Business

O/A level study Resources, Business Studies-Basic notes and solved past papers

 

 

• Basic Rules for “Judgment Question Answer”

 

 

To 'evaluate' something means to determine whether it's right or wrong, good or bad, etc. There's a judgment involved.

To 'explain' something means to take something that's confusing or obscure, and make it simpler or clearer for the reader by clearing up ambiguities or confusing points.

 

 

A  good evaluation of a theory would follow this order:

·         Introduction

·         Describe the theory (needed for context an to show knowledge)

·         Explain one or two studies that demonstrate core claims of the theory (needed for evidence of said theory and also shows strengths)

·         Explain one or two applications of the theory (needed for a full “review” of the theory, which is also more strengths)

·         Explain one or two limitations of the theory (needed to make the review “balanced,” but also shows limitations)

·         Conclusion

If a student followed this order and wrote well-developed explanations, it would be an excellent essay.

What about a discussion? The IB definition of a discussion is a “balanced review.” The keyword here is balanced. Students obviously must go beyond describing the theory, and they need to use research effectively so they should use studies. Showing applications of the theory shows a deeper understanding. But where does the “balance” come from? It comes from the counter-argument in the essay, which in the case of an essay on a theory would be the limitations.

So a well-written discussion of the theory would look like this:

·         Introduction

·         Describe the theory

·         Explain one or two studies that demonstrate key claims of the theory

·         Explain one or two applications of the theory

·         Explain one or two limitations of the theory

·         Conclusion

 

The only difference that might exist, would be an evaluation should specifically state the words “strengths” and “limitations,” to make the arguments clearly sign-posted to show that they’re following the command term. But, a discussion might have the same arguments, but not necessarily sign-posted with these terms.

So when writing about a theory or a model, discuss and evaluate mean the same thing. In fact, in all essays students should be aware that they’re writing one central argument and then balanced with a counter-argument, regardless of the command term. Once I realized this basic concept, my teaching of essay writing became much simpler and more effective.

 

  

 

Question

Evaluate strategies to improve employee performance in ADP’s country Z factory without increasing unit labour cost. (14) Nov, 2017, paper3

 

Answer

 

Employee performance refers to the efficient use of labour force to increase productivity. Businesses are always aware that whether their staff is being cost-effective or not. The employee performance can be measured by a number of factors such as outputs per worker or productivity, labour turnover and rate of absenteeism,

ADP’s country Z factory is currently facing a fall in labour productivity and it needs to consider some strategies to improve labour performance. First, it needs to provide safe working conditions as ADP immediately addresses the problems of injuries to workers at the factory due to insufficient health and safety. it necessary to provide a safe working condition to all workers at the factory so that they feel safe and secure to work. It will improve their performance and improve high motivation. However, it includes an initial cost of improving health and safety, but it will not rise in unit labour cost. Besides, a greater motivation will lead a getter output and productivity for ADP

 

Adopt a democratic leadership style that allows workers the opportunity to gain job enrichment as ADP is a multinational business. It includes a soft HRM where employees are allowed to participate in decision making. In job enrichment the workers will do better tasks and get new ideas; they will motivate and deliver greater outputs. These measures might not have to be introduced with an increase in pay because pay may not be a motivator in this country if employees already receive higher pay than equivalent workers. 

Moreover, ADP can invest in high capital equipment instead of workforces. It will obviously remove the current problem such as a higher absenteeism rate and higher wasted. And overall, it will increase more productivity at the factory. Though it needs a large amount of initial investment it will create liquidity problems.

 

However, ADP has located in country Z and operates at a lower cost of production. They are already paying high wages to their employees as compared to other businesses in country Z.  It is good to approach for ADP’s soft HRM. But ADP should inform the workers that it is unacceptable for them to have such a high absenteeism rate (has increased from 2500 to 2600) and have a high wastage rate (has increased by 1.82% in 2016) when they are well paid. The country has high unemployment; they have a limited opportunity to get a good job.

 

Thus it can be seen that improving working conditions may not be effective in improving motivation in the long term unless efforts are made to address the improvements in performance and productivity. Increasing pay would increase costs unless there was a huge improvement in productivity and pay is not the only factor in determining this.  ADP is likely to adopt a ‘soft’ approach to employees when the company seems determined to take advantage of its ‘multinational corporation status.’ Already paid more than similar workers and this doesn’t appear to have generated high levels of performance.

 

 M. Anwar Hossain

Senior Teacher (O & A-Level)

Call: 01676514507

 

 

 

 

 

1. Analyze the benefits of DLR of the elasticity concept when developing the new marketing plan. (10) (Cambridge, A level Business Studies,Paper 3, Nov, 2018.)

O/A level study resources,ctg

ANSWER:

Elasticity refers to identify the responsiveness of either demand or supply in the proportion of the change in price. The elasticity concept includes price elasticity of demand, income elasticity of demand, promotional elasticity of demand, and cross elasticity of demand. All of these elasticity concepts are more helpful for DLR to make an effective marketing plan.

 A marketing plan means a detailed plan of marketing objectives that must be achieved within a specific marketing budget. It includes all marketing strategies or 4ps.

DLR will a great use of the concept of PED as they plan to increase the prices of their rooms in the future. If the forecasted PED is elastic, DLR will know that a small increase in the price will lead to a greater fall in demand and total revenue. Thus, DLR should be cautious and it would be more beneficial if there decrease their price of room so as to increase more demand and total sales revenue. Moreover, the knowledge of PED would be more helpful when offering a discount in the off-peak season as during these seasons people don't go on holiday. if the demand is elastic a discount offer would increase a greater quantity of demand and revenue for DLR in the off-peak season.

DLR has to study the promotional elasticity of demand (AED) also as they plan to increase market share by 10% in the future. If AED is elastic, then only a higher advertising budget would be beneficial, and it would lead to higher sales revenue for DLR. If AED is inelastic, people would not respond much to DLR advertising. So, for a large amount of DLR's promotional budget might not be cost-effective which causes a loss for DLR.

As the maximum wage rate and GDP of country Z are both expected to rise, it would be beneficial for DLR. So, DLR needs to check the income elasticity of demand (YED). If YED is elastic for holidays in country Z, it means that now more people in the country would be willing to spend on holidays. Thus, DLR takes the advantage to invest more in holiday resorts to raise sales revenue.

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Question: Describe  the main features of job production and flow production (8) O Level IGCSE, Paper 2 

O/A level study resources, CTG

Ans:

Job production involves firms producing items that meet the specific requirements of the customer. Often these are one-off, unique items such as those made by an architect or wedding dressmaker. For an architect, each building or structure that he designs will be different and tailored to the needs of each individual client. With job production, a single worker or group of workers handles the complete task. Jobs can be on a small-scale involving little or no technology. However, jobs can also be completed requiring lots of technology.

With low technology jobs, production is simple and it is relatively easy to get hold of the skills and equipment required. Good examples of the job method include: hairdressers and tailoring

Main features of flow production

Flow production involves a continuous movement of items through the production process. This means that when one task is finished the next task must start immediately. Therefore, the time taken on each task must be the same. Flow production (often known as mass production) involves the use of production lines such as in a car manufacturer where doors, engines, bonnets, and wheels are added to a chassis as it moves along the assembly line. It is appropriate when firms are looking to produce a high volume of similar items. Some of the big brand names that have consistently high demand are most suitable for this type of production.

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Ans:

1.a) i)Goals or target

Before you start any market research project, it is essential that firms define very specific its goals and specific target of audience. By identifying just one or two goals for the study, the questions market research will be more focused. Firms will eliminate the need to ask too many questions, which can annoy respondents and cause them to abandon the survey before they complete it. Only ask questions that firms need to know the answers to in order to reach the specific one or two defined goals. Thus it helps reduce survey fatigue by limiting the number of questions and length of questions that can be included in every survey. In fact, the results could point the firm in the wrong direction, so always define the target market very specifically.

ii)Survey Questions

Writing survey questions take some thought. First, CC needs to determine what questions it should ask in order to gather the data its need to meet its goals. Second, it needs to make sure to write those questions in a language respondents will understand. Most often, it is best to avoid using jargon, abbreviations, and slang unless it is certain its target audience is familiar with those terms. Third, questions must be more responsible for the audience so that they can communicate easily. And, survey questions are very simple for getting a quick response from the audience.  Finally, CC should have multiple people review its survey for clarity. When firms write survey questions, they all make sense of how others might interpret them.

b) Option 1.

Revenue = 2000* 60    =   $120,000

Variable cost 20*2000   =   ($40,000)

Fixed cost                       =   ($20,000)

Profit                               =    $60,000

Option 2.

Revenue = 2000* 40    =   $80,000

Variable cost 10*2000   =   ($20,000)

Fixed cost                       =   ($20,000)

Profit                               =    $40,000

Recommendation: Option 1 is more profitable than option 2. Because raising the selling price of each unit leads to an increase the total sales revenue of CC’s business. But higher selling price per unit may reduce the demand for its product or service in the country A due to competition.

 M. Anwar Hossain

Senior Teacher (O & A Level)

Call: 01676514507

 

Question:

 Quality is important to sally. Consider the advantages and disadvantages of quality control and quality assurance.   Recommend which method sally should use to ensure quality suits are produced. Justify your answer. [12]  IGCE Paper 2

Ans:

Quality control ensures products or services are designed and produced to meet or exceed customer requirements. The most important advantage derived by introducing quality control is that it develops and encourages quality consciousness among the workers in the factory which is greatly helpful in achieving the desired level of quality in the product. Consumers are greatly benefited as they get better quality products on account of quality control. It gives them satisfaction. By undertaking effective inspection and control over production processes and operations, production costs are considerably reduced. Quality control further checks the production of inferior products and wastages thereby bringing down the cost of production considerably.

A major problem is that individuals are not necessarily encouraged to take responsibility for the quality of their own work. Rejected product is expensive for a firm as it has incurred the full costs of production but cannot be sold as the manufacturer does not want its name associated with substandard products. Some rejected products can be re-worked, but in many industries, it has to be scrapped – either way, rejects incur more costs. A quality control approach can be highly effective at preventing defective products from reaching the customer. However, if defect levels are very high, the company's profitability will suffer unless steps are taken to tackle the root causes of the failures. Also, it does not encourage all workers to be responsible for quality.

Recommendation: Total Quality Control (TQM) might be used by Premium Suit to implementation of statistical quality control techniques or quality improvements.

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Solved Past Paper ( O/A level study resources) 

)Identify and explain two ways TT might achieve quality production(8)

.ANS:

i)Quality Control

Quality control is the checking for quality at the end of the production process, whether a good or service. The quality of the product or service is ensuring if the proper designing process is followed. This designing process needs to be backed by appropriate process design supported by a suitable technology that conforms to the requirements of customers. Quality control ensures that defects and errors are prevented and finally removed from the process or product. Therefore, quality control should include; planning, designing, implementation, gap identification and improvisation. If TT can implement stringent quality control, it will achieve quality production.

Ii) Total Quality Management (TQM)

TT might use Total Quality Management or TQM, it is the continuous improvement of products and production processes by focusing on quality at each stage of production. There is a great emphasis on ensuring that customers are satisfied. In TQM, customers just aren’t the consumers of the final product. It is every worker at each stage of production. Workers at one stage have to ensure the quality standards are met for the product in production at their stage before they are passed onto the next stage and so on. Thus, quality is maintained throughout production, and products are error-free.

TQM also involves quality circles and like Kaizen, workers come together and discuss issues and solutions, to reduce waste to ensure zero defects.

b) TT should consider the following three changes before making a final decision about whether to start exporting its products. Which change is most important for the decision? Justify your answer. (12), (O/A level study resources) https://o-alevelstudyresources.blogspot.com/

ANS:

Exchange rate appreciation

 Currency appreciation usually reduces inflation because imports become cheaper and the lower prices lead to lower inflation. It makes imports more attractive, causing the demand for local products to fall. Local companies usually have to cut costs and increase productivity so they can remain competitive. So, therefore, Exports will be more expensive. This will lead to lower demand for TT’s exports. The firm will have to reduce its revenue and profit margin. But, on the other hand, imports will be cheaper. TT can import its raw materials at a cheaper price.it may reduce its production cost.

Increase economics growth

Economic growth means an increase in real GDP – an increase in the value of national output, income, and expenditure. Essentially the benefit of economic growth is higher living standards – higher real incomes and the ability to buy higher quality products. High economic growth leads to increased profitability for exporting firms like TT, because it enables them more spending on research and development. Also, sustained economic growth increases confidence and encourages firms to take risks and innovate. Economic growth is an increase in the production of goods and services over a specific period. Economic growth creates more profit for TT’s businesses. And, consumers have more money to buy additional products and services.

Increate import tariffs

Tariffs increase the prices of imported goods. Because the price has increased, more domestic companies are willing to produce good and increased domestic production. The overall effect is a reduction in imports and higher prices of imported goods to consumers in a domestic country.

However, with higher tariffs come unexpected costs for importers. Since tariffs boost the prices of importing goods, domestic producers reduce their prices because of competition. As a result, TT’s expected exporting products may reduce in developed countries.

Recommendation:   

An increase in import tariff is the most important change for TT to make effective decisions. Tariffs, or taxes imposed on imports, they tend to raise the cost of an imported good for TT’s businesses and its consumers, while boosting the affected international markets.

2. c. Discuss the usefulness of forecasted income statement to the directors of DLR (12) (Cambridge, A level Business Studies, Paper 3, Nov, 2018.)

 

 Answer

The forecasted income statement shows the performance of trading over a period of time in the future of a firm. It focuses the future expected trading activities like targeted sales and trading operations.

DLR wants to upgrade with better facilities and shifts to a new IT system. Therefore they need funds for this. The forecasted income statement shows high profitability of 88.1% to its shareholders or potential investors who will be more willing to invest in the business DLR. it helps the directors of DLR to raise expected finance. The investors can easily calculate some ratios from this income statement before making their investment decisions. For example, return on the investment and profit margin that helps them to make a quick decision. Thus, the forecasted income statement will be more important to them.

The internal stakeholders of DLR like directors will get more important profitable information from the forecasted income statement. It will also help them to achieve their business objectives such as targeted profit and sale terms. And, the directors will be able to compare the actual results with the forecasted figures. They will easily measure the performance, and change the plan quickly.  If the actual sales are less than the forecasted sales, they will change the directions or strategies to get a quick result. So, therefore, this forecasted income statement will help the directors of DLR to improve whether the marketing plan is achieving its objectives or not.

DLR will need finance for upgrading its IT system and investments. So the directors could use the forecasted income statement to apply for more loans from Bank.

However, the usefulness of the forecasted income statement may be limited to the directors of DLR, because the data from the forecasted income statement could become easily outdated due to DLR operating in the holiday market. The holiday market's demand is more fluctuated and unpredictable. The ratios from the forecasted income statement may be less useful to the directors for making the right decision. So the directors of DLR cannot only rely on it, but they will also consider the qualitative data which are not available in the forecasted income statement. For example, customer behavior is an important qualitative data that is needed for making marketing decisions. The directors may not get such customer information from the forecasted income statement.

So, therefore, the forecast income statement is an aid to decision making as only an important part of the planning process. The investment plan and cash flow plan are not shown in the forecasted income statement. the director of  DLR will have to look at investment appraisals methods like payback period and NPV which cannot be calculated from this forecast statement. Therefore, the usefulness of the forecast income statement is limited to the directors as it only shows one aspect of the business but directors of DLR need to consider all aspects both financial and non-financial when making an effective strategic decision.

 

 M. Anwar Hossain

Senior Teacher (O & A-Level)

Call: 01676514507

 

 

 

 

Q. Evaluate whether the introduction of the lean production techniques will be enough to improve ADP’s operational efficiency.(16) Nov, 2017, paper3

 

Answer:

Lean production technique is the method where the resources are used more efficiently to reduce wastage and time consuming, and aiming is to increase productivity. Lean production techniques include: JIT, Kaizen, TQM and simultaneous engineering.

ADP is currently facing poor operational efficiency. The main causes are low involvement of employees, poor communication and poor relation with suppliers.

Thus, the lean production techniques can help them to improve operational efficiency. The lean production technique, Kaizen would help involve the workers as there is very low worker involvement in the factory and they are not asked for suggestions when operation’s problems are being solved. Kaizen suggests adopting worker regular meeting where they report the managers about the problems that they really face. Employee involvement could help this business improve labour performance/motivation and provide ‘shop floor’ ideas for improving efficiency.

ADP has inventory levels that are much higher than normal industry levels. Just in time (JIT) stock management could be used to solve this issue by concentrating on only ordering the raw materials when there is demand. This will reduce the wastage of raw materials and storage costs and will increase operational efficiency. However it will be difficult for ADP to implement JIT as it totally depends on reliability of suppliers. Therefore another very important way to improve the operational efficiency is to make a very important decision to improve its relation with suppliers. Reduce number of suppliers and/or develop a better long term relationship that offers support to suppliers so that needs of ADP more effectively met. This may involve including suppliers at early stage in development of new products.

However the success of lean production depends on using flexible equipment. But equipment in some of their factories like factory Q is very old and has not been updated since 2005. With such old equipment it will be difficult for lean production techniques to improve the operational efficiency.

Lean production works most effectively with efficient and flexible machines and employees e.g. to switch from one product to another. There is evidence that these features do not exist in ADP (e.g. Factory X) so lean production techniques cannot be easily employed within ADP unless there is also investment in equipment and training – investment in equipment possible with low gearing but investment in employees seems not to be an ADP priority. JIT requires better communication to forecast demand and plan output levels AND needs well motivated suppliers so lean production will not be effective until these are sorted. Kaizen will need a complete change in leadership style and approach to employees and until these occur ADP will not introduce Kaizen effectively so lean production is insufficient.