Marked Practice Exam [38 out of 63, 60%, ‘C’ grade, 2001]

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Marked Practice Exam [38 out of 63, 60%, ‘C’ grade, 2001]

{Essay CONTENTS: ‘Flexible working’ definition; ‘rationalization’ definition; disadvantageous business effects of employee job insecurity; business options to overcome the problem of inadequately skilled employees; theories of motivation; effects of seasonality; effects of increased stock buffers; ‘Just In Time [JIT]’ production definition; factors to consider before switching to JIT production; factors to consider before switching to ‘batch’ production.}

1.a.i.)Flexible working” is used by a company to meet consumer demand through employing part-time or sub-contracted workers – therefore, workers are called in when they’re needed, reducing idle time.[^]

1.a.ii.)Rationalization” is the term used to describe a company looking at its workforce and deciding which workers are necessary and which are superfluous. Decisions will be made on the workers’ future employment in the company (for example, redundancy is one option).[^]

1.b.) If employees are feeling insecure in their job, the company will be at a disadvantage owing to decreased motivation of employees, whilst other businesses will suffer as workers alter their spending habits.

In analysis, insecure workers will be worried about the threat of redundancy, which in turn will lead to poor motivation. Workers who don’t know whether they’re going to have a job for long will start to save their money, rather than spend it.

In evaluation, decreased motivation leads to poorer productivity, which will damage the company’s ability to meet consumer demand, therefore harming profitability. Workers who save money will not be buying the company’s products, leading to possible liquidity and survival problems.[^]

1.c.) Companies can overcome this problem through staff training, capital investment, and the acquisition of better qualified staff.

In analysis, staff training will build on current employee skills, resulting in them becoming better equipped for the job. Capital investment is another possible method, as new fixed assets (such as technical machinery) can be purchased to either complement or replace the workforce. The acquisition of better-qualified staff will solve the problem, as they have the skills required by the company already.

In evaluation, staff training will be costly in the short-term, but the company will reap the benefits in the long-term, as profitability increases in line with increased production from qualified staff. Staff morale and motivation should increase as they see the results of their work. Capital investment is a further short-term cost, but will increase productivity, and therefore the chances of profitability. Acquiring new staff will cost the company a great deal in job advertising and redundancy packages, meaning they could end up with unhappy ex-employees, and unhappy bank managers as they encounter liquidity problems.[^]

1.d.) The work of the motivation theorists go some way to explaining the new approach to women at work. Here I will look at the theories of F. W. Taylor, Hertzberg, and Elton Mayo.

In analysis, F. W. Taylor’s approach was that workers are motivated by money, and don’t care about any higher cognitive needs that should be fulfilled. This isn’t the case here, as the women are motivated by external factors, such as a child’s concert. Hertzberg believed that workers have social needs, demonstrated through the lady’s desire to attend her son’s school concert. Mayo believed that hygiene factors such as working hours and conditions were important, and the new “shift swap” scheme is a clear example of this.

In evaluation, Midland Bank increased retention rates by 50% by allowing women on maternity leave to work flexibly on their return, holding out Mayo’s theory. Hertzberg’s theory is demonstrated by Asda’s scheme, which allows social needs to be fulfilled. However, F. W. Taylor’s financial remuneration theory doesn’t hold true here: the females aren’t motivated by money.

Thus, in conclusion, the principles of the motivation theorists can partly explain this new approach, although there is no financial motivation evidence.[^]

2.a.i.) Polar Ices needs to build up stocks early owing to the extreme seasonality of sales, and the potential capacity of the company. In analysis, the summer is the time of peak demand, so buffer stores are kept. The company has a limited capacity, increasing the need for buffer stores in order to meet summertime consumer demand.[^]

2.a.ii.) Three likely effects are that money will be tied up in stock; costs will be incurred through storage space; and customer satisfaction will increase.

In analysis, the build up of stocks means money is tied up in the ice lollies, rather than being available for reinvestment or cash flow problems. Money will be lost (decreased profits) as the storage space for the lollies has to be paid for. Again, this money is tied up and cannot be reinvested. However, sufficient stocks to meet demand should ensure the consumer is happy, leading to higher chances of retaining custom and therefore improved profitability.[^]

2.b.i.)Just in Time [JIT] production” is a method whereby stocks are only ordered from suppliers when they are needed. In this way, demand from the consumer can be met, with the minimum of costs regarding storage space, as goods are ordered as needed. Less money is tied up in stocks, and the ‘company-supplier’ relationship is crucial.[^]

2.b.ii.) In deciding whether to switch to JIT production, Polar Ices should consider their supplier relations, and the accuracy of their forecasted demand graphs.

In analysis, supplier relations are the key to the success of JIT production; if supply is not consistent in terms of speed and quality, the products cannot be made to meet consumer demand. This will lead to many dissatisfied customers. If the forecasted demand figures are inaccurate, the JIT method will not be sufficient; if sales are much higher than forecasted, and the production is insufficient, there are no buffer stores available to retain customer satisfaction. Thus, many unhappy customers will result.

In evaluation, poor supplier relations and inaccurate forecasting will result in the failure of the JIT production method to meet customer demand. This will decrease the profits of the company, and harm survival prospects as customers start to look elsewhere.[^]

2.c.) In deciding whether to batch produce chocolate, one would have to consider market research; the budget; and capital investment.

In analysis, market research would be vital to examine whether there is indeed a market; who to position the product at; and would the move benefit the company… If the answer was no, there would be no point – a waste of time and money. The budget would need to be consulted to see if sufficient project funding is available – would any liquidity problems arise as a result of the decision? Capital investment – the purchase of suitable machinery – would need to be considered; what new machines are the company going to need to produce the product?

In evaluation, market research will help identify a marketing strategy, while budgetary consultation will show whether funding for the product and capital investment requirements is available. If little money is available, the product would have a poor market inception, inadequate advertising, and no USP. This would result in few customers, damaging survival chances as short term costs are not recouped.

In conclusion, I would need to consider the above factors before making such a big decision.[^]

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34-year-old father of three wonderful children [William, Seth, and Alyssa]. Works as an Assistant Technical Officer in the Sterile Services Department of Treliske Hospital, Cornwall. Enjoys jogging, web design, being a bit of a geek, and supporting Arsenal FC. Obtained a BA degree in English from the University of Bolton in 2008, and has continued to gain qualifications in a diverse range of subjects thereafter.

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Posted in AS Level Business Studies [A1]

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