Chapter 7Key Business Functions
Short Questions
B1C07T2Q001eng
How is performance appraisal important to manager and employee? (4 marks)
Answer:
A performance appraisal evaluates the performance of workers and helps them identify ways to improve. As a manager discusses the results with an employee, they come to know each other’s expectations. When employees are praised in a performance appraisal, they are motivated and will be more committed to their job. However, the manager may also point out weaknesses and mistakes made by the employee. In this way, the employee knows which area is to be improved. (2 marks)
A performance appraisal is an important input for personnel training and development. It ensures that an employee is performing to the best of their ability and develops their potential for improvement. It helps managers know their employees better. This allows him to reassess the human resources of the company. (2 marks)
B1C07T2Q002eng
The sales of a product will be limited if a single outlet is chosen as an exclusive distributor. Suggest three reasons why some manufacturers may still prefer to enter into an exclusive distributor agreement (limiting distribution to a single outlet) in a geographical area. (6 marks)
Answer:
The manufacturer can exercise better control over the distributor.
The manufacturercan concentrate its effort on offering sales and promotional support to that distributor. The distributor will become more loyal. A better relationship can be developed.
As there is only one distributor, lower administrative costs will be involved.
If more than one distributorsis employed, the distributors may cut prices to compete. Entering into an exclusive distributor agreement can avoid a retail price war in a geographical area.
The product may have a low sales volume.
The consumers are concentrated in a certain geographical area. Customers are not dispersed.
The product may require a lot of marketing support. The manufacturer cannot afford to have more than one distributor.
(Any three of the above, 2 marks each)
B1C07T2Q003eng
List four factors to be consideredwhen planning the number of seats in a cinema. (4 marks)
Answer:
Size of the cinema
Number of customers
Coziness of the environment
Market positioning of the cinema
Price of the ticket
Revenue generated
Spacious arrangement
Ventilation
(Any four of the above, 1 mark each)
B1C07T2Q004eng
List one way that a finance manager can maximise the wealth of a firm by
(a)Acquiring funds
(b)Using fund
(c)Managing funds(3 marks)
Answer:
(a)
Choose a low interest rate loan plan
Issue shares and bonds
(Any one of the above, 1 mark)
(b)Control costs and expenses(1 mark)
(c)
Make a high-return investment
Control cash flow
(Any one of the above, 1 mark)
B1C07T2Q005eng
Go Go Department Store is an MNC, with its base in the US. It is now planning to expand its business toIran.
(a)Analyse the risks which are likely to be faced by the department store.(4 marks)
(b)What risk management tasks are involved? (4 marks)
(c)Suggest how the risks you mentioned in (a) can be controlled.(6 marks)
Answer:
(a)
A country’s economic, social, cultural, political and legal environment has a great impact on business practices. As the political situation in Iran is unstable, there is a lot of uncertainty. Go Go Department Store may not be familiar with the situation in Iran. Thus, it may not have enough information to make the right decisions. It will suffer business losses as a result. (2 marks)
In general, a department store also facesthe risk of loss resulting from fires, accidents, thefts, injuries, labour strikes and natural disasters. (2 marks)
(b)The risk management tasks involved are:
Identifying and assessing the risks associated with the expansion.(2 marks)
Deciding the most suitable risk management strategies for the new department store in Iran.(2 marks)
(c)
Go Go Department Store can collect information about the economic, social, cultural, political and legal environment in Iran. It can help the company assess and identify the risks of investing and develop the most suitable methods to control those risks. (2 marks)
Go Go Department Store can buy insurance against fire, theft and accident. (2 marks)
Go Go Department Store can employ more security guards.(2 marks)
(Any other reasonable answers)
B1C07T2Q006eng
Lowoe and Cynthia run a bakery, Mr Bakery, in Central together. They are planning to open anotherbranch in Mongkok.
Cynthiawould like to open up a dine-in area in the new shop. Customers can stay in the shop to enjoy their food. Simple beverages will be served. Since all the products are ready-made, Cynthia thinks that they only need a simple kitchen.She also suggests that they shouldoffer more products, with different kinds of bread in different seasons.
Lowoe and Cynthia have a bread factory in Kwun Tong to produce their own bread. Recently, Lowoe has found that the factory has reached its production capacity. The bread produced will not be sufficient to supply two shops.
(a)List three possible ways that Lowoe and Cynthia can finance their expansion?(3 marks)
(b)How can the introduction of more kinds of bread benefit Mr Bakery?(2 marks)
(c)In opening up the dine-in area, list the operations management tasks involved in order to ensure that the production processes are effective. (8 marks)
(d)As far as the production capacity is concerned, what should Lowoe and Cynthia do? List four of them.(4 marks)
(e)Lowoe and Cynthia now sell their bread for a relatively high price in Central. They target executives with relatively high income. Cynthia is thinking about whether to lower their prices in Mongkok. List four factors she should consider. (4 marks)
Answer:
(a)Ways that Lowoe and Cynthia can finance the expansion:
borrow from financial institutions (e.g., bank, finance company)
owners’ savings
borrow from friends and relatives
utilise retained profits
admitnew partners
(Any three of the above, 1 mark each)
(b)This can attract more customers. It also helps differentiate their products from other shops(2 marks)
(c)
Forecast demand: Lowoe and Cynthia need to estimate future demand for theirgoods and services.i.e., the number of people who will dine in the shop. (2 marks)
Planning for capacity: Lowoe and Cynthia need to determine the number of seats and tables in the shop.(2 marks)
Designing facility layout: Lowoe and Cynthia need to determine the physical arrangement of resources in the kitchen and dine-in area. They need to use space more effectively so that employee productivity can be enhanced. (2 marks)
Scheduling work: Lowoe and Cynthia need to determine how long each production task takes to complete. They should set starting and ending times for each task. e.g., taking orders, preparing food, serving food, billing customers etc. (2 marks)
(d)Lowoe and Cynthia can expand the production capacity of the factory by:
buying more equipment
expanding the factory
outsourcing the production process
employing more workers
renting a bigger factory
renting one more factory
(Any four of the above, 1 mark each)
(e)Factors Cynthia has to consider are:
Brand image
Market positioning
Cost (rent, labour and transportation etc)
Demand curve (are customers price-sensitive?)
Competitors’marketing strategies (price and product)
(Any four of the above, 1 mark each)
B1C07T2Q007eng
Hotel Expert is aHong Kong-based luxury hotel group. It has hotels in key cities in Asia and Middle East, with new properties under development in Europe and North America.
Recently, the CEO, Megan finds that sales in Hong Kong have been falling. Last month, the occupancy rate of executive roomsdropped by a significant 40% while that of deluxe roomsfell by 20%.She has asked Schilling, the marketing manager, to investigate the problem.
Meganalso wants to penetrate the Russian market. She plans to build a new hotel in Russia.
(a)Suggest three other types of information that Schilling needs to enable him to investigate the sales problem.(3 marks)
(b)In choosing the location of the new hotel, list five factors to be considered.(5 marks)
(c)Megan is very concerned about the service quality at the new hotel. Suppose you are the human resources manager, how would you respond to her concern? (8 marks)
(d)How can Megan monitor service quality at the new hotel?(3 marks)
Answer:
(a)Shilling needs to know:
Economic conditions (worldwide economic conditions, macroeconomic factors, interest rates, property market, stock market, etc)
Number of tourists in the past month
Competitors’marketing strategies (Are there any new competitors? Do they have any price promotions?)
Weather conditions (Are tourists affected by bad weather in Hong Kong? What have the temperature, rainfall and humiditybeen in the past months?)
Occupancy rate of the hotel at the same point in the past year (Is this a low season for the hotel? Is it part of the hotel’s business cycle to experience ups and downs in sales? )
(Any three of the above, 1 mark each)
(b)
Rent
Terrain and geographical features (landscape)
Labour costs
Labour supply
Water and electricity supply
Transportation network (Is it easily accessible, is it near the airport?)
Communication network and ICT
Accessory facility (Is there any shopping centre, tourist attraction nearby? the existence of competitors?Any hotel nearby?)
(Any five of the above, 1 mark each)
(c)
Manpower planning: This can ensure that the hotel has the right number and kinds of workers who are capable of completing company tasks.I have to determine how many workers are to be recruited.
Recruitment and selection: It is important to identify and attract capable applicants for jobs in the hotel. The most appropriate candidates should be selected. I will hire those who have experience in the service industry. The importance of service qualityshould be emphasised in the recruitment process.
Training and development: I should continuously improve workers’ performance and capability. Training should be provided for employees to enhance their knowledge and customer service skills.
Performance appraisal: I should evaluate the performance of workers regularly and help them identify ways to improvetheircustomer service skills.
Compensation and benefits management: An effective compensation system can motivate workers to work productively, and attract and retain competent workers. I will review the compensation and benefits regularly. Staff with outstandingcustomer service performance should be promoted so that employees will be more committed to their job.(Any four of the above, 2 marks each)
(d)Megan can monitor service quality by:
setting up a suggestion box to encourage customers’ feedback
setting up a customer complaint department to keep track of customers’complaints
dispatching secret customers to visit the hotel
carrying out on-site inspections on a regular basis(Any three of the above, 1 mark each)
B1C07T2Q008eng
Pioneer Fitness is one of the largest groups of fitness clubs in London, with 500 associates and more than 12,000 members.Over the years, Pioneer Fitness has prided itself on offering reasonably priced memberships with a high level of service, and the best equipment, facilities and professionals.
Pioneer Fitness has recently reduced the joining fee for newcomers. The price cutting scheme has turned out to be very successful and has attracted a lot of members in a very short time. There are always queues waiting at sports equipment during rush hours. The bathroom and changing room are always very crowded. This has caused some members to complain to the top management. In one case, a member twisted her anklewhen exercising. She blamed the trainer, Gill, who was on duty that day for being negligent. She claimed that Gill should have reminded her to warm up before exercising. It was later found that Gill was giving instructions to another member at the time. During rush hours, members cannot always consult with the trainers. They are often occupied. There are also complaints that the trainers cannot answer members’ enquiries regarding the use of sports equipment.
Owen has just been appointed as the general manager of Pioneer Fitness. The above problems havealready aroused his concern.He has also noticed that the facilities are wearing out due to overuse. He suggests to the top management that they should replace the worn-outequipment and buy more new equipment to meet members’increasing demands.
(a)What problems does Pioneer Fitness have in terms of
(i)Human resourcesmanagement(4 marks)
(ii)Operation management?(4 marks)
(b)Besides buying more sports equipment, identify one way for Pioneer Fitness to shorten the waiting time during rush hours? (2 marks)
(c)List three human resources management tasks which are needed to support Owen’s decision to buy more new sports equipment. (6 marks)
(d)Suggest four ways that Pioneer Fitness can prevent accidents from happening.(4 marks)
(e)Owen has just learnt that he can make use of the 4Ps in marketing management to increase sales. Apart from price cutting, what suggestions would you give him? (6 marks)
Answer:
(a)(i)
There is no manpower planning in Pioneer Fitness. Pioneer Fitness should forecast the demand for its services and plan ahead for promotion. This can ensure that the company has the right number and kinds of trainers to perform the tasks necessary to accomplish the company’s objectives. (2 marks)
The trainers are not capable of completing the company’s tasks. (2 marks)
(ii)
There is no demand forecasting. Pioneer Fitness should estimate the demand for its services and plan its production activities ahead of any promotions. (2 marks)
There is no planning for capacity. The facility is not large enough for customers.Production capacity at Pioneer Fitness has already been reached. This limits the company’s ability to satisfy customer demands. (2 marks)
(b)Pioneer Fitness can:
open another branch
require members to make reservations
(Any one of the above, 2 marks)
(c)
Manpower planning: As there are more members and more sports equipment, Pioneer Fitness should ensure the company has the right number and kind of workers who are capable of completing the company’s tasks. Pioneer Fitness should decide how many trainers are to be employed.
Recruitment and selection: Pioneer Fitness should hire more trainers. It can hire those who have experience in training.
Training and development:New equipment is bought. Trainers may have to upgrade their knowledge. The companyshould provide training to trainers to enhance their knowledge of fitness and their skills in providing instructions to members.
Compensation and benefit: Pioneer Fitness should set trainers’ wages and benefits. This can motivate workers to work productively, and attract and retain competent workers.
(Any three of the above, 2 marks each)
(d)Pioneer Fitness can prevent accidents by:
regular on-site inspection
ensuring that the club has an adequate workforce
trainingtrainers to prevent accidents (e.g., asking trainers to give instructions to members before exercising)
educating members about safety
postingsafety instructions in a conspicuous place
(Any four of the above, 1 mark each)
(e)
Product
1Increase the variety of services (group class, health care consultancy service, fitness plan, weight control plan etc)
2Provide more facilities, new sports equipment, lockers, dining areas, rest rooms
This can attract customers and help differentiate Pioneer Fitness club from its competitors.
Promotion
Carry out various promotional campaigns, e.g., advertising on TV and in newspapers, lucky draws, discounts, coupons, trial lessons, and sponsoring sports competitions and cultural events.
All these initiatives can increase the club’s appeal to customers. In particular, discounts, coupons and trial lessons can induce a trial. Customer interest and awareness can be enhanced.
Place:
Open more branches in convenient locations
It is important that customers find the location of the club convenient and accessible. Customers would not like to walk far to exercise.
(Any two of the above, 3 marks each)
B1C07T2Q009eng
Mr Hung runs a small supermarket that sells clothing and household merchandisesin a housing estate. Currently, he has threeshop assistants helping him with the daily operations.
Mr Hung has just installed a new POS (point-of-sale) computer system (somewhat similar to an electronic cash register). It is equipped with a bar-code reader which can read and calculate prices.
The computer system can also keepsales records. Here are the reports generated by the computer system.
Computer report ADate: 1st July, 2008
Stock / Purchase / Sales / BalanceProduct A / 2 / 10 / 6 / 6
Product B / 10 / 5 / 7 / 8
Computer report B
Mr Hung is thinking of increasing the variety of goods in the supermarket. His friend, Linda, suggests that he should consider selling fruits and vegetables. Linda also suggests that heshould extend the opening hours of the shop.
(a)How can Mr Hung make use of the reports generated above?(4 marks)
(b)How does the new computer system benefit Mr Hung’s supermarket?(4 marks)
(c)Compare the differences between selling goods and selling fruits and vegetables.(6 marks)
(d)As far as marketing management is concerned, how should Mr Hung prepare for the increase in product variety? (6 marks)
(e)Suggest four factors to be considered in the extension of opening hours.(4 marks)
Answer:
(a)
Computer Report A collects the daily purchases and sales of different products. Mr Hung can monitor the stock on hand on a daily basis.He can then determine what, when and how much to order. (2 marks)
Computer Report Bkeeps track of the monthly sales of products and can be used to predict sales trends. It can help Mr Hung detect changes in customer tastes. (2 marks)