28 sundayherald 2 April 2006
EXAM GUIDE
Photograph: Photolibrary.com
BUSINESS
MANAGEMENT
BY ALISTAIR WYLIE
Alistair Wylie is an experienced former
Business Education teacher and senior
lecturer with extensive knowledge of
SQA examinations and standards.
He is also a respected author of business
and legal textbooks, including the national
core text for Intermediate 2 and Higher
Business Management.
T
HIS exam guide concentrates
and gives significant detail on
Intermediate 1, Intermediate 2 and
Higher Business Management. The
subject can also be studied at Standard
Grade and Advanced Higher, although all
grades might not all be offered in every
school.
When you have checked which level you
are studying, you need to check the date
and time of the examination.
INTERMEDIATE 1, 2 AND HIGHER
The Business Management Course at both
Intermediate 2 and Higher levels covers
similar topic areas in different depth. Each
Course is made up of two units of work: Busi-
ness Enterprise and Business Decision Areas.
The Business Enterprise unit covers the
following topics:
n Business in contemporary society.
n Business information and information
and IT in business.
n Decision-making in business.
The Business Decision Areas unit covers the
following topics:
n Internal organisation.
n Marketing.
n Financial management.
n Human resources management.
n Operations management.
The course at Intermediate 1 level covers
similar topics across three units.
The Business In Society unit covers the
following topics:
n Business in contemporary society.
n Operation of a business enterprise.
The Business Activities unit covers:
n Marketing.
n Human resources.
n Operations.
The Information in Business unit covers the
following topics:
n Sources and types of information.
n Uses and users of information.
n Types and uses of IT.
n Benefits and costs of IT.
EXAM PREPARATION
The Intermediate 1, Intermediate 2 and
Higher examinations cover the whole
syllabus of topics within the course
arrangements and not just the outcomes
covered by the internal assessments which
you will already have completed.
You should be sure to revise all aspects
of the syllabus in preparation for the exam.
Remember that the examination questions are integrated, meaning that one
question will be subdivided into three to
five smaller questions, not all on the same
topic area. Get as much practice as
possible in writing timed answers.
The examination at Intermediate 1 level is
divided into two sections. Both contain
stimulus material on which some of the
questions will be based. Each section of the
paper is worth 25 marks. The Intermediate 1
examination lasts 1 hour 15 minutes.
The examinations at Intermediate 2 and
Higher levels are also divided into two
sections. The first section contains a case
study (stimulus material) and questions.
This section is worth 50 marks at Higher
level and 25 marks at Intermediate 2 level.
The information in the case study does
not provide all the answers to the questions
and you will have to apply other knowledge
that you have gained while studying the
Course. Case study material will be based
on a real organisation and will usually focus
on problems that the organisation is facing.
The second section of the examination
offers a choice of two from five extended
response questions.
These questions typically integrate a
minimum of two different topic areas
taken from any part of the course. Each
question is worth 25 marks.
The Intermediate 2 examination lasts
1 hour 45 minutes and the Higher
examination lasts 2 hours 30 minutes.
The sections of each examination can be
answered in any order and you may find it
easier to start with Section 2 in the
Intermediate 2 and Higher examinations,
since the questions attached to the case
study usually require a mixture of short and
long answers.
HIGHER – SECTION 1
n Question 1 always relates to the case
study and always attracts 10 marks.
n Question 1 includes headings under
which the question should be answered.
You must use these headings.
n In Question 1, all 10 marks cannot be
gained under one heading.
Resources designed to suit the way you study
2 April 2006 sundayherald 29
BUSINESS MANAGEMENT
n Headings will attract a maximum
number of marks per heading (usually 3).
n There will be a maximum number of
marks available (less than the maximum of
10) if no headings are used.
n If the question asks only for concerns/
problems/issues, the provision
of
“solutions” to the concerns/problems/
issues in your answer will not be
accepted.
n Questions other than Question 1 can be
related to the case study but can also relate to
knowledge from other parts of the course.
HIGHER – BOTH SECTIONS
n If a diagram is asked for it will attract marks
and the answer will not be awarded full
marks unless the diagram is included in the
answer. If a diagram if not asked for, it is likely
to attract marks (if relevant) but the diagram
will not be essential to gain all the marks.
n Within SQA marking schemes, professional judgement is inferred, so single word
answers are unlikely to attract marks.
n No half marks are awarded in the
marking of the paper.
n Any valid responses will normally be
accepted even if they are not included in
the suggested marking scheme.
MARKS
Look at the mark allocation for each question
and be guided by it in your response. In
general, every valid point merits a mark.
Further marks are seldom awarded for
developing a point and beware of repetition.
It is advisable to make more points and
develop these less thoroughly rather than
make only a few points and develop each
one at great length. The use of bullet points
is generally acceptable, although you must
be careful to write in sentences and not just
provide a list of points. Lists on their own
will attract few marks at Higher level.
All past paper questions referred to came
from the 2005 examination paper
Question 1 (Section 2)
A local entrepreneur decides to set up a
business.
(a) Identify four organisations which offer
advice to someone setting up in business.
(4 marks)
Answer
n Business Start Up scheme
n Enterprise Fund
n Local Enterprise Companies
n Prince’s Trust
n Trade Associations
n Banks
n Inland Revenue
n Local Authorities
n Lawyers and Accountants
Also accept Business Gateway or Small
Business Gateway, Scope, START, Careers
Scotland, Scottish Enterprise (watch for
repetition, eg local enterprise), parent
companies giving advice to franchisees.
Question
(b) (i) Explain how ICT (information
communications technolog y) could
support an organisation in the areas of
n Marketing
n Human Resources
n Finance
(5 marks)
Answer
Internet
n Organisation can obtain information
about potential customers (where, who).
n Organisation can obtain information
about competitors (prices, products).
n Can advertise.
n Reach a much wider audience.
Revise
n Can sell product on internet – may save
costs of buying/renting premises.
n Can improve communications by using
e-mail/websites.
n Can improve decision-making due to
amount and quality of information
available.
Interactive CD/DVD
n Can provide a means of staff training.
CAM/CAD
n Can be used to design/produce products
– saving labour costs and producing a
consistent quality.
DTP/Word/Publisher
n Used to produce professional-looking
advertisements, business cards, and so on.
Accounting packages
n Used to help with preparation of wages,
book-keeping records.
n May be used to prepare a cash flow
forecast.
Databases
n Can be used to store staff records.
Spreadsheets
n Useful for financial record keeping –
once set up with formulae calculations can
be performed automatically.
n Reduced wage cost due to increase use
of ICT.
Question
(ii) Outline factors which might restrict the
use of the technology.
Answer
n Cost of installation, maintenance and
training (one only)
n Lack of technical support
n Lack of staff knowledge
n Reluctance of staff to accept change
n Trade union objection if redundancies
are likely
n Poor signal for mobile phones in certain
areas
n Compatibility with existing software
n Availability of technology, for example,
technology for a new invention is not yet
available
Question
(c) Describe 3 forms of legislation which
would affect the running of an organisation.
(6 marks)
Answer
Health and Safety at Work Act 1974
States employees’ and employers’ duties
with regard to health and safety. Employers
have a duty to take responsible care of their
own health and safety as well as that of their
employees.
Office, Shops and Railway Premises Act 1963
States regulations which must be met by
employers regarding working temperatures, toilet and washing facilities, first aid,
space requirements, cleanliness.
Equal Pay Act 1970
States that all employees should receive the
same pay when work of equal value is
undertaken.
Race Relations Act 1976
Unlawful to discriminate on the grounds of
race, colour, religion or ethnic origin
regarding recruitment, training, promotion,
conditions of service.
Sex Discrimination Act 1975
Unlawful to discriminate on the grounds of
sex or marital status regarding recruitment,
promotion, training, conditions of service.
Victimisation and sexual harassment are
unlawful.
Employment Rights Act 1996
States duties and rights of employer and
employee. Includes the right to a written
Contract of Employment within two
months of starting work. The right to an
itemised pay slip. Rights of employees
regarding Sunday working. Rights of
/ Practise
KEY WORDS
Here is a list of key words and some advice on what questions actually mean
and how they should be answered.
INTERMEDIATE 1
COMMAND WORD
Define
Describe
Give
Identify
List
Name
Outline
State
Suggest
INTERMEDIATE 2
COMMAND WORD
Compare
Define
Describe
Distinguish
Explain
Give
Identify
Name
Outline
Suggest
HIGHER LEVEL
COMMAND WORD
Compare
Describe
Discuss
Distinguish
Explain
Identify
Justify
Outline
DEFINITION
State the exact meaning of the word or phrase
Give a full account of the word, phrase etc.
Pick some key factors and name them
Name the main point or points
State the factors (with no explanation or elaboration)
Identify or make a list
Give the main features
Present in a brief form
State a possible reason or course of action
(no development required)
DEFINITION
Identify similarities and differences between two or more factors
Give a clear meaning
Provide a thorough description
Identify the differences between two or more factors
Give details about how and why something is as it is
Pick some key factors and name them
Give the name or identifying characteristics of something
Identify or make a list
State the main features
State a possible reason or course of action (no development required)
DEFINITION
Identify similarities and differences between two or more factors
Provide a thorough description
Examine closely taking account of strengths and weaknesses in an
argument; offer reasons for and against
Identify the differences between two or more factors
Give a detailed response (definition and explanation) as to
how/why something may benefit/hinder
Give the name or identifying characteristics of something
Give reasons to support suggestions, conclusions
State the main features
employees regarding maternity and
termination of employment.
Data Protection Act 1998
Data must be obtained fairly and lawfully.
The organisation must register the purpose
for which the information is held. They
must keep records for no longer than
necessary. The information must be up-todate and accurate. Employees have a right
to request to see information held about
them and have it changed if incorrect. The
information should not be used for any
other purpose than that for which it was
collected. They must take appropriate security measures to keep the information safe.
Correct identification of Act = one mark per
Act (date not required).
Question
(d) Describe and explain the purpose of the
following when recruiting staff.
n Job description (specification)
n Person specification
n Reference
(6 marks)
Answer
Job description
States job title, location, tasks, duties and
responsibilities (one only). States conditions
of service, for example, holiday entitlement,
benefits and hours of work (one only).
Preparation means that the organisation
has thought out the tasks they wish the job
holder to undertake.
Person specification
A description of the person thought suitable
for the post. Contains the qualifications,
experience, personal qualities, physical
Test
attributes, special skills and interests of the
ideal candidate. The organisation thinks
about the type of person they would like to
employ. Should be matched to the job
specification to make sure the correct
person is selected.
Reference
A statement (oral or written) by a former
employer or reliable contact. Gives information about suitability for the post from
an external source making sure that the
best person is appointed. Should be
unbiased. Describes reliability, personality,
and so on.
Question 3 (Section 2)
Many companies selling branded goods (for
example, Levi and Pepsi-Cola) are moving
into new markets such as China.
(a) Describe the benefits of holding a brand
name.
(4 marks)
Answer
n May be seen as a guarantee of quality.
n An easily recognisable product.
n Snob value/image.
n Brand loyalty may result.
n Can launch new products on the back of
the reputation of others.
n Adds value to the balance sheet (intangible asset).
n Higher prices may be charged.
n Marketing costs can be saved if brand
profile is high.
n Brand names purchased because they
are in fashion.
Review
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leckieandleckie.co.uk
30 sundayherald 2 April 2006
BUSINESS MANAGEMENT
From previous page
n Can expand more easily into new
countries.
Question
(b) (i) Companies operating in different
geographical areas may choose to group
their activities by territory. Describe an
advantage and a disadvantage of doing so.
(2 marks)
Answer
Allows organisation to cater for the differing
needs of customers in different locations.
Expensive as functions (marketing, finance,
administration) exist in all the divisions.
Question
(ii) Discuss two other types of activity
grouping.
(4 marks)
Answer
Function
n Staff are grouped together in departments according to skill and expertise
n Each functional area employs specialists
n Staff know who to go to when they need
a job done
n Organisations may become too large to
be managed effectively
n Unresponsive to change
n Individual departments become more
concerned about their own interests rather
than those of the whole organisation
Product
n Product/service groups where each
deals with a different product or service
n Organisations with different products
can concentrate on them individually
n Expertise can develop regarding the
product
n Easier for management to identify which
areas of the business are less successful
n Unnecessary duplication
n Divisions may compete with each other
Customer
n Divisions dealing with different types of
customer, for example, overseas/home,
business/personal
n Product/service suited to the customer
n Customer loyalty builds up because of
personal service
n Additional staffing required (costly)
n Duplication of procedures
Technology
n Business activities are grouped according to technological or production process
n Only suitable for large organisations that
have different products and/or production
processes
Line/Staff
n Organisation is divided into line departments and staff departments which provide
support for the whole organisation (human
resources, finance)
Advantage of grouping by territory: more
relaxed legislation
Disadvantage: difficulties in communication
Question
(c) Levi and Pepsi-Cola’s move into a new
market is an example of growth. Describe
other methods of growth.
(6 marks)
Answer
Merger
Where two firms join together on agreed
terms
Takeover
Where one firm purchases another firm
and takes control shareholders sell shares –
may be a hostile takeover.
Horizontal integration
Firms producing the same type of product/service join together. Firms can then
dominate the market, Can obtain cheaper
supplies due to bulk buying. Can benefit
from lower administration costs.
Vertical Integration
Firms at different stages in the same
industry join together, for example, brewer
and pub.
Backward vertical
Business takes over supplier – guaranteeing
stock. Stock is cheaper and profits higher.
Forward Vertical
Business takes over a customer. Control of
distribution is possible.
Diversification (conglomerate)
Firms in different markets merge. Reduces
risk of failure
De-integration, de-merger, divestment, asset
stripping, contracting out, outsourcing
or management buyout will also be
accepted, but only if very well explained.
You will be awarded a maximum of 5 marks
for any one method of growth.
Question
(d) Explain some of the measures companies
take to ensure their products are of a high
quality.
(9 marks)
Answer
Benchmarking
Copying the best techniques used by other
organisations.
Quality control/assurance
Products are checked at various stages
during production. Unacceptable products
are discarded.
Quality circles
Small groups of workers meet to discuss
where improvements can be made.
Suggestions are made to management for
approval. Results in a more motivated
workforce
TQM
No errors tolerated. All staff involved and
committed to ensuring high quality, Work
processes scrutinised. Strive to make
processes more efficient and reduce waste.
Focus on teamwork. Training provided.
BSI
A national standard for certain products.
When a business meets the standard its
product can carry the BS Kitemark. Other
quality standard symbols also exist (Lion
marks on eggs).
Recruitment
Quality staff need to be appointed. Staff
with appropriate qualifications, skills and
qualities must be appointed.
Training
Quality training must be provided regularly.
Materials and Equipment
Good quality materials must be purchased
Equipment must be maintained regularly.
Question 5 (Section 2)
Mobile phone operators have been criticised
for overcharging customers and may be
forced by legislation to reduce their prices.
(a) Describe four factors which allow organisations to remain successful while charging
customers high prices.
(4 marks)
Answer (choose from)
Brand loyalty
Consumers choose to buy the product
despite cheaper alternatives being available.
Lack of competition
There is no alternative product for the
consumer.
Successful marketing
Strong advertising/promotion can convince
consumer that the price is worth paying.
Image
Consumers wish to be seen wearing/using
the expensive product as it enhances their
personal image.
Holding a Unique Selling Point
The product may have a unique feature.
There may be a limited supply or it may
hold a patent.
Question
(b) (i) Identify 2 objectives of firms operating
in a highly competitive market such as the
(2 marks)
mobile phone industry.
Answer (choose from)
n To increase profits.
n To dominate the market.
n To eliminate a competitor.
n To be the most innovative (develop the
product).
n To survive.
n To grow.
Question
(ii) Describe pricing strategies which could be
used to achieve these objectives. (4 marks)
Answer
n Low-price strategy (destroyer) could be
used to undercut the competitor; price can
be raised once they leave the market.
n High-price strategy could be used to
increase profits; demand may fall as a result
of the high prices.
n High-prices can be charged for an
innovative product (skimming); money
spent on innovation can reduce profits.
n Discriminatory where different prices
for the same product are charged according
to time of day, age, and so on – may
increase sales/profits.
n Penetration pricing where low price is
charged when a new product is launched –
enables growth.
n Promotional pricing where price charged
is reduced in order to increase sales.
n Accept any pricing strategy.
Candidates must describe at least two
strategies A maximum of 3 marks are
awarded for each. There is no need to link
part (ii) to the objectives in part (i).
Question
(c) (i) Explain why organisations choose to
spend large sums of money on marketing.
(5 marks)
Answer
n Persuades consumers to buy their
product as opposed to the competitor’s
product.
n Gives consumer information about the
product.
n Reminds consumer that the product still
exists.
n Identifies the requirements (changing)
of the consumer.
n Consumers need to know of new
product developments.
n Targeting a market segment which is
influenced heavily by promotion and
product endorsement.
n Attempt to increase market share and
enter new markets.
Free gift
Given with the purchase.
Free sample of a product
Given so that the customer tries it out and
then returns to purchase it.
Demonstrations
Where the product is shown operating so
that consumers can see how it works.
Bonus packs
A larger pack of the product is offered at the
same price.
Coupon
May be attached to the product to allow for
discount on the return purchase.
Display material
Given to retailers to provide materials to
help them display the product attractively
in the shops.
Dealer loaders
Where retailers are given a free product,
for example, 13 packets and they only pay
for 12.
Sale or return
The retailer is allowed to return any unsold
goods and be reimbursed.
Dealer bonuses
The retailer selling the most will be given
cash or, for example, a holiday.
Staff training
The manufacturer trains the staff who will
be selling the product.
Credit facilities
Retailers or consumers are allowed
to buy the goods and pay for them at a
later date.
Question
(d) Profitable firms may fail due to poor
cash flow. Identify four sources of cash flow
problems and suggest one solution for each
source you have identified.
(8 marks)
Answer (choose from)
Sources of cash flow problems
Too much money tied up in stock; allowing
customers too long to pay; debtors not
paying on time; high levels of borrowing
along with high interest rates; high drawings; low sales; high expenses; purchasing
capital equipment.
Solutions
Introduce JIT; offer discounts to encourage
prompt payment; offer discounts/promote
cash sales; sell any unused assets; reduce
loans by, for example, increasing number
of investors; debt factoring; sale and
leaseback; extended credit; arrange
overdraft/loan; cut costs; promote product
or service; deferred payment (HP, leasing);
reduce waste/economise.
BUSINESS
MANAGEMENT
EXAM TIMETABLE
Level/Paper
Question
(ii) Other than altering prices, describe two
methods of promotion which are used by
organisations.
(2 marks)
Friday May 12
Foundation
General
Credit
Answer (choose from)
Advertising
Newspaper, magazine, TV, and so on, where
product is displayed using photographs
and text.
Product endorsement
Where a famous personality is seen using
the product.
Buy one get one free
Two products are given and the customer
pays for one.
Thursday May 18
Intermediate 1
Intermediate 2
Higher
Advanced Higher
Time
9am-10am
10.20am-11.35am
1pm-2.30pm
9am-10.15am
9am-10.45am
1pm-3.30pm
1pm-3.45pm
Supporting students from Standard Grade to Advanced Higher