Business Management in Practice February 2015 Important notice When reading these suggested answers, please note that the answers are intended as an indication of what is required rather than a definitive “right” answer. In many cases, there are several possible answers/approaches to a question. Please be aware also that the length of the suggested answers given here may be somewhat exaggerated compared with what might be achieved in the reality of an unseen, time-constrained examination. Examiner’s general comments Many candidates excelled in this paper. It was clear from some answers that candidates had an understanding of many topics. However, some candidates provided incomplete answers or only partially answered the questions. There appeared to be a basic lack of understanding of the question and the material in some instances. Candidates are advised to answer the question set. Section C requires candidates to explain and provide examples and evidence of their understanding.
Section A Answer all parts of Question 1. Select only one of the options A, B, C or D for each part. 1 (i) Managers may adopt an autocratic management style when:
A There has been delayering.
B Workers are unmotivated.
C There are no trade unions. D They manage staff who have very little power.
(ii) Research that is commissioned especially for a particular organisation is known as:
A Primary research. B Organic research. C Customer relationship research. D Direct research.
(iii) Organisational commitment often occurs when: A Workers receive additional benefits. B There is clear communication between managers and workers. C There is a strong identification of the individual with the organisation.
D The business environment is simple and stable. (iv) Business environments where the pace of change is very quick are known as:
A Laissez-faire B Complex
C Tyrannical D Dynamic
(v) Process innovation:
A May result from a reduction in the cost of manufacturing or service delivery. B Takes place when an organisation develops a new or improved product or service. C Occurs where a new market is created. D Always results in the development of a tangible product.
Section B Answer all ten questions. 2 Mintzberg (1973) argued that managers play a number of distinct but interrelated roles in the
organisation. Define the interpersonal role of managers according to Mintzberg. (4 marks) Suggested answer Interpersonal roles arise from the manager’s status or authority within the hierarchy, they are ceremonial or symbolic. The manager is a figurehead, and represents the organisation formally with duties of either a legal or social nature. They also lead the organisation and their role includes hiring and firing staff, motivating and training. The role also includes liaison with other managers in other units or maintaining a network of outside organisations who provide information. Examiner’s comments
Some answers lacked sufficient depth or were partial answers.
3 Identify and explain some of the benefits of working from home, from the employer and the
employee’s perspective. (4 marks)
Suggested answer With broadband and mobile communications, working from home or while mobile in the car is a significant trend. Generally, three types of jobs are suitable for home-working:
those involving routine information handling tasks;
mobile activities such as sales and service repair; and
professional and other knowledge-related tasks.
Home working has a number of advantages for the individual and the firm. No commuting saves the employee time and stress. Home working tends to increase productivity because there are fewer distractions from colleagues. Firms that encourage home working are also able to reduce office space through a concept called hot-desking. People who work a reasonable amount at home do not need a permanent desk at work. This means that the organisation does not have to provide a desk for everybody. This can lead to significant savings in the cost of office space.
Examiner’s comments
The question was generally well answered, but some candidates were unable to answer from both the perspective of the employer and the employee.
4 Define the purpose of a SWOT analysis. (4 marks)
Suggested answer SWOT stands for Strengths, Weaknesses, Opportunities and Threats; and it is a process that will eventually help to generate strategic options that make the most of strengths and opportunities, and reduce the dangers that is posed by weaknesses and threats. A SWOT generates no new information; it assesses that which we already have to help make decisions and generate options. The information for the SWOT comes from our analysis of the external environment through the PEST analysis, the competitive environment through the Porter 5 Forces, the internal environment through the identification of strategic capabilities, and the value-generating activities of the organisation through the value chain refined through the VRIO framework. The strengths and weaknesses come from the internal environment, and the opportunities and threats from the external environment. Examiner’s comments Most candidates understood a SWOT analysis but did not demonstrate any real depth of knowledge of the purpose of this popular business tool.
5 Outline the argument of the competing values framework (Quinn et al, 2003). (4 marks)
Suggested answer Quinn et al (2003) argue that four models Internal Process, Rational Goals, Human Relations and Open Systems had some applicability in certain situations. They acknowledge tensions between the four approaches, but they suggest that the four approaches are complementary. Quinn et al suggest that these tensions operate on two continua. Firstly, the need for flexibility, to innovate or react to change and the need for control to ensure accuracy or efficiency. Secondly, the degree to which a manager needs to focus internally or externally. Their model applies the four approaches, applies them to situations, and seeks to develop a relationship of fit. Quinn et al suggest that this framework will be helpful in management development as managers identify learning and training needed for different roles they may need to adopt. Examiner’s comments
Some candidates provided excellent full answers. Others provided poor or entirely incorrect answers.
6 Identify the four phases of the strategic drift model (Johnson, Whittington & Scholes, 2011). (4 marks)
Suggested answer
Examiner’s comments
This question was generally well answered. 7 Explain the characteristics of a ‘blue ocean’ in blue ocean strategy. (4 marks)
Suggested answer Intense rivalry which resembles a war zone has led to markets in which innovation and profits are hard to achieve. This is the red ocean. High-growth firms seek to outflank the competition by offering a different mix of benefits and so define a new market space; this is the blue ocean; and, within this blue ocean, growth remains possible. It is argued that organisations should assess what customers value rather than what is needed to beat the competition. The blue ocean strategy seeks to increase value to customers, thereby increasing revenue. A blue ocean strategy also seeks to reduce costs, thereby increasing margins. This redefines the marketplace. To achieve this, an organisation needs to challenge the conventional wisdom, the long-held assumptions and the bases of competition of their industry. Examiner’s comments
Many candidates defined the blue ocean in terms of lack of competition. This is partly true but only as a consequence of a redefining of the competitive space. The reduction in cost and increase in value created by a blue ocean strategy were missed by many.
Phase 1. The organisation is able to keep pace with changes in the environment with small incremental changes.
Phase 2. The pace of external change increases. The tactics of incremental change no longer have the desired effect. The organisation is becoming left behind as strategic drift develops.
Phase 3 Crisis
Phase 4. The organisation either transforms or it dies.
8 Explain the term ‘organic growth’ in the context of organisational strategy. (4 marks)
Suggested answer Organic growth develops from within the organisation. It champions the existing unique competences and resources of the organisation, and it builds upon them in a developmental way. By taking advantage of the existing capabilities, the organisation is able to pursue growth at a time of its own choosing leading to the development of deeply-embedded organisational knowledge and learning. One of the benefits of organic growth is that it is not dependent upon a third party. Mergers and acquisitions and strategic alliances depend upon the availability of a suitable partner, and this might not be easy. Many organisations favour organic growth given that acquisitions can be expensive, mergers can take time to assimilate, and strategic alliances will probably lead to compromises.
Examiner’s comments
Some candidates appeared not to have read the question carefully. An important part of the question was: “… in the context of organisational strategy”. Organic growth can also have an Organisational Behaviour context where it is associated with the structuring of organisations rather than the strategy.
9 Explain ‘operant conditioning’.
(4 marks) Suggested answer The concept of classical conditioning argues that our reactions may be the result of conditioning because of previous associations. Operant conditioning is more interventionist: it is active conditioning to create a desired behaviour in return for a reward. By behaving in a certain way people get something they want. In the workplace this is generally money or recognition or some other motivator. The tendency to repeat a particular behaviour is based on reinforcement of the behaviour. People learn to see the relationship between actions and their consequences, which in turn impacts on behaviour. The advocates of behaviourism argue that this conditioning becomes automatic. This results in the stimulus creating unconscious reactions leading to conditioned responses (behaviour) of which the individual is unaware. Examiner’s comments This was a question that candidates either understood well and scored highly, or did not understand at all and scored poorly.
10 Identify the four components of transformational leadership (Bass & Avolio, 1994). (4 marks)
Suggested answer
Idealised Influence Inspirational Motivation Intellectual Stimulation Individualised Consideration Examiner’s comments This question was generally poorly answered. Many candidates defined transformational leadership which was not asked.
11 Some companies seek to be innovation pioneers and be the first to enter a market. Others delay
entry into the market. Identify the potential advantages and disadvantages of being a ‘follower’ organisation.
(4 marks) Suggested answer Follower organisations try to be second-in to the market. It is a deliberate strategy to follow a pioneer into a market with all the benefits of watching and learning from the mistakes the pioneers have made. To develop the next generation of product with added benefits to the user. To be successful the follower will need substantial R&D capability and an agile manufacturing and marketing capability. The improvements they make to the original product will need to be lower cost, and have improved design and functionality. Examiner’s comments Some very good answers, many very nearly right answers. A strongly scoring question.
12 According to Johnson, Whittington & Scholes (2011), there are five ways in which an organisation can trade internationally. Discuss the advantages and disadvantages of each of the approaches.
(25 marks) Suggested answer
Simple export and import – this is the oldest and simplest form of international trade, and involves the physical movement of goods and services across an international border. Manufacturing is concentrated in one country. These are then distributed overseas by agents in different countries who have the contacts and market knowledge not enjoyed by the manufacturing company. Marketing and branding tend to be conducted locally. This is a model employed by many companies without a sophisticated international management structure, or one that produces products for which international marketing and brand development would add little value. Complex export – in this model there are advantages to be gained from coordinating branding and marketing. Manufacture is still located at a single source so that economies of scale and expertise can remain intact, but pricing, positioning and branding are professionally managed. In taking into account variations in packaging and variations for local tastes this export strategy requires greater coordination. Direct foreign investment (DFI) – instead of manufacturing in one place and exporting overseas an organisation may decide to build manufacturing capacity in other countries. DFI can form part of a truly global and integrated global strategy in which highly-coordinated international activities take full advantage of international value linkages to create a global player. A less ambitious alternative is a multi-domestic policy where investment leads to manufacturing being located in each of the geographical markets. Instead of being exported/imported, goods are made locally. This is a suitable strategy for organisations where economies of scale are low and localisation costs are high.
Licensing – an organisation that owns a product and a brand that has value in the marketplace can choose to license one or both. This occurs in the brewing industry where a well-known brand may be made in the home nation by its originator but is also made in other countries under licence. The license allows the licensee to be able to manufacture and market a branded product for a specific period. The licensing firm gets revenue for very little risk. The licensee manufactures a product that has a track record of sales and already benefits from marketing and market exposure. Joint Venture (JV) – in a joint venture two or more companies come together in order to share the risks and resources needed to do business internationally. Most JVs involve a domestic partner and an overseas partner. The home partner brings its knowledge of markets, competitors, politics and customs, whereas the overseas partner often brings strategic capabilities such as expertise, finance, products or brand names. In emerging markets, JVs between home and overseas companies have been a successful way of opening up new markets.
Examiner’s comments
There were some very good full answers with well-developed points which scored highly. Some candidates confused the question with drivers for globalisation or other models of internationalisation.
13 With reference to the use of groups in organisations: (a) Explain the role of groups within the workplace. (5 marks)
(b) Describe the process of group formation and development first devised by Tuckman (1965). (15 marks)
(c) Explain why decisions made by groups are considered more comprehensive than decisions
made by an individual. (5 marks)
(Total: 25 marks)
Suggested answer (a) Work is a social activity, it does not take place in isolation; and it is not conducted by
individuals working, operating and communicating alone. Work involves group activity and effort because it requires collaboration and cooperation. The group provides a sense of belonging and can provide identity of the individual in the workplace. A group of colleagues performing a similar or complementary task become known for their association with the task and with each other. Although groups can be close or relatively loose coalitions, they have a definable membership, and a group consciousness; they share a purpose; they are interdependent; and they interact. Groups develop hierarchies, even leaders, and can be very influential on behaviour and performance in the workplace. Certainly in the workplace teams are put together to achieve a task, and are directed towards organisational goals.
(b)
Forming The forming stage involves the coming together of the group members. Often group members will not know each other; they may come from different parts of the organisation. There is great uncertainty about the structure and purpose, but these are reduced as the group attempts to work out some roles and responsibilities. Some members may feel they need to make an impression on the group, and do or say things to get themselves noticed. A period of anxiety. Forming may happen quickly or may take time but ends when the members of the group recognise themselves as a group.
Storming The group structure provides constraints on individual activity which can lead to frustration. Coupled with this the members of the group know each other better and are more prepared to put forward their views more forcefully. The structures and objectives set out at the forming stage become a source of disagreement. Challenge to the group’s role, objective and responsibilities are made; this can be a time of open hostility as members jostle for position. This is an important stage because challenge to the objectives and purpose of the group generally make it stronger.
Norming The norming stage is complete when the group has settled and roles and responsibilities are sorted, and work expectations and behaviours are agreed. The norming stage sets out the basis for cooperation and performance.
Performing With the structure accepted and functional, the group’s effort has moved from getting to know and understand each other to delivering on the task. This is the most productive stage of the relationship.
Adjourning A group that has worked together and delivered on a task can feel a sense of loss when the project ends. Effort is no longer on performance but on winding-up and letting go. The members of well-functioning groups rely on each other; and, as the group disbands, members can feel trepidation at independence once more.
(c) It is argued that groups make more rounded decisions than individuals; they take into account more of the known facts, and have more complete information than an individual. Groups bring more knowledge and experience than any one individual can hope to. Not only does the group bring more and better information, it also brings more diverse information which opens up new possibilities for alternative approaches. Decisions made by groups have a chance of greater acceptance than those made by individuals partly for the reasons stated above but also because members of the group will work collectively towards its acceptance.
Examiner’s comments
The biggest issue in answering Question 13 was related to developing full answers to the questions set. Some candidates provided very poor support or illustrations for their answer.
14 (a) How does the process of learning as described by Kolb (1984) impact on the concept of the
‘learning organisation’? (10 marks)
(b) The expertise and knowledge of staff are fundamental resources of an organisation. Explain, using theory, how knowledge workers should be managed.
(15 marks)
(Total: 25 marks) Suggested answer
(a) At the heart of Kolb’s model of learning is a bringing together of four elements to perform a
complete learning situation. Many people would agree that learning can start with an experience, whether it was planned or not. As a result of that experience the individual may observe what happened or reflect on the experience. After reflection comes theorising, building a concept, questioning why things turn out the way they did, or how things could be done differently next time. The final element involves experimentation and change, and planning implementation, and then the cycle returns to the amended tangible experience. A learning situation is therefore a complete cycle that involves all four elements. Within this model, learners are active participants in learning. Kolb argues that the concept of the learning cycle will help managers cope with change and complexity.
Kolb’s Learning Cycle
Traditional theories of management assumed a stable environment. Contemporary organisations are much more fast-paced, and managers are required not only to be efficient but also to champion change and innovation. Increasing competitiveness and technological development mean that an organisation must be able to learn quickly and effectively. The learning organisation recognises its part in the continual upgrading of skills and knowledge. To do this it creates a culture of learning, where learning is valued. All people within the learning organisation are encouraged to develop their knowledge but also learn from what they currently do. An important element of the process is to be able to capture and share the learning gained team-working. Worker participation and empowerment are important parts of this.
(b) Within the knowledge economy, the expertise and knowledge of staff are fundamental
resources of the organisation. Research says that knowledge workers provide self-motivation but that they still expect reward and motivation from the organisation. The manager needs to ensure that four different criteria are met. Knowledge workers have to be competent at the task they have been set. They have to be supported by their peers and by management. They have to know what they are supposed to be doing; and they have to be corporately and commercially aware. The challenge for managers is to ensure all these requirements are met.
The managing and leading of knowledge workers assumes McGregor’s theory Y. Knowledge workers are keen to work; they are creative; and, although they may require direction, they do not require coercion. In many instances, workers and managers will work together in a fraternalistic way often making joint decisions about work-related tasks. Robert House’s goal-path theory is applicable to this situation. The role of managers is to remove as many obstacles to efficient work as possible. Knowledge workers tend to be task orientated. The removal or reduction of things they see as peripheral is positively received especially when combined with a supportive or participative management style. Transformational leaders motivate knowledge workers and provide a unifying vision which helps to create a team identity. In looking at Maslow’s hierarchy of needs, knowledge workers are seeking self- actualisation. The manager needs to ensure all other factors are satisfied too, but it is the self-actualisation that the knowledge worker values. Opportunities for self-actualisation will help retain valuable staff. Certainly the organisation will need to satisfy the worker’s higher needs, and provide a job challenge.
Certainly the knowledge worker is an individual but the nature of the work they undertake lends itself to group and collaborative work. Knowledge workers often operate as part of a multi-disciplinary team. One reason for increased group work is the removal of bureaucracy and levels of hierarchy within the organisation. This has led to the creation of self-managing groups and teams. The role of the manager therefore becomes facilitating the self-managing. Certainly the flexibility of team working is a prerequisite for developing a creative atmosphere in which the knowledge worker can thrive and innovative problem solutions be developed. The modern organisation is more loosely structured than organisations have been in the past. Collaborative teams mean that knowledge workers increasingly have to work with colleagues from other sections over whom they have no formal or informal authority. In this situation the knowledge worker not only needs their work skills but also needs to develop softer skills of communication and negotiation.
Examiner’s comments
Part (a) of this question was generally well answered. Many candidates attempted to utilise the Kolb learning cycle in their answer and provide as a consequence robust answers deserving of a diploma level qualification. In part (b), ‘Explain, using theory, how knowledge workers should be managed’, the key words in this question were ‘using theory’. Many answers gave personal opinions about the treatment of knowledge workers but did not support their work with theory. Without the framework of theory, some answers were repetitive and did not score good marks.
The scenarios included here are entirely fictional. Any resemblance of the information in the scenarios to real persons or organisations, actual or perceived, is purely coincidental.
