordinary Shares

Ordinary shareholders are members of the company holding voting rights. They own a share of the company’s

assets and a share of any profits earned after all prior claims have been met.

Ordinary shares or Equity, as they are termed, are a permanent source of finance. Ordinary shareholders provide

seed capital to allow the business to develop and grow. There are no fixed repayment or interest charges to be

paid in the case of equity. Equity also provides the owners with authority to influence policy and direction.



Equity may be raised through offers for sale, public issues, placing, tender or rights issues. Equity is generally

regarded as an expensive source of finance when compared to loan finance, as the dividends to equity holders

unlike loan interest are not tax deductible. Another disadvantage of equity is the potential for change in the

balance of control between existing and new shareholders.

Bank Borrowings

Commercial banks extend short-term facilities mainly in the form of overdraft arrangements. Generally

commercial banks reserve the right to cancel overdraft facilities at short notice. In practice it is probably not to

the banks advantage to pursue this policy to the letter, as they might needlessly force the borrower into financial

difficulties.

Utilising bank facilities in a proper manner will ensure the maintenance of a flexible and comparatively cheap

source of finance. Bank borrowings are flexible in that interest is only payable on the amount outstanding and not

on a fixed advanced sum as is the case with the borrowings from other financial institutions. Bank borrowings are

also comparatively cheaper than long-term loans due to the fact that the risk involved is smaller given that the

lending period is shorter.

The security required by banks differs depending on the risks involved. They might require personal guarantees

in the case of a private company or, alternatively, floating or fixed charges on the assets of the company, or

indeed, both.

Bank lending rates are normally set one to two percent above the bank rate. Bank lending rates can therefore

fluctuate upwards or downwards during the period in which the monies are advanced. This can be an advantage

or a disadvantage depending on the direction of the change when compared to other forms of advances made by

financial institutions at fixed interest rates.

Marks Allocated

4 Marks for the quality of description of each source X 2

2 Marks for overall quality 10 Marks

PART C

A system of budgetary control is a useful way to monitor a firm’s profitability and liquidity.

Budgetary control refers to the analysis, recording and reporting on the activities and financial well being of the

organisation. It involves forecasting likely outcomes of plans in an attempt to control the future for the

organisation. It is a bread and butter activity for the financial team, in that it ensures effective monitoring of

current activities, and gives invaluable information about performance in relation to plans.

Financial control of activities is vital to all organisations. Many smaller firms, for a variety of reasons, such as

lack of expertise or over-trading, opt for informal rather than formal systems of control. This can be catastrophic

for the small firm as the true performance or profitability cannot be gauged.

Budgetary control requires that realistic profit and loss and cash flow forecasts are prepared at the beginning of

the period and that they be updated normally on a quarterly basis as the year progresses. Due care and

consideration is required in interpreting variances from budget to ensure managers are held accountable for all

those matters that fall within their sphere of control

The cash flow forecast may be used to determine if company borrowing is required or if surplus funds are likely

to be available for re-investment. Comparing actual performance against forecasted profit and loss account

projections allows management to monitor margins on a regular basis and to take appropriate corrective action

before deviations become too serious.

Comparisons against budgets may be done in a number of ways but ideally it should be integrated with the

system of responsibility accounting in place in the company – by department etc. Indeed it may be wise to

prepare financial reports on a weekly basis should this be deemed necessary. It is also important to incentivise



those with the authority to make decisions. (e.g. in the case of a restaurant one may link the Chefs bonus to the

margin earned by the Food section etc.)

Ratios also provide useful information to enable an organisation to monitor liquidity, profitability, asset

utilisation and solvency. This information is important to internal and external users. Ratios provide useful

warning lights but usually require further analysis and explanation. Ratio analysis is enhanced when the

information in comparable (e.g. when we are comparing like with like). Ratio analysis is a good diagnostic tool

to help assess the financial health of an organisation, thereby enabling managers and users to identify areas which

might be seen as strengths, or on the other hand, areas that might be causes for concern. They allow managers to

stand back from the details and zone in on key relationships that highlight financial strengths or possible sources

of financial concern.

Marks Allocated

2 Marks for the quality of the description of the concept and its monitoring


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