GCA business management revision kit

Global Chartered Accountants - GCA www.gcaofficial.org 30 January, 2013 Business Management Exam Kit This kit is designed to help ICAP Module E business management students to get the following:  ICAP Syllabus Grid  Complete Revision Notes from PBP  Past Papers Analysis  Topic wise past papers with answers and examiner comments  All up to date past papers given with solutions attempt wise You don't need to spend hours on making past papers analysis and important topics It’s all provided in one single file Share this file with your friends as well If you have any type of study/exam material related to CA/ACCA/ICAEW etc, please send us at gcaofficial@gmail.com For study/exam material of other papers/qualification, visit out website Regards GCA Team Final Examination Business Management Module E P AP ER E 16 : Bu s i ne s s M a n a g e m e n t (100 marks) Introduction The ob ject ive of t his p aper is t hat the ind ivid ual s hould b e ab le to: • • • • • • • • • • Identify the principles and concepts in the theories and practices of strategic business management; Asses the impact of environmental forces such as global microeconomic forces, international trade and financial system on organizational strategies and plans; Understand the importance of linking information systems development and management to business goals and needs; Understand the interplay of marketing with other vital functional areas in business management and to understand the accountant»s role in servicing the needs of marketing and other functions of business; Recognize the role of global marketing and international business; Assess the importance of human resources development to organisations and identify methods of managing people effectively; Evaluate ways in which change can be managed successfully; Appreciation of social and ethical implication of strategic policies in business; Understand the aims of corporate codes of conduct and their role in improved corporate governance; and Understand the manager»s role and responsibilities in relation to the working environment Case studies / scenario based questions will be set in the examination Indicative Grid Syllabus Content Area Weightage Strategic management and planning Corporate social responsibility and business ethics 30 Human resource management Management of the working environment 30 Marketing Management International Business 20 20 Total Note: 100 The weightages given above are for guidance purposes only and some deviations in setting of papers could be expected The Institute of Chartered Accountants of Pakistan Final Examination Business Management Contents: Strategic management and planning: a b c The purpose of strategic management and business planning and their inter relationship The methods which organisations use to plan for the future including the role of information technology Pos ition ap prais al and analys is : i ii iii Identifying the organization»s strengths and weaknesses, opportunities and threats Identification and quantification of the planning gap Closing the planning gap through the identification and evaluation of alternative courses of action: improved efficiency; improved product(s);or service(s); introducing new product; entering new markets; merging with or acquiring other organisations iv Use of alternative strategies v Quality and a strategic variable; its implementation and management vi Performance against operational and strategic targets; flexibility» economy, efficiency and effectiveness vii Performance against that of competitors; benchmarking; use of inter-firm comparisons; the limitations of external data viii Performance of costs, profit and investment centres using financial and non-financial measures ix Problems of measuring divisional and subsidiary company performance x International and multinational trading; transfer pricing of goods and services and their impact on trading results xi Impact of changing price level on current performance and the future projections xii Customer outlets, including customer profitability analysis d The eff ect of ex ternal environm ent on st rateg y and p lans and ap prais ing t he env ironment : i ii iii iv v Scanning the environment of the organisation and the context in which it is set for changes, developments and opportunities Forecasting trends and developments in relevant areas through the use of relevant quantitative and qualitative analysis Future basing (i.e Anticipating long-term prospects for the business and its likelihood of survival) and other scenario-building techniques Impact on the organisation of changing national and international influences: demography; technology (progressional alternative / acceptability); economic resources; social attitudes and aspirations; legislation and regulation; political forces; government and other agencies, including pressure groups Competitive advantage: ◗ ◗ ◗ its meaning in different markets and industries of nations and the implications of this for organisational success the different approaches used by organisations and management in different countries and the lessons which can be applied to Pakistan the effect on organisations of working in an international environment, the key aspects of that environment and methods of entry into it The Institute of Chartered Accountants of Pakistan Final Examination Business Management vi Use of renewable and non-renewable resources including the ethical implications of such use; the effect of the environment on corporate performance vii External sources of information, including databases, both private and public, and their usefulness to the organisation viii Impact of innovation, substitution and obsolescence on business process (including marketing and production) ix Impact of international market integration on the transfer of goods, services and labour x Comparative organizational performance: market share production capacity e Methods of gaining support and commitment for strategies f Es tab lishing the corporat e object ives: i ii iii iv v Organizational missions, aims, goals and objectives Long-term (strategic) and short-term (operational) objectives: quantitative and qualitative evaluation Application of decision theory Problems of achieving balanced growth and development Internal and external factors effecting decisions; implication of «short-termism» g Formulating and evaluating plans with an awareness of the various techniques available to managers h Understanding and managing the risk of a proposed business plan for the plan itself and for all the aspects of business which it will influence i Reviewing strategy for the effect it will have on the organisation and the local and global community Corporate social responsibility and business ethics a Understanding of obligation towards society by business organisations and the individuals associated with it, in carrying out the business and professional activities b Understanding ethical and social implications of business strategic policies and decisions and their impact on the stockholders; consideration thereof in the formulation and implementation of strategic planning and management decisions c Disclosure and confidentiality d Profit motives versus other corporate objectives e Goal congruence and corporate performance measurement f The role of professional bodies in regulating the activities of members The Institute of Chartered Accountants of Pakistan Final Examination Business Management Human resource management a b c d e f g h i The purpose and forms of personnel specifications in the recruitment of personnel Methods of identifying competencies and other attributes required Specifying personnel requirements Evaluating and determining the benefits and costs of new or additional personnel Identifying and determining suitable methods of recruitment Selection methods and their use Methods of motivating and supporting personnel Staff appraisals and the assessment of competence Warning and dismissing personnel: legal and organizational policies and procedures; the role of internal and external specialists in the process j The role of employee group in promoting the welfare of personnel k National legislation which affects recruitment, selection, employment and dismissal of personnel l The management of organizational and personal changes m Concep ts and princip les of hum an resource dev elopm ent i ii iii iv n The role which individual and team development can play in growth and development The different concepts and models of competence Methods of encouraging and supporting individuals and teams to grow and develop The effect of internal and external factors on development Human relations management Management of the working environment a b c d Interpretation, applying and monitoring best practices for managing the working environment National Legislation which affects the working environment The role and purpose of health , safety and security requirements, procedures and guidelines Roles and responsibilities of management for managing and improving the working environment Marketing Management An introduction to marketing principles, the purpose of marketing philosophy and concepts in providing for customer needs Areas include: a S trat egy in t he m arket place i ii iii iv v Assessing threats and opportunities to the marketing plan; determining the need for change in the planning area Development of marketing strategies to meet organisation objectives Assessing the nature and size of the market using internal records, market intelligence, market research The process of creating, reviewing, selecting and marketing the right product in the right place, to the right customer at the right time, while achieving the right price; relevance of the product life cycle The product portfolio; formulation, management, the relevance of branded merchandise The Institute of Chartered Accountants of Pakistan Final Examination Business Management vi Consumer power within the marketing environment vii Strategic management of markets through mergers, acquisitions and divestments viii Problems associated with the acquisition of the foreign subsidiaries especially in respect of performance appraisals b Analyzing the impact of globalization on marketing to assess competitive advantage c Techniques for analyzing the market, choosing the target market and the appropriate marketing mix, distribution channels, promotions, and developing a marketing plan International Business a The environment of global marketing, global opportunities and threats; difficulties in International business and alternative approaches to managing the process b The development of multinational organisations and transnational corporations and their role in the world economy c Int ernational f inancial m anagem ent d ecisions i ii iii Alternative methods of financing imports and exports The workings of international money and capital markets and the opportunities that they offer to companies as a source of finance and as a repository for the investment of funds The management of financial resources within a group of companies including: • • • • • iv payments between companies cash management transfer pricing judging the performance of companies within a group the financial control of a group of companies The appraisal of international capital investments, applying the appropriate techniques, and the consideration of the major issues in the decision-making process, including: • • • • • • • strategic objectives the principle of foreign home country versus host country returns the form of foreign investments, including the use of branches versus subsidiaries the different methods of financing foreign investments the effect of taxation on foreign investment decisions repatriation of sales amounts, earnings and charges to foreign operating companies political risk analysis The Institute of Chartered Accountants of Pakistan Final Examination Business Management Recommended Reading PAPER E 16: Business Management Book Name & Author About the Book Strategic Management Concepts and Cases by Fred R David The book ensures concept building for the topics on strategic management Principles of Marketing by Kotler Armstrong The book gives an in-depth knowledge of the principles of marketing and a good explanation of basic marketing concepts Human Resource Management by H John Bernardin The book is relevant for various syllabus topics under the mentioned grid Management and Organizational Behaviour by Laurie J Mullins A comprehensive and detailed explanation of managerial practices is given in this book The book is a good guide for concepts in the field of organizational behavior Business Studies by Dave Hall Rob Jones and Carlo Raffo } AS Level and A Level Business Studies by Peter Stimpson The books comprehensively cover the following topics: Business Strategy and environment, marketing and human resources Supplementary Study Material Business Management Study Text and Revision Series by AT Foulks Lynch Pakistan Business Management Study Text and Revision Series by Professional Business Publications (PBP) The Institute of Chartered Accountants of Pakistan Global Chart ered Accountants - GCA Revision Notes (An effort by Mr.Asif) www.gcaoffici al.org Global Chart ered Accountants - GCA Chapter : Objectives of Organisation Introduction to Strategy Strategy: ― Course of actions, including specification of resources required, to achieve a specific objective‖ Influences on /Determinants of Strategy:  External o Society o Organized groups  Nature of business o Market situation and conditions o Products of company o Technology used  Organization‘s Culture o Organizational system and structure o Leadership style o Organization‘s history o Organization‘s founder  Stakeholders‘ powers (mapping) and Internal coalition  Economic objectives  Social responsibility Environmental conditions affecting Strategic Planning: Resources (mineral) Disaster Logistics Government Environmental M anagement Accounting is a solution: examples are Eco – Balance Cleaner Technology Lifecycle assessment Performance appraisal Budgetary planning and control Corporate liabilities (a factor in PERT) Characteristics of Strategic Decision: Scope: Overall long-term direction Matching: Matches activities to environment & resources capability Affect: Affected by values, beliefs and powers of people in organization & Affect operational decisions Implications for change Complex in nature Allocation or reallocation of resources Strategic Financial Management: It is identification of strategies able to maximize NPV and to allocate scarce resources, and implementing and monitoring of such strategy Financial management decision: (Also see end of chapter 9)  Investing decisions (merger, divestment etc.)  Financing decisions (Capital structure and Working Capital Management)  Dividend decisions (Cash or Bonus share)  Financial objectives: Non financial objectives:  Primary; to maximize wealth of shareholders  Service provision  Others are  Fulfillment of responsibility to suppliers & customers o Decrease in debt  Welfare of Society o Profit retention  Welfare of M anagement o Sales growth  Welfare of Employees Government organizations: External Financing Limit To create Value for Money, funds must be applied Economically, Efficiently and Effectively www.gcaoffici al.org Global Chartered Accountants - GCA Q2 Q3 The following important points should be considered when one is involved in the decision making process: (i) have a clear perspective of the goals to be achieved (ii) develop the timeframe for reaching the final decision (iii) analyse the nature of the problem in sufficient detail according to the importance of the final outcome of the decision (iv) examine the various available options (v) weigh the possible consequences of selecting any one or combination of actions The advantages of Business Process Outsourcing are: (i) Outsourcing would enable the managers and the staff to concentrate in activities which are of critical importance for the achievement of the corporate mission, thus improving their core competencies and the overall productivity (ii) Outsourcing may help to reduce the operating costs of SEL (iii) Outsourcing would enable SEL to reduce the amount of capital investment that it would otherwise have to incur in the facilities which would be provided by the outsourced agency Also enable SEL to improve core activities performance (iv) Careful selection of outsourcing companies would help to acquire new know-how and expertise from the outsource agencies as they would be providing similar services to their several customers The disadvantages of Business Process Outsourcing are: (i) Outsourcing involves loss of some control and places excessive reliance on outsiders (ii) Outsourcing can result in loss of valuable in-house skills (iii) Outsourcing may result in creation of competition in future (iv) Outsourcing may result in disclosure of critical confidential information to outsiders (v) If the level of the performance is not the same then it might result in brand dilution and shift in brand loyalty Q4 Key stakeholders of FSML and their importance for the sustainable and long-term profitable operations of the Company are : (a) Shareholders: The shareholders are the ultimate owners of the Company and it is important to maximize their wealth through sustained growth in real earnings and profitable expansion of the business (b) Distributors and Customers: The distributors and customers are important as the Company can operate profitably only if it is able to build long-term relationship with the distributors and the ultimate customers by offering quality products and value for money (c) Cane Growers: The sugar cane farmers are critical stakeholders as the Company has to build ongoing relationship with them for supply of good quality cane according to the pre-determined delivery schedules (d) Employees: The employees are important as the staff have to be trained and motivated to enable the Company to maintain and strengthen its reputation as a progressive company and be able to continue to operate as a profitable entity (e) Creditors: The creditors, including the banks, are important stakeholders as substantial amounts of finances are required by FSML for making payments to the cane growers, financing of stocks of sugar manufactured during the crushing season, purchase of components, parts and spares, etc The creditors are important stakeholders as they have to provide funds to meet FSML’s requirements www.gcaofficial.org Global Chartered Accountants - GCA (f) Government: The government officials at various levels play an effective role for the smooth operations of FSML for movement of heavy traffic, maintaining law and order particularly during the crushing season, its role for fair pricing of sugar and ensuring its availability for the consumers throughout the country (g) Community: The neighbouring community has to accept the Company as a socially responsible and conscientious corporate citizen mindful of its obligations to the community and its overall welfare Q5 The various stages of the Decision Making Process are: (a) Identification of the objectives: The first stage in the decision making process involves identification of the objectives which may vary considerably It is important at this stage to specify the criteria for measuring the extent to which the objective has been achieved (b) Collection of information and ideas: The importance of outcome of the decision would determine the extent of the efforts that should be made to collect the information and ideas and the degree of accuracy of the input data required to reach a well-considered decision (c) Analyses of information and ideas: The information and ideas collected have to be analyzed to assess the alternative courses of action Decisions which cannot be reversed readily and have serious long-term consequences require more indepth and accurate analysis of the data and evaluation of the ideas obtained from the different sources (d) Making of the Decision: This is the most important stage of the decision making process as the decision maker has to select a particular course of action Reaching the right decision is important because this process involves selection of a particular course of action to the exclusion of the various other alternatives At times the decision maker may require additional information to reach a well-considered decision (e) Communication of the Decision: Quite often the persons making the decision are different from those who have to implement the decision Consequently it is necessary to issue instructions to all individuals who would be affected by the decision or who would be required to implement the decisions (f) Evaluation of the results of the decision: Decision makers have to evaluate the outcome of the decision It enables them to modify the course of action or revise the objectives etc Q6 The business strategy/policy in each of these situations is: (a) Market Skimming Pricing Strategy (b) BCG Matrix (c) Gap Analysis (d) Product Specialization (e) Conglomerate Diversification or Conglomerate Expansion Strategy (f) Contingency Planning Strategy (g) Multi-brand Strategy (h) Relationship Marketing (i) Test Marketing www.gcaofficial.org Global Chartered Accountants - GCA Q7 Q8 Scenario Planning is a technique which involves the process of identifying alternative scenarios in the future, and on the basis of different assumptions that the strategists may anticipate in the future, formulate corporate strategy The process of scenario planning on the basis of different assumptions enables the company to realign its corporate strategy quickly in the changing business conditions The purpose of scenario planning is to avoid formulating corporate strategy on the basis of a single future outcome which may not materialise.Rather, the objective is to re-evaluate the relevance of the strategic objectives which would be valid for different outcomes/events as they unfold from time to time Business firms expect to derive the following advantages by outsourcing of selected business activities to external entities: (i) Reduce requirements of capital investment and human resources as the facilities and services are provided by the external entities to whom these activities have been outsourced (ii) Place greater focus on core value-added activities of the business as the ancillary activities are outsourced to external suppliers (iii) Achieve cost economies as the suppliers of the outsourced activities are able to obtain the advantages of economies of scale (iv) Derive benefits of the particular expertise and innovations of the external entities who provide these services www.gcaofficial.org Global Chartered Accountants - GCA www.gcaofficial.org Global Chartered Accountants - GCA www.gcaofficial.org Global Chartered accountants – GCA BM Examiner Comments Final Examination - Winter 2010 General: the paper was well designed and comprehensive All important topics were included and the questions were simply worded so as to help the students in understanding what exactly is being asked It is suggested that students consult reference books and improve their understanding of the concepts so that they are able to tackle questions in a better way It is reiterated that marks allotted next to each part of each question are checked so that the time to be spent on answering each may be gauged Q.1 (a) This common ethical dilemma was given to test the candidates’ personal ethical and moral judgment Students were required to give measures that DEL should adopt, in order to eliminate unethical practices by sales representatives Most candidates mentioned measures like: • Sales reps should be given written instructions about acceptable behaviour and norms • Consequences of indulging in unethical practices should be made clear • Training workshops should be held • Sales targets should not be superficially high as that may demoralize the employees Very few touched on the important point of circulating a written Code of ethics Some candidates mentioned that surveys of hospitals and feedback from doctors, etc should be sought, which was completely irrelevant as an organization would not degrade its employees by secretly seeking feedback from customers Q.1 (b) Establishment of branch operations instead of an overseas subsidiary: Students need to understand the difference between incorporating a branch in a foreign country and an overseas subsidiary A branch is simply a part, division or section of an entity that is set apart to undertake certain tasks or responsibilities in order to carry on business and derive revenues in a foreign country An overseas subsidiary however, has a separate legal and corporate existence and is not a part of a larger entity with at least 50% shareholding of the parent company Students were unable to score high marks in this part as they mostly mentioned benefits like cost savings and lesser legal formalities in case of establishing a branch The tax implications and long term benefits were not touched upon Q.2 In this question ‘exit barriers’ that prevent going concerns from quitting the business were to be explained Answers were mostly good however, at this level it is expected that terms like severance payments, redundancy costs and ancillary costs associated with closure of business etc are understood and mentioned Some candidates were unable to understand the question and in haste mentioned reasons that would lead a corporation to wind up and leave Q.3 Students’ knowledge of various business strategies was tested through this question This style of testing the knowledge should be encouraged Few students scored well, others just did guess work This shows that concepts are just skimmed through and students not make any effort to practically understand the strategies Q.4 (a & b) Both the parts of this question were generally attempted nicely and show that recruitment is a topic that is commonly liked and understood However, it is suggested that extensive reading should be done and reference books should be consulted to improve the quality of responses Some of the students seemed to be in a hurry and missed to mention some very mandatory points like required qualification or job description Q.5 (a) Four methods of payment against imports were given These had to be arranged in order of preference for the importer in descending order It was felt that students were not sure about the meaning of descending; so many answers were given in reverse order which resulted in loss of easy marks Q.5 (b) Students had to list the obstacles in attracting foreign investment in underdeveloped countries There are so many factors that make up this answer, some are: corruption, instability of government & its policies, inflation, lawlessness etc The question was mostly attempted well Q.5 (c) The advantages of market based transfer pricing, asked in this question are: fair pricing, competition between depts., resulting in improved efficiency, tax benefits, easy performance evaluation etc Most students could mention one or two points only Q.6 (a) The easiest question of this paper and a golden opportunity to score quick marks There are numerous factors which a Chinese company would reflect on before going ahead with the decision of whether or not to export Almost all students secured atleast passing marks in www.gcaofficial.org Global Chartered accountants – GCA BM Examiner Comments this part of the question Q.6 (b) This question asked the benefits availed by the licensor by entering into a Licensing Arrangement Most common error here was that students gave the benefits availed by the Licensee instead of the Licensor This usually happens when students hurry to answer after reading two three words of the question It is advisable to take at least the initial five minutes to just read the paper CAREFULLY before attempting to answer it Q.7 (a) “Brand Equity” is a well-known concept in management studies but most students gave wrong answers Equity was mistaken for equality, students thought that it meant having equal value or same name of many products launched under one brand Q.7 (b) The Pull Strategy is not an alien concept for anyone having some knowledge of product management It is a strategy in which promotional expenses are incurred with the aim of attracting potential consumers and reduce reliance on sales persons The response was generally satisfactory Q.8 (a) The objectives to be achieved by Human Resource Managers are several including fair compensation management, recruiting the most suitable workforce, updating the skills of Employees through training & development, maintaining a peaceful environment by conflict management etc There are several more of them but most candidates could mention not more than four Despite the fact that this question pertained to basics of Business Management, students not being able to well shows a lack of commitment on their part Many students did not understand that HR manager’s duties of strategy formulation and implementation are being discussed and included points such as maintenance of personal records etc Q.8 (b) The basic definition of SBU is “an independent unit which has its own resources and products and strategy” and because SBUs have independent objectives they allow the owning conglomerate to respond quickly to changing economic or market situations Many students incorrectly mentioned that SBU is a department of the organization which plays an important role in achieving its strategy Q.9 (a) Students were lost whilst attempting this question Some had no grip on the concept of strategic planning Those who had a fair idea could not express themselves due to lack of reading Mostly, vague and general answers were given Q.9 (b) Steps in the implementation of a well considered business strategy were required in this part It seemed like students had difficulty in organizing their responses and hastily tried to get over this part Students ignored important areas like policies, systems and resource allocation Most answers left a lot to be desired Q.10 This question again did not require any text book learning just some logical, knowledge & wit It just required students to give a pointwise enumeration of advantages of conducting training The same points were repeated in many different ways 3-4 points were created out of one This manifested in the form of a lengthy answer but not the one which was desired It was observed that students talked only about the benefits to the employees like higher prospects for promotion etc Benefits to the organization, clients and overall business were often ignored Competitive advantage in service-oriented companies was touched upon by some However, the true essence of distinguishing oneself on the basis of good quality service did not come out Final Examination - Summer 2011 General: Question Paper was interesting and covered almost all the major topics As for the students’ performance, it was below average; although most students attempted all questions but the usual problem of hazy answers led to failing grades As observed in the past, inadequate preparation, selective study, failure to read and understand the requirements of the questions and weak expression power were the major reasons for below standard performance Q.1 (a) The question pertained to skills essential for frontline operational managers Very few actually knew the difference between skill and function, although both of these are basic topics of business management Most students emphasized on achieving objectives and crafting strategies These can not be categorized as skills Skills essential for frontline operational managers include resource allocation, conflict resolution, motivating employees, communicating effectively etc Some of the students discussed strategic level decision-making; which is not the responsibility of frontline managers www.gcaofficial.org Global Chartered accountants – GCA BM Examiner Comments Q.1 (b) A very basic yet interesting question What benefits organizations reap by “Employee Participation”? Most candidates mentioned Employee motivation and commitment as the main benefits These points were rephrased and broken down into 3-4 points with the same matter being repeated in different words Advantages like better working relationship, greater willingness to implement the decisions, reducing the need for supervision etc were missed out Q.2 (a) Porter’s Five Forces Model of Competition: in this question, students were given three different scenarios and they had to identify and highlight the salient features of the model of competition that would be appropriate in each scenario Most candidates were able to identify the model that would be apt in each scenario However, the reasons to support their choice were brief, incomplete and weak Some students mentioned or models under each scenario which were contradictory and defeated the purpose of the question Many students confused “Threat of New Entrant” with “Threat of Substitute Product” Q.2 (b) Four strategic objectives of a leading cotton fabric manufacturer were required Most candidates were not aware of the difference between strategies, tactics and goals Majority of the students referred to generic objectives irrespective of whether they were strategic, operational or tactical Students didn’t realize that leading firms/companies capitalize on their established reputation and premium quality of their products/services Hence, objectives like cost cutting, price reduction, discounts etc were not of much relevance Q.3 This question required the students to define downsizing, its effects on the organization and then explain what considerations should a HR manager keep in perspective while pursuing a policy of downsizing Most students could write that downsizing means reducing the number of employees and it results in a flatter hierarchical structure However, while discussing matters requiring consideration of the HR manager, hardly anyone did justice to the question Most students emphasized on payment of due compensations and the legal and social consequences Important considerations like employee morale, effect on workload, transparency, objectivity and image of the bank etc were less frequently mentioned Q.4 (a) Students did have a fair idea about ‘market research’ but definitions lacked substance and it was apparent that many students had difficulty expressing themselves Q.4 (b) Most of the students mentioned the basic reasons for undertaking market research and scored good marks Performance in this part was good as most of the students could frame answers based on their general knowledge and such answers did fit in Q.5 (a) Unfortunately, majority of the examinees were not clear about the concept of Succession Planning Many students wrote that it is the taking over and handing over of duties by a new employee when the old employee resigns or retires Wholly irrelevant answers were given, like formulating plans for making the employees successful Some of the better replies simply discussed fulfillment of future requirements but missed out key points such as identification, grooming, training etc Q.5 (b) This part of the question required mentioning advantages of formal succession planning As discussed in part (a), those who were not aware of the basic concept, ended up stating wholly irrelevant points However, this part was better handled; although it is felt that students have to thoroughly read and understand these topics to be able to produce good answers in a specific scenario and to express themselves better Q.6 (a) Market Penetration proved to be a difficult topic as very few students were able to define this simple term which means increasing market share/sales volume by lowering prices Some students confused Market Penetration Policy with Market Skimming Policy Very few students could specify that this policy is adopted when a firm has excess capacity and is in a position to achieve economies of scale or when cost reduction is possible by using new technology, etc Q.6 (b) The concept of Market Segmentation was better understood as the students were able to produce average, if not good answers Many students knew the basic concept and the bases on which the markets are divided Q.7 In this question, distinguishing characteristics of organizations which pursue innovative corporate strategies were required to be identified Innovative and forward looking companies are continuously coming up with new products, better services and technological advancements They focus their strategies on the future and are able to anticipate the threats and opportunities to better handle market www.gcaofficial.org Global Chartered accountants – GCA BM Examiner Comments requirements, combat competition and avoid being obsolete Some of the students were well prepared and produced really good answers However, the majority seemed to rely on their general knowledge and could produce only two or three valid points Most of them emphasized on R & D and new products Some students offered long winded explanations, although the requirement was only to identify the characteristics of organizations which pursue innovative corporate strategies Q.8 (a) Majority of the students appeared to be confused while distinguishing between a global business strategy and a multi-domestic/adaptive business strategy Most of them wrote that companies pursuing global business strategies ‘think globally and act locally’! Multi-domestic strategy was defined as a firm that serves the local market only and does not business globally All such students were apparently placing reliance on guesswork and need to consult good books Q.8 (b) In this question, the students were required to list the key financial decisions that need to be made by MNCs contemplating direct investment in a foreign country through a subsidiary company Most of the students did not appreciate that their answers should be limited to financial considerations only Consequently, many irrelevant points were mentioned, whereas relevant points were missed Q.9 This was one of the most poorly attempted question Most students mentioned that an MNC adopts a policy of centralized decisionmaking only when it wishes to exercise close control over the subsidiary companies Other important points like safeguarding access to specialized technology and highly interdependent nature of operations were mentioned by very few candidates Q.10 Students were fairly able to list the responsibilities which employers must fulfill in order to ensure that issues of Health and Safety are addressed adequately in a manufacturing environment Some students advised about buying health and life insurance policies and bearing medical expenses, which were not relevant for this question Many students wrote to points, where a single point would have been sufficient For example, a student wrote that health policy should be crafted, implemented, monitored and reviewed as four different points Q.11 Short notes were to be written on four different topics The comments are as under: Business Ethics: Some students confused this concept with that of corporate social responsibility Majority of the candidates emphasized on rules and regulations A reference to values and culture would have been more appropriate Environmental Scanning: Most of the students were not clear about this concept and described it as an exercise to control environmental pollution and keeping the world clean! Tactical Planning: Many candidates defined it as strategic level decision making and planning and implementation at management level, although it is quite the contrary A number of students incorrectly described it as a medium term plan Backward Integration Strategy: Most of the students gave appropriate definition of the concept with relevant examples However, very few students explained the situations in which this strategy is pursued Final Examination - Winter 2011 General: The question paper was quite easy and interesting but unfortunately many students had resorted to selective study and were therefore inadequately prepared The students lacked conceptual understanding of the terms and gave vague answers, without understanding the precise demand of the questions Question-wise comments are given below: Q.1 The Public Relations job means moving people to action by creating credible and meaningful relationships between an organization and the people and groups important to its success This question required the candidates to specify the critical skills required for the position of Director Public Relations Skills like problem solving, experience and knowledge of the business, interpersonal and communication skills, multi-tasking, leadership, writing skills, coordination with senior level executives, and good management skills were mentioned by most of the students but appropriate explanations were often missing Moreover, since the question required eight critical skills and competencies many candidates repeated similar skills using different words The students must understand that such techniques cannot impress the examiner and simply result in wastage of time www.gcaofficial.org Global Chartered accountants – GCA BM Examiner Comments Q.2 In this question the candidates were required to explain three types of Growth Strategies Most of the students were able to define them and were able to give relevant examples However, the explanations were mostly incomplete or inappropriate While explaining Forward Integration, many students confused it with Backward Integration which is the acquisition of source of raw material Q.3 (a) The performance in this easy question was good as most of the candidates were able to identify the harmful effects of an Austerity Policy on various stakeholders i.e employees and society Q.3 (b) This part required definition of Corporate Social Responsibility CSR is a well-known concept in business management, but many candidates performed poorly Many candidates included all sort of responsibilities in CSR For example, many students also stated the responsibility to pay the salaries and taxes on time as a CSR Q.3 (c) This part of the question required five factors which should be included in developing an Effective Accident Prevention and Reporting System for a company Students attempted this question fairly well However, many candidates also indulged in repetition to complete the five factors In some cases, the fact that the company was involved in heavy engineering operations was ignored Q.4 (a) Overall performance in this question was good Students were able to correctly point out the disadvantages that Accurate Engineering Limited would experience due to High Employee Turnover Some students tried to repeat the same points which was a sheer waste of time Q.4 (b) A very basic marketing term, “Differentiation” was to be explained here A large number of students confused differentiation with segmentation Many students picked up the word differentiation and elaborated its dictionary meaning in different contexts without addressing the concept in its marketing parlance While identifying the skills and resources required to pursue a differentiation strategy, the students generally gave a long list of relevant as well as irrelevant points Q.5 Both parts of this question were challenging as these topics had not been tested in the past many examinations The answers to this question strengthened the viewpoint that the vast majority of students resort to selective studies Q.5 (a) Only few students produced appropriate answers and lack of clarity in the understanding of this topic was visible Q.5 (b) (i) The performance in this part was average Most of the students had vague ideas of Marketing Intelligence System and believed it to be an informal system of collecting information about competitors In identification of sources which help in creating an effective Market Intelligence System, the performance was comparatively better probably because most students were able to respond on the basis of their general understanding and experience (ii) Some students talked about concepts such as decision support system etc., which were not relevant Q.6 (a) In this question on Geocentric Orientation, most of the students wrote “think globally and act locally” but the explanations that followed this sentence were mostly incorrect, irrelevant or vague Some students got totally confused and discussed the concept of ethnocentric orientation Q.6 (b) This part required identification of advantages of appointment of a single distributor in Pakistan, by a Taiwanese company manufacturing photocopier machines Approximately fifty percent of the candidates were able to identify most of the points correctly However, a common mistake observed in many answer scripts was that candidates compared appointment of distributor against opening a subsidiary in Pakistan Some of the students just mentioned advantages of having distributors and missed the actual question Such basic mistakes are not expected at this level of examinations Q.7 The major issue with answering this question was that a number of students were unable to understand the precise requirements of the question and defined what skimming and penetration is, instead of listing the situations in which the respective strategy can be beneficially adopted Further, there were a number of students who had no idea about the concepts of skimming and penetration Q.8 The result of this question was very poor The candidates are familiar with the basic features of Product Life Cycle This time they were www.gcaofficial.org Global Chartered accountants – GCA BM Examiner Comments asked to suggest the types of promotional strategies required in different stages of the Product Life Cycle Most candidates had no clue Majority of them mentioned more or less the same promotional strategies in the introduction, growth and maturity stages Many students repeated the same points with variations in emphasis and usage of words Some of the candidates were so confused that they suggested Price Skimming Strategy for the Declining Stage of the product life cycle Q.9 (a) This was a very easy question and most students were able to secure high marks However, many students ignored the fact that each factor consisted of one mark only and offered very detailed explanations Q.9 (b) This part required description of political factors to be taken into consideration by a multinational, while making direct investment in a foreign country The performance was reasonable although many students also included financial/commercial factors Again, a lot of duplication of points was also witnessed in both parts of this question Q.10 (a) Purpose of Intelligence, Proficiency and Aptitude tests was required to be explained Unfortunately almost all the examinees had no idea about the exact purpose of these tests and just played around the words, especially in the case of Intelligence and Aptitude tests Q.10 (b) Two qualities of a well conceived selection test were required In this part also, the students lacked specific knowledge and mostly tried to mention generic points Q.10 (c) In which situation does it become necessary for an organization to dismiss an employee, was the question The overall performance was reasonable because on the basis of the practical experiences, most students were able to discuss the relevant points However, many students wrote incorrect points and then tried to repeat them in different words For instance “not obeying instructions” and “not following orders of seniors” were listed as two separate points Final Examination - Summer 2012 General: Overall performance of the students in this paper was not satisfactory Students not only displayed lack of proper knowledge of the subject but also poor comprehension It is quite apparent that intrinsic motivation is lacking in students and appropriate measures should be taken to create interest in this subject Students have a cursory understanding of the major topics but lack in-depth knowledge This was a balanced paper with enough margin for students to grab good marks But majority of students not appear to cover the Syllabus comprehensively; clear examples were Q on Critical Success Factors and Q on characteristics and business strategies of Stars, Cash Cows and Dogs Another most common observation is that students answer the questions by repeating the text written in questions or by reiterating the same point in different ways, which should be avoided Q.1 This question required identification of four critical success factors which would create sustainable long-term competitive advantage for a company that is in advanced stage of implementing its facilities for manufacture of home textile products Most students limited themselves to good quality of products and low prices but could not identify other important points Many students just provided the points and gave no or inadequate explanation, ignoring the fact that it was a 10 mark question and only four points were required Q.2 This question required the students to explain the characteristics of the markets and the relative competitive positions of Stars, Cash Cows and Dogs This should be a very familiar topic for anyone studying or related to management/business studies Most of the students mentioned market growth and market share but did not mention the appropriate business strategies to be pursued in each case Many students emphasized quality as a descriptive characteristic of these business units whereas there was no mention of quality in the entire matrix analysis Many students gave explanation of Problem Child which was not required One wonders whether it was lack of thorough reading of the question or flaunting of their knowledge This exhibit of their knowledge, however, did not gain them any extra marks! Students are advised to use the allotted time wisely, and avoid giving irrelevant material Q.3 (a) The Training Needs of employees in three categories namely competent, more than competent and not yet competent to perform in their present positions were to be discussed in this question Also how this training would enhance motivation at all levels was required www.gcaofficial.org Global Chartered accountants – GCA BM Examiner Comments Training and learning and development are common and usual organizational activities aimed at improving the performance of individuals Therefore, it was expected that students would give apt answers from their cognitive awareness and observations if not from text book learning Quite regrettably, the answers did not meet the examiners’ expectations Most of the students could not differentiate between the training needs of the different categories of employees, mentioned in the question A number of students stated that training is not required for competent employees and extensive training is required for not so competent ones There was no mention of how specifically to train them or which skills should be provided Q.3 (b) A very important issue in Human Resource Management is Reward and Compensation System The aims and objectives of rewards were the issues to be analyzed here The performance in this part was good as the students were able to mention at least some of the points However, some of the students gave entirely irrelevant answers like types of rewards and basis or criteria on which rewards should be based, etc Q.4 (a) Wilful Misconduct was to be explained and situations where an individual was guilty of the same were to be identified Most students were able to correctly explain the term and also quoted the four situations in which an employee would be guilty of wilful misconduct However, many students gave incorrect examples also It must be noted that late coming and absenteeism would not be considered as wilful misconduct unless it is done with the malicious intent of foul play and to hamper/paralyze the working of the organization An important point which many students ignored is that any explanation of Wilful Misconduct would be incomplete unless it is mentioned that the misconduct was done on purpose Just stating that an employee committed a misconduct or an act which harmed the organization is not adequate Q.4 (b) Five security measures were to be identified which the Chief Security Officer should adopt for the security of the employees of a Sugar Mill which is located at the outskirts of a small rural town Implicitly it is a remote, deserted and isolated region The most prevalent and common error here was that security was confused with health and safety, presumably because these have been asked several times in the previous examinations Q.5 This was a very interestingly designed question Students were required to identify the most appropriate characteristic of each ingredient of the marketing mix for the given category of Consumer Products The four categories were: Price, Consumer Buying Behavior, Distribution and Promotion Since the question was framed differently from the questions which are normally asked, only those with good conceptual understanding were able to well and score high marks Q.6 This question pertaining to core capabilities of leading global organizations was not as well answered as it should have been Students incorrectly perceive global organizations as trouble-free and limitless entities, whereas practically every organization has its strengths and weaknesses Other observations are as follows: • Most of the students gave the difference between local companies and global companies which was not asked in the question • Many students listed a large number of “Capabilities” supposed to be possessed by good organizations, whereas they were required to mention the “Core Capabilities” Q.7 (a) Most of the students had a clear idea of the reasons why Employees offer strong resistance to major organizational changes and prefer to continue with the existing status Q.7 (b) Quite a number of students confused the concept of Business Ethics with Corporate Social Responsibility Corporate Social Responsibility is not the same as Business Ethics although there are some common grounds between the two, such as the need to combat corruption Corporate Social Responsibility refers to the responsibilities of an organization on social and environmental issues, whereas Business Ethics relates to matters such as honesty, trust and integrity Q.8 (a) The principal objectives behind merger and acquisition were required to be narrated Being students of accountancy, most candidates had a clear idea of the concept of mergers and acquisition Most of them were able to narrate the objectives such as synergies, profit maximization, combating competition, cost saving, taking advantage of the strengths of the other company, achieving economies of scale and diversification of risks, etc However, many students wasted time and left a bad impression by quoting whatever benefit they could think of Q.8 (b) This part required the candidates to differentiate between strategic and tactical decisions Most students had a clear idea of the concept of ‘Strategic Decisions’ which determine the course and define the contours of the company’s main objectives These decisions are taken by the top management and have far reaching financial repercussions However, majority of the students confused the concept of www.gcaofficial.org Global Chartered accountants – GCA BM Examiner Comments Tactical decisions with Operational decisions Tactical or Business strategy is concerned with achieving overall success in particular business markets and allocation of resources whereas operational or functional strategy is concerned with the contribution of the particular function or operation towards achievement of the business and corporate strategies Q.9 Performance in this question was below average Most of the students did not have a clear idea of the difference between a Market Challenger and a Market Follower Most of them gave very brief answers Many of them described the two concepts by repeating the words as were given in the question and offered very little discussion about when and why does a firm decide to pursue a particular strategy Many students were of the erroneous view-point that a firm would always like to challenge the Market Leader to acquire that position In fact, quite often firms are satisfied as market followers, specially when they lack the resources to challenge the market leader or when they not want to provoke retaliation from the market leader Q.10 (a) Highly centralized treasury function allows automation of basic processes and information flows, sophisticated risk management techniques and highly specialized functional competencies Most of the students seemed to possess only basic understanding of the issue Instead of mentioning the key strategic factors, most answers revolved round earning interest and saving financial costs Q.10 (b) Performance in this question was extremely poor Instead of providing reasons why globalization has assumed importance in the present environment a great number of students mentioned the advantages of globalization, which were not required Final Examination - Winter 2012 General: The overall performance in this paper was quite below expectations as has been the case in the past many sessions It was quite a normal paper as most of the concepts that were tested were the same and remote areas of study were avoided The most important reason for such a lackluster performance seemed to be selective study Insufficient proficiency of the subject, imprecise articulation and reliance on rote learning and bookishness were also responsible for the below average result The students are advised to adhere to the following guidelines if they really desire to improve their performances: • Cover the whole syllabus; • Develop reading habit and try to read books and magazines other than the prescribed books on relevant topics This will enhance their knowledge base and allow them to quickly recall the relevant points rather than wasting time in thinking them over; • Do not try to deceive the markers by repeating the same points again and again or by producing irrelevant stuff It would not yield any additional marks and would result in wastage of precious time Q1 A short scenario was given which pertained to a company which is a leading supplier of a small motor which is installed in printers The candidates were required to identify and explain the factors which the company should strictly monitor to anticipate the emerging business environment (challenges) and which can have a profound impact on its Strategic Plans General understanding of the business environment was required to answer the question Unfortunately, most of the candidates did not read the question carefully They were more focused on social, political and environmental factors and overlooked important points like projection of future demand, competitive rivalry and diversification Some students also included internal factors like skilled human resources which was not required Some of them discussed SWOT, PESTEL, Porter & Ansoff analysis which were entirely irrelevant Q (a) This question pertained to HR Skills Information Database and its usefulness in the areas of Recruiting, Training and Succession Planning especially with reference to an organization which is about to recruit new workers, to expand production Generally, the students performed well However, some of them confused it with normal HR database rather than HR Skills database Q (b) This part required identification of advantages of quarterly performance appraisal of skilled workers rather than as an annual exercise Majority of the answers were quite satisfactory However, some students did not read the question carefully and mentioned advantages of performance appraisal without discussing the main issue, i.e how often should appraisal be carried out Some students discussed the advantages from the point of view of employees instead of discussing from the employers point of view Q (c) This part required the students to describe the different types of costs that are associated with high rate of employee turnover These costs may be enormous but are quite often ignored The students generally performed well and identified and described the relevant costs such as training and recruitment costs, cost of lost productivity/sales and the loss of competitive advantage, etc Q (a) This mark question was rather easy and almost all the students met the requirement i.e to portray the correct meaning of the term Customer Database www.gcaofficial.org Global Chartered accountants – GCA BM Examiner Comments Q (b) This question required a very focused answer i.e usefulness of a customer database for a bank, which is about to launch its credit card Instead, most students gave general answers where usefulness of the database for a bank was discussed with little or no reference to the specific situation i.e launching of credit card Q4 In this question, six brief situations were given and the students were required to identify the types of strategies, policies or objectives which the organization was pursuing, in each of the given situations An average response was seen as most students were able to give or correct answers In response to part (ii) the appropriate answer was Global; but Geocentric was also acceptable However, many students wrote ethnocentric Majority of the students had no idea of the concepts of ‘Work to rule’ and ‘First mover advantage’ Many students probably tried to use “write what you know” approach and just identified whether the given situation reflected a policy, a strategy or an objective Most students were not familiar with the technical business terminology or jargons Specialized terms capture the complexity and specificity of business concepts No other words can encapsulate their meaning and if they are replaced by normal “transliterated” words, then that meaning is lost Many students gave explanatory footnotes in support of their answers which were not required and resulted in wastage of precious time There were some students who generated multiple answers; such answers are not acceptable Q (a) Students displayed lack of knowledge of the issue namely the stages of dealing with employees involved in serious offences or gross misconduct The question specifically required identification and brief explanation of the various stages However, many students patched all the stages together in one long point They generalized their answers stating that after oral and written warning if the behavior does not show signs of improvement, the employee should be discharged Some of them only listed down possible actions against such employees with few even concluding that HR should try to be polite In many cases, the stages identified by the students were unorganized and indistinguishable Some students broke down the initial stage of investigation into multiple points, each describing the different ways the matter should be investigated So much detail was not required While discussing the last stage of Discharge or Termination, many students ignored a very important point i.e that the legal formalities should be complied with while terminating an employee; otherwise it may have serious implications for the employer After describing the various stages many students stated that the process should be fair, equitable and confidential which was not really required as it was mentioned in the question itself Q (b) Outsourcing is the buzz word in business these days and hence very relevant Its advantages were asked and most students seemed to have a good idea and answered fairly well Q (a) Most of the students had fair idea of the factors which have contributed to the creation and significant expansion of Global Markets Usually they mentioned the correct points However, some of them also included points which were not relevant such as cheap labour and raw material, growing competition, absolute and comparative advantage, increase in demand and increase in number of wealthy people in the developing countries, etc Many students mentioned the relevant points such as greater specialization but were unable to clearly spell out as to how it results in greater globalization Q (b) This part required the salient features of the terms of a franchising agreement with brief explanation and an example of a franchise relationship Since the students come across various agreements, during their training, many of them jotted down a long list of general clauses instead of those pertaining specifically to franchising agreements Some of the important clauses that form part of such agreements are those relating to achievement of desired sales in the defined territory and the undertaking to purchase input materials from the franchisor or a specified supplier These were generally missed Q (a) A below average performance was seen in this part of the question in which the requirement was to provide the objectives that progressive organizations aim to achieve through their marketing strategies Most students wrote any and every thing about marketing that they knew, repeating the same things again and again Quite often the answers were equivocal and mostly mentioned that through marketing, the firms introduce new products, enter new markets, increase sales and profitability, promote brand extension etc Objectives such as market penetration, overcoming competitive pressure, creating goodwill and strengthening relationship with customers were covered by few candidates Q (b) This part required the measures which companies take to retain and further consolidate their competitive advantage The performance was quite reasonable as majority of the students were able to cover the main points specially those relating to marketing and HR However, efficient organizational structure and capable leadership was touched upon by very few students Q (a) Students performed well in this question as almost all the students could mention the benefits which BTC (name of company) expects to derive by pursuing a well-conceived policy of good human relations management between the employers and the employees Q (b) Very few students could appropriately explain as to what is meant by a Competency Based Job Description Most students could not mention the most important distinguishing factor i.e that Competency Based Job Descriptions are primarily worker-performance focused rather than work-description focused www.gcaofficial.org Global Chartered accountants – GCA BM Examiner Comments Q9 This question required Advantages and Disadvantages of advertising in TV, Newspapers and Billboards It was quite easy but majority of the students could only mention one or two advantages and disadvantages in each case They mostly discussed costs, reach to the audience/customers and attractiveness of the advertisement Other areas were rarely covered Q 10 (a) This question enquired about the policies which a large conglomerate should pursue while entering the market in a country for the first time, by way of a joint venture and which would be perceived favorably by the joint venture partner, the government and other stakeholders in that country The students didn’t seem to appreciate the essence of this question They struggled with explaining marketing and production policies rather than getting to the gist of this question and identifying policies which would be looked upon favourably in that country or in other words which would enable the company to gain popularity Some of them wrote that the company should pursue a policy of CSR but did not explain any further Q 10 (b) The candidates were supposed to identify the main reasons why leading companies obtain cross-border financing The performance was quite poor Most of the students could identify low interest cost as the only reason Other reasons such as exchange liberalization, broad based debt and equity markets, etc were rarely covered Surprisingly, some students also mentioned reasons on account of which crossborder financing is discouraged such as risk of exchange fluctuations and exchange controls www.gcaofficial.org ...Global Chartered Accountants - GCA www.gcaofficial.org 30 January, 2013 Business Management Exam Kit This kit is designed to help ICAP Module E business management students to get the following:... Supplementary Study Material Business Management Study Text and Revision Series by AT Foulks Lynch Pakistan Business Management Study Text and Revision Series by Professional Business Publications (PBP)... Strategic management and planning Corporate social responsibility and business ethics 30 Human resource management Management of the working environment 30 Marketing Management International Business