scscyear12businessmanagement.weebly.comscscyear12businessmanagement.weebly.com/uploads/1/9/8/4/... · Web viewCOMPAC Suggested answers SECTION A Question 1 (2 marks) Outline one advantage

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Suggested answers

SECTION AQuestion 1 (2 marks)

Outline one advantage of a business operating as a private limited company and one advantage of a business operating as a partnership.Note: The following answer is one of a number of possible answers to this question.

One advantage of a business operating as a private limited company is that the business is a separate legal entity; therefore, the owners (shareholders) have limited liability to the value of their shareholding.

An advantage of a partnership is that it is less expensive and simple to set up, with minimal government regulation.

Marking guide:

1 mark for outlining an advantage of a private limited company

1 mark for outlining an advantage of a partnership

Question 2 (4 marks)

Using a business case study from the past four years, explain a potential conflict that might exist between one stakeholder from within the business and one stakeholder from outside the business. Note: The following answer is one of a number of possible answers to this question.

In the hospitality, retail and fast-food industries recent changes to the penalty rate law has the potential to cause conflict between the owners/managers of a business and unions (stakeholders outside the business).

For the owners, reduced penalty rates means lower wage costs on a Sunday, which will decrease the cost of trading on that day and increase the profitability of a business. It might also mean the business could employ more workers, resulting in increased customer satisfaction.

In contrast, the unions, which advocate the protection of employee rights, pay rates and working conditions, would not want any employees to receive pay cuts. Employees will be negatively affected by a reduction in the hourly rate they receive in exchange for their labour on a Sunday. This could mean that some employees have to work longer hours to cover their living expenses or have to seek alternative employment.

As the laws have already been changed, the union’s priority is to minimise the financial impact on its employee members during the transition period.

Marking guide:

1 mark for identifying a relevant business case study

1 mark for describing how the stakeholder within the business will be affected

1 mark for describing how the stakeholder external to the business will be affected

1 mark for stating why the conflict exists


a. Describe the role of a human resource manager in the workplace. 1 mark

Note: The following answer is one of a number of possible answers to this question.

Human resource managers are crucial in workplace relations as they liaise with other departments to create a productive and harmonious workplace. Their role includes day-to-day administration of wages and entitlements, negotiation with employees/unions around workplace issues and participation in the dispute resolution process.

Marking guide:

1 mark for providing the key characteristics and features of a human resource manager

b. Describe the role of employer associations in the workplace. 1 mark


Employer associations are groups of employers who come together to promote a common interest in workplace relations issues and support employers through sharing information and providing support. Employer associations may represent employers during collective bargaining procedures, advise employers of their rights and obligations and act as their advocates.

Marking guide:

1 mark for providing the key characteristics and features of an employer association


a. Using Porter’s Generic Strategies (1985), describe the key characteristics of the differentiation approach as a strategy to position a business for the future. 2 marks


If a business adopts the differentiation approach as its strategy to gain a competitive advantage it is aiming to be unique in its industry; therefore, becoming valued by the customers. To differentiate itself the business would need to use high-quality materials, adopt a pricing strategy aimed at skimming the market, ensure it is innovative in product design, distribute through select channels and provide customer service by trained professionals.

Marking guide:

1 mark for describing the key characteristics of the differentiation approach

1 mark for describing why this approach can assist a business position its future

b. Outline how a business you have studied this year has successfully adopted one of Porter’s approaches (including differentiation) to position the business for the future.

2 marksNote: The following answer is one of two possible answers to this question, with the other being the differentiation approach.

Porter believed that businesses are subjected to competitive forces not only from their existing competitors but also from other businesses, such as their buyers and sellers, and that businesses can be threatened by the introduction of substituted products or a new competitor. By adopting the lower cost approach as the business strategy, a business needs to become a lower cost producer relative to its competitors. This can be achieved through practices, such as economies of scale, implementing appropriate technology, determining the best access to raw materials and adopting lean production techniques. A business that has successfully adopted this approach is Ikea. It offers stylish furniture, cheaper than most of its competitors, sources its products from countries that pay lower wages than Australia and requires the purchaser to construct products from a flat pack, which enables the company to keep its prices low.

Marking guide:

1 mark for outlining the key characteristics and features of an approach

1 mark for outlining how a specific business has adopted this approach to gain a competitive edge


a. Define the term ‘performance management’. 1 mark


Performance management is the practice of strategically linking the performance of an individual employee with the objectives and tasks related to their job and the overall objectives of the business.

Marking guide:

1 mark for stating the meaning and essential qualities of performance management

b. Identify and justify one appropriate key performance indicator (KPI) that Shannon could use to measure the quality of customer service. 2 marks


The number of customer complaints is a KPI that Shannon could use to measure the quality of customer service, as it is an indicator of how customers view the quality of the service they have received. An increase in customer complaints might indicate that there is a need for change in the training and development of staff or the processes, whereas a decrease in the number of customer complaints can be interpreted as a positive outcome.

Marking guide:

1 mark for identifying an appropriate KPI

1 mark for providing a valid reason for the choice of the KPI

c. Discuss one performance management strategy Shannon could implement to improve the performance of the receptionists who work on Wednesday and Thursday afternoons.3 marks


One performance management strategy Shannon could use with reception staff is to introduce a system of performance appraisals. Performance appraisals would give Shannon the opportunity to appraise the performance of individual receptionists in terms of how well jobs are being carried out. It would also provide opportunities for open and honest feedback about individual performances and for collaboratively establishing plans to improve performance. Appraisals can be conducted on a formal basis, annually, or informally, taking place when a specific activity or task has been completed.

The advantage of conducting performance appraisals in this case study is the systematic approach to review and support. However, both formal and informal performance appraisals can be time-consuming and challenging for Shannon. She needs to conduct ongoing appraisals to determine if the training and development programs offered to the receptionists and her ongoing support of receptionists will lead to a cultural change regarding patient care.

Marking guide:

1 mark for proposing an appropriate performance management strategy

2 marks for providing valid reasons for the choice of the performance management strategy

d. Explain how Shannon could apply one of the following motivation theories to encourage her receptionists to improve the quality of their services. 4 marks

Note: The following answer focuses on Locke and Latham’s Goal Setting Theory.

The Goal Setting Theory (Locke and Latham) focuses on the process of setting and achieving goals as a means of increasing individual’s motivation, effort, task focus and persistence. This theory would be particularly useful for Shannon to apply for several reasons. Locke and Latham’s theory would complement the use of performance appraisals. It would lend itself to using key performance indicators (KPIs), such as the number of patients treated per shift to quantify the performance of the receptionists. In addition, the theory would facilitate ongoing discussions between Shannon and the employees around individual and business goals.

The goal setting cycle has five stages—collaborative setting goals, employees undertaking the job/tasks, periodic feedback from the manager, end-of-period evaluation, and the outcomes.

An example of a goal is using KPIs to measure the number of patients treated per shift. If Shannon and the receptionists set the KPI targets together, with the benchmark being the number of patients treated on a Monday and Tuesday, and Shannon provides periodic feedback, then both parties should be able to identify the reasons for the problem and assist in determining a remedy.

It is possible that there are other reasons why patient bookings on a Wednesday and Thursday afternoons are low—not just that the receptionists want to finish on time. The other practitioners see more patients on Wednesday and Thursday afternoons than earlier in the week, so the receptionists might be busy dealing with these patients and taking reception time away from Shannon’s and George’s patients.

This goal-setting process should help Shannon identify training and development needs for the receptionists, such as, training focused on the computer booking system or end-of-shift procedures. In addition, it could identify the need for additional staff to work on Wednesday and Thursday afternoons to meet Orchid Centre’s demands.

Marking guide (global):

1 mark for describing the key characteristics and features of selected relevant motivation theory

1–3 marks for explaining how this theory will help to overcome the problem. More complex answers will refer to the trends in KPIs presented in the case study.


Explain the role of the Fair Work Commission in resolving workplace disputes.


The Fair Work Commission (FWC) is responsible for providing assistance to resolve workplace disputes. When a workplace dispute has not been resolved through mediation, one of the parties can to apply to the FWC to handle the dispute. Initially, the FWC will appoint a conciliator to undertake the conciliation process, which involves the parties meeting to attempt to resolve the issue. If the conciliation process fails, the matter is referred to arbitration. An arbitration hearing is similar to a court case in that the FWC acts as an independent third party, listening to the parties make their case. Once a decision is made about how the dispute will be resolved, it becomes legally binding.

Marking guide:

1 mark for identifying how the FWC is brought into the dispute by one party

1 mark for describing the features of conciliation

1 mark for describing the features of arbitration


With reference to Lawrence and Nohria’s Four Drive Theory, analyse two motivation strategies a manager could apply to decrease rates of staff absenteeism and levels of staff turnover, and increase the productivity of a business.

Note: This suggested answer focuses on two motivation strategies, namely career advancement and investment in training. Other accepted strategies are performance-related pay and support and sanction. The sample answer focuses on one drive per strategy; however, responses could discuss multiple drives per strategy, within the context of the analysis.

Investment in training and career advancement are two motivation strategies that could be used to decrease rates of staff absenteeism and levels of staff turnover, and increase the rate of productivity growth. When a business invests in the training and development of the employees, it is drawing on a principle of Lawrence and Nohria’s Four Drive Theory that employees are driven or motivated by a desire to comprehend (learn). Training builds the capacity of employees and can increase employee satisfaction because they feel more motivated and energised when they are working in a stimulating environment. Training will also provide employees with additional skills and expertise to perform their jobs more efficiently and effectively, thus increasing productivity. Staff absenteeism and high staff turnover often occurs when workers feel undervalued and are given limited or no career advancement opportunities.

A manager needs to match the training with the specific task needs of each employee. The training should challenge employees, motivating them to apply newly acquired skills and practices to their work. Monotonous and unstimulating work can increase job dissatisfaction and decrease productivity.

Career advancement refers to the promotion of employees into more challenging and higher level positions within a business. It is a long-term motivation strategy and is most closely linked to Lawrence and Nohria’s Four Drive Theory that employees are driven or motivated by a desire.to acquire. Career advancement is recognised as a strategy to increase employee satisfaction as it offers employees the opportunity to acquire higher levels of status, accomplishments and/or power within a business. Incentives include increased wages/salary, new opportunities to gain experience and increased levels of authority.

Career advancement also offers employees the opportunity to contribute to the business in a more productive manner through job enlargement (making a job bigger), job enrichment (more challenging) or job rotation (moving between roles). However, productivity might decrease in the short-term as employees build their knowledge and experience in their new roles. Managers should also be mindful that the drive to acquire might be extremely strong in some employees, resulting in excessive competitiveness within teams and a perception that career advancement processes are not fair and equitable. This can lead to a decrease in job satisfaction and productivity for some employees, who might feel overlooked in the career advancement process.


1 mark for identifying each motivation strategy and linking it to the Four Drive Theory (x two = 2 marks)

1–2 marks for explaining how the strategy might increase employee satisfaction

1-2 marks for explaining how the strategy might increase productivity


Minh manages a team of employees at a holiday resort. He has established an objective to improve staff productivity by 15% within 12 months. The staff are generally very experienced, with most having been in their role for many years.

Recommend and justify the most appropriate management style Minh could adopt to improve staff performance and productivity.


The participative management style would be an appropriate management style for Minh to adopt to improve staff performance and productivity.

This style is characterised by decentralised control, authority and decision-making. The participative manager is focused on working with staff as a team and is people-oriented; therefore, central to the participative management style is the belief that satisfied and motivated employees perform more effectively and are more productive. Control and authority still ultimately lies with the participative manager; however, the participative manager highly values the input and contributions of employees, which is different to the consultative, persuasive and autocratic approaches.

Minh’s staff are highly experienced in their roles and have been with the business for many years, therefore they would have a deep understanding of the business. By seeking input from employees about how they can improve their productivity, Minh would gain valuable insights into how each role can be performed more efficiently and effectively. In contrast, more task-oriented styles, like the autocratic or persuasive approach to introducing changes relating to productivity, would be less inclined to seek input from experienced employees. It is likely that these types of managers would assume that they have a better understanding of what is required to improve productivity.

Other benefits of the participative management style are that it cultivates and values shared visions and directions so that the managers and employees are working together to achieve the productivity objectives. It lends itself to the adoption of a coaching model of employee development and it creates good employee relations.

Some limitations that Minh will need to consider are that some employees might seek to have their increase in productivity to be rewarded financially rather than through an increase in satisfaction. It can be time-consuming to have employees involved in decision-making and consultation, and when there are differing viewpoints or beliefs about the changes that need to be made, there is a potential for conflict to arise between people that can affect staff performance and productivity.

Marking guide:

1 mark for identifying an appropriate management style from the study design

1 mark for identifying characteristics of the chosen style

2 marks for explaining how this management style can improve staff performance and productivity

1 mark for explaining the limitations of this style

1 mark for contrasting this style with other management styles to justify why it is the most appropriate


Identify one of Senge’s Learning Organisation principles (disciplines) and explain how the application of that principle (discipline) can assist a business to implement a change.


Building a shared vision is one of the principles (disciplines) identified in Senge’s Learning Organisation. A shared vision of the future is part of encouraging and inspiring all of the people within a business to innovate, create and drive business change and transformation. When people feel enthusiasm for the goals and direction of a business, the vision is reinforced and encourages a deeper level of commitment to the change that is being implemented.

Marking guide:

1 mark for identifying one of the five principles (disciplines) of Senge’s Learning Organisation

1 mark for outlining the principle (discipline)

1 mark for explaining how this principle (discipline) can be applied to implement change


With reference to a business case study from the past four years, outline the driving and restraining forces for change in that business and explain how the business has used Lewin’s Three Step Change Model to plan for new business opportunities in domestic or global markets.


Lewin’s Three Step Change Model involves three key steps or principles for leading and implementing change. Step one involves unfreezing the current situation, step two involves moving from the current situation to the new situation and step three involves refreezing the new situation.

In 2008, the volume of letters being sent through Australia Post’s mail system reached an all-time peak; however, by 2016 the delivery of addressed letters had decreased significantly. Australia Post knew it had to change. For 200 years, Australia Post operated as a monopoly in the area of domestic letter delivery. However, to remain competitive in a rapidly changing market, the business has had to shift into an already competitive market for the delivery of parcels and ecommerce solutions. It was crucial for Australia Post’s survival to shift from their original core business of letter delivery to ecommerce, involving digital communication and transactions.

There were a number of forces that were driving Australia Post’s need for change. In terms of Lewin’s model, this meant that Australia Post had to unfreeze from being a domestic business focusing on letter delivery. Some driving forces included increasing globalisation of the economy, new technologies, innovation and changing societal attitudes. Globalisation meant Australia Post had to compete in an international market and it had to harness the capabilities of new technologies that supported ecommerce. The business needed to adopt new ways of operating in a technology-rich economy and it had to recognise a shift in the way that consumers purchased goods and services.

Given the rapid rate of decline of letter deliveries, it was essential that Australia Post managed effectively the restraining forces of time and organisation inertia. Moving from the current situation to the new situation involved putting the customer and customer experience at the centre of Australia Post’s plans for change and innovation. This included the creation of a new position of Chief Customer Officer, responsible for customer advocacy, and creating customer-led services and developing a more customer-centric culture. Shifting to the new situation also involved providing safe online shopping experiences for customers, supporting small businesses to grow online, powering ecommerce for all businesses and assisting corporations and governments to digitise their services. The Australian Government supported reforms to letter service delivery, including an increase in the price of regular stamps and changes to delivery time to ensure that letter delivery by Australia Post is sustainable in the long-term.

Australia Post articulates how it intends to refreeze the new situation in its 2016 annual report, Part of tomorrow. The report outlines the business’s strategy to help Australians prosper in the 21st century. The strategy explains what Australia Post wants to achieve and how this will happen. It wants to ensure that change is embedded into the business culture and it will advance its purpose by providing customers with experiences they value, by differentiating its products and services from its competitors, by changing the expectations of its stakeholders, both within and external to the business, and by considering the importance of global issues, such as climate change.


1 mark for outlining the driving forces

1 mark for outlining the restraining forces

2 marks for explaining the new business opportunities

1 mark for describing each of the three steps in Lewin’s model (x three = 3 marks)

1-3 marks for illustrating how Lewin’s model relates to the selected case study

SECTION B: CASE STUDYQuestion 1 (2 marks)

Describe the relationship between operations management and Arrow’s business objectives.


Businesses endeavour to achieve their business objectives through the management of their operations system. In Arrow’s case the aim is to provide its customers with high-quality products at the lowest possible price with the objectives of making a profit and increasing market share. Arrow maximises the competitiveness in its operations systems through producing maximum quantities at a minimum cost, maintaining high levels of quality, meeting customer demand through the speed of production, ensuring that its products are reliable, and by being flexible and responsive to changes in consumer demands and technology.

Marking guide:

1 mark for stating the relationship between the operations system and business objectives

1 mark for providing specific examples to illustrate the relationship


Describe the key elements of the operations system at Arrow. Provide one specific example of each element.

Note: Multiple examples have been provided for each element of the operations system at Arrow. Students only have to provide one example for each element.

The key elements of Arrow’s operations system are inputs, processes/transformation and outputs. Inputs are resources that are put into Arrow’s operations system to obtain their planned products. Examples of inputs in Arrow’s operations system include raw materials (such as cotton to make fabrics), component parts (such as threads), human resources (such as designers and machinists), capital resources (such as the manufacturing plant, equipment and robotics), entrepreneurial skills (such as leadership), and time.

Processes are the operations and actions used by Arrow to transform or convert their inputs into outputs. Examples of Arrow’s processes include computer-aided design, laser-cutting of fabrics to minimise waste, testing for quality control and quality assurance, and ecommerce platforms to make it easier for customers to make purchases.

Outputs are finished products in the form of goods ready for sale to customers. They are the result of inputs being processed. Examples of products produced by Arrow include clothing, sporting equipment and homewares.

Marking guide:

1 mark for describing the input element and providing a specific example

1 mark for describing the process element and providing a specific example

1 mark for describing the output element and providing a specific example


Explain two strategies that Arrow could implement to improve the efficiency and effectiveness of its operations.

Note: Various strategies can be used to improve efficiency and effectiveness. This sample answer focuses on the strategies of technology developments and waste minimisation. Other acceptable strategies include materials management and quality management.

Arrow could incorporate more robotics into the operations system as a strategy to improve efficiency and effectiveness. The use of computer-aided design and laser-cutting technology indicates that Arrow has incorporated some automation and robotics technology into their operations system; however, further cost savings could be achieved through robotic technology being used in its warehouse. Robots could be used to select, load and transport stock around the warehouse, ready for shipment to Australia. Robotics might improve efficiency by increasing the speed of production, reducing the cost of labour and freeing up employees to take on other responsibilities. Robotics might improve effectiveness by decreasing potential occupational health and safety hazards for employees on the warehouse floor and improving the quality of the products, as robots minimise the possibility of human error.

Another strategy that could improve efficiency and effectiveness in Arrow’s operations is to adopt the Just in Time (JIT) inventory management system. JIT aims to avoid holding stock at any point in the supply chain to decrease inventory costs, with the objective of having the right quantity of products needed, at the right time, at every stage of the production process. This would ensure that finished products are ready for immediate dispatch to customers, which would maximise efficiency. If Arrow wants to achieve its objectives of providing high-quality products at the lowest prices, it must ensure that it has efficient and effective inventory management practices. This means reducing costs by minimising inventory levels, meeting immediate requirements and avoiding stockpiling of products that might go out of fashion quickly.

Marking guide:

1 mark for explaining how each chosen strategy will improve efficiency (x two = 2 marks)

1 mark for explaining how each chosen strategy will improve effectiveness (x two = 2 marks)


a. Key performance indicators (KPIs) provide data to analyse the performance of a business.

Using key performance indicators, analyse how Arrow’s focus on Porter’s (1985) lower cost approach to strategic management has affected the business’s ability to maintain a competitive advantage over its competitors. 6 marks


Competitive advantage refers to the point of difference a business has over competitors. Arrow’s competitive advantage over its Australian-owned competitors is that it has focused on a lower cost approach, rather than a differentiation approach to strategic management. Adoption of Porter’s lower cost approach means that Arrow is focused on being a low-cost producer and adopting a no frills approach to appeal to price-conscious consumers. Arrow achieves its cost advantage through charging lower prices. It achieves this by reducing costs and expenses. Examples of cost and expense reduction include moving its offshore manufacturing to a cheaper location, employing waste minimisation practices and using technology to streamline the operations system.

Arrow’s approach has proven to be effective. It has successfully managed the introduction of two international competitors, Lola and Q&T, into the Australian discount department store market. While the key performance indicators of percentage market share and level of sales show that Lola and Q&T both dominate the market, Arrow is the top-performing Australian-owned company. Arrow has the highest percentage of market share and level of sales turnover of the Australian-owned businesses, and is the only business to experience significant growth in the one-year period.

The entry of Lola and Q&T into the Australian market in late 2015 has significantly affected the performance of two of Arrow’s competitors, Big D and DisCo, as evidenced by their negative growths of 15.8% and 25.7%, respectively. In contrast, Arrow experienced a 13% growth in the same period, indicating that its focus on a lower cost approach and providing its customers with high-quality products at the lowest price is currently an effective strategy in spite of the new entrants into the market.

The percentage of market share indicator demonstrates that Arrow has maintained a competitive advantage over its Australian-owned competitors, Big D, DisCo and Fat Henry’s. Arguably, this lower cost approach might have been the reason why it held the largest percentage of market share of the Australian-owned stores, with continued percentage growth. Arrow also has the highest level of sales turnover of the Australian-owned stores, having achieved $1.1 billion in sales turnover during the period, demonstrating that it is shifting far greater quantities of products than their Australian competitors.

Ultimately, Arrow is proving to be more resilient in the market than its Australian-owned competitors; however, it will need to continue to pursue its lower cost approach in order to ensure that it can maintain growth, continue to increase sales turnover and increase its percentage of market share into the future.


1 mark for defining competitive advantage

1 mark for describing Porter’s Generic Strategy approach of lower cost

1–3 marks for explaining the relationship of a relevant KPI to the lower cost approach to gaining a competitive advantage. Note: There are three relevant KPIs

1 mark for distinguishing between Arrow’s performance and its Australian competitors and international competitors

b. Propose and justify two KPIs that could be used to measure Arrow’s commitment to its stakeholders. 4 marks


Two key performance indicators (KPIs) that could be used to measure Arrow’s commitment to its employees are rates of staff absenteeism and level of staff turnover.

Rates of staff absenteeism is expressed as a percentage and indicates the number of work days lost due to unscheduled absences during a certain period of time, such as illness, personal leave or employees not turning up to work due to work dissatisfaction. There is a time element to a KPI—to be measured it would be days lost in a year, which could then be compared with the next year. Employee absences represent a large cost to a business, as it still usually has to pay wages while an employee is on sick leave or personal leave, and there is also lost productivity. This indicator can measure a business’s commitment to employees, because motivated and committed employees feel supported in their work and are generally less likely to take days because they feel overwhelmed, stressed or unsupported in the workplace. Businesses that are committed to their employees will use a range of strategies to reduce staff absenteeism, including employee-wellness programs and flexible working hours.

The level of staff turnover is another KPI that Arrow could use as it measures the rate at which employees permanently leave a business in a given period of time. It is expressed as a percentage of the total number of employees. In other words, this KPI is expressed as the number of employees who left divided by the average number of employees for a particular period, such as a year. High levels of staff turnover might indicate high levels of staff dissatisfaction in the workplace, so this KPI could be used by Arrow to measure its commitment to employees. When employees feel dissatisfied generally because they, it is feel unsupported, stressed, unmotivated or overwhelmed, are poorly paid or their work is not recognised, prompting them to seek other employment opportunities. It is important for Arrow to nurture their employees’ skills and attributes, provide opportunities for training and development, consider their wellbeing, as illustrated by Arrow’s provision of free meals, and choose skilled managers to communicate the vision, goals and priorities of the business. This should demonstrate Arrow’s commitment to its employees and in turn result in low levels of staff turnover.

Marking guide:

1 mark for identifying each KPI (x two = 2 marks)

1 mark for supporting the selection of each KPI (x two = 2 marks)


a. Businesses should consider their corporate social responsibility when implementing change.Describe a corporate social responsibility issue that Arrow should have addressed when making decisions about moving its manufacturing operations from China to Indonesia. 2 marksNote: The following answer is one of a number of possible answers to this question.

When Arrow decided to move its operations from China to Indonesia, it had a corporate social responsibility to consider the impact on the people who were going to be affected by the change. This included the employees in the Chinese plant who would be losing their jobs, and the broader effect on the community following the loss of so many jobs after the operations shut down. Similarly, Arrow had a corporate social responsibility to its new employees and the wider community in Indonesia. The business needed to ensure that the stakeholders would benefit from the creation of new jobs by paying above the minimum wage rates and providing free meals during working hours.

Marking guide:

1 mark for identifying a corporate social responsibility

1 mark for describing some likely impacts of shifting Arrow’s manufacturing plant

b. Discuss the implications of Arrow’s decision to change the location of its manufacturing operations from China to Indonesia. 4 marks


To maintain its competitive advantage as a cost leader in the Australian market, Arrow decided it was necessary to shift its manufacturing operations from China to Indonesia. This change offered Arrow a number of advantages. As Indonesia is significantly closer to Australia than China, shipping costs and travel times are lower. Deliveries are direct from the factory to the stores in Australia, cutting out the involvement of an intermediary, hence reducing costs. Indonesia has lower minimum wages than China, and despite the fact that Arrow is going to pay above the minimum wage, its labour costs are still lower. In addition, Indonesia’s high-standard manufacturing practices produce high-quality output (product), leading to increased customer satisfaction.

However, these advantages need to be weighed against the disadvantages associated with implementing the significant change in Arrow’s operations system. A change like this would be expensive to initiate and execute. Typical costs associated with such a shift include redundancy payments to employees as well as costs incurred in shutting down the plant, such as terminating leases or selling properties. Other significant costs included transporting the machinery, equipment, furniture and other assets from China to Indonesia. In addition, the new plant in Indonesia was equipped with new technology, such as computer-aided design software and laser-cutting machines. This would amount to a significant investment in the new capital items.

Marking guide:

2 marks for explaining the advantages of shifting Arrow’s manufacturing operations

2 marks for explaining the disadvantages of shifting Arrow’s manufacturing operations

SECTION A

Question 1a.

Sample response

A partnership is a business owned by two or more people, with most partnerships having a maximum of 20 partners.

A partnership does not operate as a separate legal entity from the owners. Therefore, the owners are subject to unlimited liability, making them personally responsible for the debts of the business.

Each partner will contribute capital to the establishment of the business and will share in the profits of the business in proportion to the capital contributed. Hence the partners need not be equal and some partners may contribute capital only and not work in the business (known as a silent partner). With multiple owners, a partnership allows for shared decision-making, shared responsibility and a share of the workload in operating the business, making it easier for the business to start operating.

Mark allocation: 4 marks

2 marks for describing unlimited liability as a feature of a partnership

2 marks for describing shared responsibility and decision-making as a feature of a partnership

Tip

To describe means to provide information about the topic – more than just a statement. Always try to provide more than a basic summary in your response.

Question 1b.

Sample response

By operating as a private limited company, Glen and Aimee would benefit from limited liability. This means that, should the business have to fold due to financial problems, the two

owners would be limited in their liability for the debts of the business to the amount of their investment in the business. If they were to operate as a partnership, they wouldn’t have that protection and so would be liable for all the debts of the business, to the extent where their personal assets may be used to pay these debts.

Secondly, the tax paid by a company could be lower than the tax paid by the two owners as partners in the business. Company tax is a flat rate (a fixed percentage) whereas the partners in a partnership are subject to PAYG income tax, which is a progressive tax, and the percentage of tax incurred increases as the incomes of the partners increase (as the profits of the business increase).


2 marks for each aspect:

1 mark for explaining how that aspect is derived by operating as a private limited company

1 mark for explaining how this aspect is different for a partnership

Note: A comparison must be made, therefore an explanation of how each aspect operates under each type of business must be included.

Tip

To compare means to provide similarities as well as differences. It is important to balance your response to cover both aspects of the two ownership types.

Question 1c.

Sample response

Planning is the ability of a manager to define business objectives and decide on the methods or strategies to achieve them.

In establishing a business, there is a range of tasks that need to be performed and a number of legal requirements that must be met. Through planning, the two owners can determine which task needs to be completed first, and prioritise accordingly. There are three types of planning – strategic, tactical and operational – which ensure that tasks are completed in the order of importance and urgency.

Using these three levels of planning, Glen and Aimee could develop a timeline for the

completion of tasks so that each task is completed in order. It also means that duties and responsibility for those tasks can be allocated, thereby eliminating duplication of tasks.


1 mark for describing planning

1 mark for identifying the levels of planning

2 marks for explaining how planning would be used by Glen and Aimee

Tip

On first glance this question is straightforward – explaining a skill. However, the second part of the question is asking you to apply your knowledge of the skill to explain how it can be used.

Question 2.

Sample response

Lewin’s Three Step Change model provides a structure for businesses to follow as they attempt to undergo change. Lewin identified that businesses become set in their ways – their policies and practices become rigid and the business itself becomes reluctant to change. Lewin suggests that, at this point, the business needs to ‘unfreeze’ – this involves identifying why a change is needed and what needs to change. Employees are informed that support is available from management to assist in the change process and that the status quo – the conditions under which the business is currently operating – is no longer applicable.

Once the business is unfrozen, it has the opportunity to make the necessary changes. Policies, practices and processes can be changed and, if management has put the appropriate support in place (be it training, communication, team-building, redundancy packages and transition services if jobs are lost), the business is moved into the new position that was identified when the need for change arose.

Finally, Lewin identified that the business now needs to ‘refreeze’. Once the change has occurred, it needs to become part of the culture of the business or else there is a temptation to

revert to the ‘old way’ of doing things. Lewin suggests that refreezing can involve developing strategies to sustain the change and to celebrate the change, such as creating some ritual that can be referred to as a means of reminding staff of the change. It can also involve re-writing the mission and vision statements so that the change is formally recognised.


1 mark for describing each of the features/steps in the model (up to 3 marks)

Tip

The new Study Design contains more theories than before, and you must be familiar with them all as examiners may ask directly about a particular theory.

Question 3.

Sample response

The ‘drive to defend’ is what Lawrence and Nohria identified as a latent drive – there needs to be some form of threat for the drive to become active. Threats to the individual, their group, or the business as a whole can trigger the drive to defend. When this drive is activated, employees have the desire to remove those threats to their safety and security, and to protect what they regard as ‘theirs’.

Referring to this drive, motivation comes from removing fears and insecurities from the workplace.

Managers and employees seek to create a workplace that is welcoming and supportive, and one where intimidation, threats and manipulation are not used as management techniques. There is consistency and fairness in the treatment of employees, and any system for determining rewards and recognition are fair and transparent, so that no-one feels that any other employee is the subject of favouritism or that they have been discriminated against. Overall, there is a level of trust between managers and employees, and they are free (and even encouraged) to speak up and offer suggestions. If these forces aren’t present, then staff won’t be motivated to do their best work.


3 marks for the description of the ‘drive to defend’

1 mark for explaining how the latent drive is roused when an employee is threatened 1 mark for explaining employees’ drive to protect themselves from any perceived threat 1 mark for explaining how the drive to defend is used to motivate 1 mark for explaining how this could affect a business

Tip The new Study Design identifies three theories of motivation. You should understand each theory because any of them can be specifically referred to. Lawrence and Nohria’s theory is new to the course and is therefore likely to appear in the examination.

Question 4a.

Sample response

A social enterprise is a business that produces goods and services for the market but operates with the primary objective of fulfilling a social need. The business will want to make a profit, because that profit will be reinvested back into the business so that it can continue to fulfil the social need.

Filling a social need means producing and/or selling goods and services for the purpose of making the world a better place.


2 marks for defining a social enterprise

1 mark for outlining what it means to fill a social need

Tip

On some occasions, a question may have two distinct parts. Each part must be answered to attain full marks, and you should use reading time to determine how the marks might be allocated in these circumstances so that you approach the question in the correct manner. Here, the question is broken into 2 + 1 marks and should be answered accordingly.

Question 4b.

Sample response

As a social enterprise, Andrew Thomas’ business will seek to fill a social need. Those people

in the community affected by the issue that Andrew’s new venture will be addressing will have an interest in the new business. They will be interested in how the business will operate and what practices it will put in place to achieve its objectives.

The employees of the new business will also have an interest in the business. As employees, they will receive an income from the business, and its continued success will provide a degree of job security for them, so they will want the business to succeed.


2 marks for each stakeholder (up to 4 marks)

1 mark for explaining the stakeholder 1 mark for explaining their interest in this business

Tip

When asked to describe the interests of a stakeholder, the best approach is to ask, ‘What does the stakeholder want from the business?’

Question 4c.

Sample response

As the operator of a social enterprise, Andrew would like his business to generate a profit so that it can be used to fill a social need. A key performance indicator he should use is his net profit figures, which is the value of revenue remaining after all expenses have been deducted. If the business is making a certain level of profit, it will have commenced successfully.


1 mark for describing the key performance indicator (KPI)

1 mark for linking the KPI to the business

Note: Students may identify other KPIs, such as number of sales or percentage of market share. However, students must be mindful that not all KPIs identified in the Study Design will be relevant for this scenario.

Tip

In questions that ask you to refer to a style, skill or KPI, you should ensure that you select the style, skill or KPI that is most appropriate to the scenario provided and not just the one you remember best.

Question 5.

Sample response

A new business owner could adopt the consultative style of management.

The consultative style involves the manager seeking input from staff, and asking for their advice and ideas regarding key questions about establishing a business. It will involve open, two-way communication. However, once this input has been collated, the manager will make the final decision.

This style is appropriate when starting a business because often the owner does not have experience in all aspects of establishing a business. Obtaining advice from employees and other stakeholders can help the owner to establish the business in the correct manner and ensure that nothing is overlooked. Since the owner makes the final decision, they get to put their ‘stamp’ on the business.


2 marks for explaining the management style; at least two features of the style selected must be provided

o Students may select autocratic, persuasive or consultative as appropriate management styles. Participative and laissez-faire are not appropriate when commencing a business.

2 marks for a justification of the identified management style

Tip

In questions that ask you to justify a concept that you have selected, it is important to explain how this concept (in this case, a management style) would allow the business manager to achieve what they intend to achieve (in this case, starting a business).

Question 6.

Sample response

Senge developed the concept that all businesses are ‘Learning Organisations’; that is, all businesses are dynamic entities, constantly having to adapt and improve in an effort to develop into the type of business they aspire to be, often as outlined in their mission and vision statements.

He theorised that Learning Organisations are those businesses where managers and staff continually seek to expand their capacity to achieve the results they desire.

One principle of a Learning Organisation is the concept of systems thinking. Systems thinking is the ability to see the ‘big picture’ – to look past what is happening within the business, observe what is happening in the external environment and adapt. Businesses do not operate in isolation, and change can arise from patterns outside the business, not just from events specific to a business.

Another principle of Senge’s Learning Organisation is the concept of building a shared vision. Having a shared vision will motivate all members of the business. It encourages risk-taking and experimentation, and fosters innovation because as the business is seeking to continually learn, it must take risks to grow and adapt to the changes occurring. Staff who adopt this shared vision will see the long-term objectives and plan for the business, and so a commitment to the business and to learning will further develop.

Team learning is another of the five principles of Senge’s Learning Organisation. It is described as the process of aligning and developing the capacities of a team to create the results its members truly desire. Staff within a business need to act together so that the goals of the team members, the team itself and the business are all aligned.


2 marks for explaining the term ‘Learning Organisation’

2 marks for each principle identified and explained (up to 6 marks)

Tip

The concept of the ‘Learning Organisation’ as proposed by Senge is a new area in the Business Management course. You must ensure that you are fully aware of these new concepts as they are likely to feature in the examination.

Question 7

Sample response

Staff turnover refers to the number of staff employed in a business who leave the business and need to be replaced. If staff turnover is increasing, it suggests that staff are unhappy with various aspects of the business. This could include pay and working conditions, hours of work or opportunities for promotion. Staff turnover is a cost to the business because the process of recruiting and selecting new staff is time-consuming and costly. A business should therefore seek to minimise the level of staff turnover.

One means of reducing the level of staff turnover is to improve the motivation of staff. Motivation is the individual, internal process that directs, energises and sustains a person’s behaviour. It is individual to each person, so a manager must determine what will motivate each employee so that they are satisfied with their job and are working towards achieving business objectives.

To help motivate employees, the manager might implement a motivation theory. Two such theories are Maslow’s Hierarchy of Needs and Locke and Latham’s Goal Setting Theory. Maslow recognised that each employee has five levels of needs, and to motivate an employee it is the responsibility of a manager to identify which level of need is not being met and then develop strategies to meet that need. Once a particular level of need has been met, the manager will need a new strategy to fill the next level of need. Each employee is individual and will therefore be at a different level, so the strategies will need to be set to suit each individual employee.

Another theory is Locke and Latham’s Goal Setting Theory. This theory suggests that employees can be motivated by having a goal that they have helped to set. In setting these goals, employees can work with management to ensure that the goals are clear, provide some challenge for the employee, engender a commitment to both the business and the goal, have some element of complexity and can be achieved through regular feedback on progress.

These theories both seek to motivate employees through the use of various strategies. However, Maslow’s theory is more generic as it places each employee into one of five groups (levels) and the strategies are linked to each level. Locke and Latham recognise that each employee requires individual methods of motivation and therefore each employee will require a different goal. Maslow’s theory also ranks the levels and states that employees move from one level to the next after each one has been met. Locke and Latham state that once the goal

has been achieved, a new goal will need to be set as the cause of the motivation will no longer exist.

Locke and Latham’s theory could be used to reduce staff turnover by working with staff to develop goals appropriate to their position within the business. The goals would be clear so that employees would know what is expected of them. The management would sit with staff to develop these goals collaboratively so that staff feel some level of ownership of the goal. Management would provide feedback during the period so staff are kept on track, and small milestones would be identified and celebrated so staff see achievement occurring. If this occurs, staff may decide to see the goal through to the end and, if satisfied, may continue with the business, reducing turnover.

Regardless of which theory is adopted, managers will devise strategies to increase motivation according to how best they believe employees are motivated.


Responses are marked globally

1

Mark range Descriptor: typical performance in each range

9–10 marks Very high

Very high level of comparison between the two theories

Shows in-depth understanding of key terms and concepts

Includes definition of staff turnover

Shows detailed understanding of the basics of each theory

Clearly links a theory to an improvement in staff turnover

7–8 marks High

High level of comparison between the two theories

Shows understanding of key terms and concepts


Shows understanding of the basics of each theory

Links a theory to an improvement in staff turnover

5–6 marks Medium

Good comparison between the two theories

Shows some understanding of key terms and concepts


Shows somes understanding of the basics of each theory

Some link between a theory and an improvement in staff turnover

3–4 marks Low

Satisfactory level of comparison between the two theories

Basic understanding of key terms and concepts

Includes weak definition of staff turnover

Shows limited understanding of the basics of each theory

Poor link between a theory and an improvement in staff turnover

1–2 marks Very low

Basic/limited level of comparison between the two theories

Shows limited understanding of key terms and concepts

Includes weak definition of staff turnover

Shows very limited understanding of the basics of each theory

No link between a theory and an improvement in staff turnover

0 marks

No attempt at response

Response addresses none of the concepts/issues identified in the question or suggested marking guide

Tip

These questions are marked globally – assessors read the response from start to finish and award a mark based on the criteria above. They don’t ‘check off’ points. Ensure that you write one response, not three short- answer responses.

SECTION B – Case study

Question 1Sample response Operations is the area of a business responsible for the day-to-day activities of the business. In the case of Michaels Holdings, it is responsible for manufacturing the products sold by the business.

Operations staff oversee the management of the operations system, which is the conversion of inputs into outputs via the use of a range of processes.

The first element of this system is the inputs. These are the resources (human, physical and natural), time, information and money that form the basis of the products the business produces. For Michaels Holdings, it would be the materials, wheels, metal and other components used.

The next element is the processes that the inputs are put through to create the product. This is a value-adding process where the inputs are combined, added to, altered or converted into another form. This would involve welding, and putting the various components of the prams and strollers together.

Lastly there are the outputs – the finished products (prams and strollers), ready for sale.


1 mark for stating ‘responsible for day-to-day activities’

1 mark for explaining the operations system

1 mark for each element correctly outlined (up to 3 marks) Tips

There are five areas of management responsibility identified in the Study Design. You need to be able to define them and explain their role in a business.

Section B specifically asks you to link your responses to the business in the case study. While you are not expected to know everything about a business that manufactures prams, a reasonable attempt should be made.

Question 2 Sample response

Customer complaints may stem from a deterioration in the quality of the product. Introducing a quality management system at Michaels Holdings could help to rectify issues with quality.

Quality control is a quality management system where products are selected at random at various points along the production line and these samples are checked against the required

standard. Any items that vary from the standard are rejected, and problems in the production of the product are able to be identified and subsequently rectified. Hence all products have a minimum level of quality, and if this meets customer expectations then there should be a reduction in the number of customer complaints for Michaels Holdings.

However, the use of quality control may not always have the desired outcome. Quality control has a limited focus on production. If the complaints stem from the price of the product, the service provided during sales or after-sales or some other aspect of the business, then quality control may not rectify those problems. In addition, as only random samples are selected for testing, there may be some defective products that are not sampled and that make it through to customers. Quality control often requires the appointment of a quality control manager and this is an added cost of production, which will raise prices for Michaels Holdings. It also means that with a dedicated person responsible for quality, other employees may be less vigilant in monitoring quality and so further issues may arise.


o 2 marks for proposing a quality management system and explaining how it links to efficiency

o 2 marks for an evaluation

Tips

The Study Design clearly identifies three quality management strategies and you should base your response on one of those strategies, as they will have been studied in class. While other quality management strategies can be used, it is always best to use those concepts stated in the Study Design.

It is also important to link to the KPIs in the scenario. Care should be taken to link the quality management strategy with the most appropriate KPI.

Question 3

Sample response

The level of wastage measures the amount of waste created by the production process. If the process is inefficient or the materials used are of a poor quality, poorly stored or handled, or the purchasing process is poor, then the level of wastage is likely to rise. To overcome this, Michaels Holdings can consider implementing a materials management system. Materials management is the strategy that manages the use, storage and delivery of materials to ensure that the right amount of inputs is available when required in the operations system. A system

that can be implemented is the Just In Time (JIT) system.

JIT is a system whereby materials are ordered and delivered just as they are needed to enter the production process. This can reduce storage costs as no stock is actually held by the business, and it also reduces the risk of any waste occurring in storage, thus lowering costs and increasing competitiveness.

However, this system relies on the ability of suppliers to guarantee delivery of materials, both on time and in the quantities required. Any delay in delivery will result in production ceasing for a period and so sales may be lost.


o 2 marks for proposing a materials management system and explaining how it will improve efficiency

o 2 marks for an evaluation

Tips

When asked to refer to one of the KPIs provided in the case study, it is important that you identify the most appropriate KPI to match the strategy selected. This allows for a full evaluation to be provided and therefore increases the chances of full marks being awarded.

Given a KPI was addressed in the previous question, it is better to select a different KPI for this question to avoid repetition.

Question 4

Sample response

When a business measures its performance, it may identify areas of concern. If Michaels Holdings’ management has identified that the level of wastage and the number of customer complaints have risen, then it may suggest problems with the materials being used and/or the method of production being used. The business may then seek to change the means of production, with one option being manufacturing overseas. Overseas manufacturing (also referred to as offshoring) refers to the production of a good in a country that is different to the location of the business’ headquarters.

Businesses may offshore their manufacturing because they can achieve certain advantages over their competitors. It is often cheaper to manufacture overseas because the labour costs are lower. This reduces the costs to the business, which could improve the net profit figures for

Michaels Holdings. The business may also consider that, if the supplies are from overseas, it may make financial sense to manufacture in the country from which the supplies are sourced. This reduces transport costs (although the product will eventually be transported to Australia). In a similar manner, if the business exports its products, then overseas manufacturing may lower transport costs, as the location of the manufacturing may be closer to the export market.

However, overseas manufacturing could cause issues for Michaels Holdings. The business could lose control of the quality of the production process when it is outsourced to another business. The level of waste is difficult to control, as Michaels Holdings may have no say in the method of operation, so costs may increase, which would defeat the purpose of the move to overseas manufacturing.

If Michaels Holdings makes the decision to move manufacturing offshore, there is also the possibility of a public backlash against the business. The loss of jobs, incomes and spending in Australia will create a negative image of the business, and future sales and profits may be affected if the public stops buying from Michaels Holdings.

The decision to manufacture overseas is one that must be considered carefully, as there are negatives as well as the expected benefits of such a decision.


2 marks for defining and explaining overseas manufacturing

2 marks for the discussion of advantages and disadvantages

2 marks for linking discussion to the relevant KPIs

Tip

When asked to discuss, you are required to provide arguments for and against the issue – in this case, the use of outsourcing. Again, you should link your response to the relevant KPIs for both the argument for and the argument against outsourcing.

Question 5

Sample response

When outsourcing the manufacturing of a product overseas, Michaels Holdings’ management must consider the reasons why they are doing it. It is often due to the lower wage rate available overseas and, in these circumstances, it is important that the business pays its workers the legal minimum wages applicable in that country and not exploit youth workers or other workers in the pursuit of lower costs and higher profits. Exploiting workers through the use of low-wage

employees can give a business a poor reputation, which can negatively impact the sales and profits of a business – counteracting the gains made by outsourcing.


1 mark for identifying a corporate social responsibility consideration associated with overseas manufacturing

1 mark for outlining what the business needs to consider

Tip

This question requires you to briefly outline the issue referred to in the question. To outline a concept requires more detail than a definition, and you should avoid just defining the key term – in this case, corporate social responsibility.

Question 6

Sample response

Finance is the area of management responsible for financial aspects of the business. This can include developing financial policies, raising finance, budgeting, accounting and reporting, and cash control. Keeping control of cash flow will ensure that the business is meeting its financial obligations and paying bills, wages and costs for materials. Finance is also responsible for preparing financial reports, drawn from financial records, from which the performance of the business is able to be determined by calculating a range of key performance indicators – such as number of sales, net profit figures and the percentage of market share.

In the case of Michaels Holdings, the business has seen an increase in the $ value of sales over the period shown, but also a decrease in the $ value of net profit. This suggests that the costs of the business have increased over the year.

The finance area of responsibility should be able to identify which of the costs have increased over the period shown and then develop strategies to reduce those costs. If the cost of utilities has increased (gas, electricity, phone and water), the business can seek new providers. If the cost of materials has increased, the business can seek a new supplier or seek to offshore its labour or manufacture overseas.


2 marks for describing the area of management responsibility (students may choose from finance, sales and marketing, and technology support)

2 marks for linking the area of responsibility to one of the KPIs identified

Tip

When a constraint is included in a question, it is important to take that into consideration. Referring to operations will result in no marks being awarded. You have three other areas of management responsibility to choose from, and you should also consider the KPI you wish to refer to before selecting one of these three areas.

Documents

scscyear12businessmanagement.weebly.comscscyear12businessmanagement.weebly.com/uploads/1/9/8/4/... · Web viewCOMPAC Suggested answers SECTION A Question 1 (2 marks) Outline one advantage