BUSINESS AND MANAGEMENT - PAPER 1 PRACTICE EXAMINATION LEVEL
PAPER 1 – HL exam
CASE STUDY: THE IMPERIAL
For use in May and November 2014
For use in May and November 2014
2 hours 15 minutes
INSTRUCTIONS
Do not open this examination paper until you have been instructed to do so
You will need a clean copy of The Imperial case study for this examination paper
A clean copy of the Business and Management formulae sheet and the discount tables are required
Answer any two questions from Section A
Answer the compulsory question from Section B
Answer the compulsory question from Section C
You are permitted to use a calculator for this examination paper
Total marks available: 80 marks.
SECTION A
Answer two questions from this section.
1.
2.
(a)
Define the following terms:
(i)
Shareholders (line 20).
[2 marks]
(ii)
Strategic alliance (line 150).
[2 marks]
(b)
Explain two advantages to Global Properties of organizing The Imperial as a private limited
company.
[4 marks]
(c)
Examine the advantages and disadvantages for The Imperial of forming a strategic alliance
with KenSafar.
[7 marks]
(a)
Outline two ways in which the market size of the hotel industry in Mombasa might be
measured.
[4 marks]
(b)
Prepare a SWOT analysis showing only the opportunities and threats for The Imperial.
[4 marks]
(c)
New luxurious hotels were opening in the vicinity of The Imperial (line 50).
Using Porter's generic strategies as a framework, examine how The Imperial might develop its
competitiveness.
[7 marks]
3.
(a)
Define the following terms:
(i)
Position map (line 60).
[2 marks]
(ii)
Margin of safety (line 25).
[2 marks]
(b)
In the context of The Imperial, explain the difference between the marketing of goods and the
marketing of services.
[4 marks]
(c)
Examine the uses and limitations of break-even analysis for The Imperial.
[7 marks]
SECTION B
Answer the compulsory question from this section.
4.
(a)
Define the following terms:
(i)
Working capital (lines 62-63).
[2 marks]
(ii)
Budget (line 65).
[2 marks]
(b)
Describe two advantages of preparing monthly budgets for The Imperial (lines 64-65).
[4 marks]
(c)
Explain how seasonality (line 63) creates problems for managing working capital.
[4 marks]
(d)
Evaluate strategies for dealing with the likely liquidity problems if The Imperial implements
either Option 1 or Option 2.
[8 marks]
There is no additional information in this mock exam paper for Sections A and B.
SECTION C
Answer the compulsory question from this section.
Additional information (Items 1 - 5)
Item 1 - Excerpts from the World Bank Doing Business 2014 report for Kenya
Kenya
Ease of doing business: Ranked 129th out of 189 economies (Kenya was ranked 122nd in 2013)
Income category: Low income
Currency: Kenyan shillings (KES)
Number of days to secure building permit: 40 days at a cost of KES 63 429 (around $742)
Gross national income per capita: $840
Mombasa
Ease of doing business: ranked 9th out of 13 cities in Kenya
Total costs of permit (to build a warehouse): KES 138 135 (or about $1 616)
Tourism
Tourist arrivals: 1.71 million
Number employed in travel and tourism industry: 232 500 (4.3% of total employment)
Holiday tourism: 71.2% of total
Business tourism: 13.8% of total
Source: Adapted from http://www.doingbusiness.org/data/exploreeconomies/kenya/
Item 2- Getting Small Kenyan Businesses Online
Small local businesses account for the largest source of revenue in Kenya. Recently, Google launched the "Getting
Kenyan Businesses Online" (GKBO) initiative, allowing firms to set up websites for free. The free website builder
allows businesses to reach more customers and improve their marketing. Google also launched YouTube.co.ke
(the Kenyan version of YouTube), allowing local video clips to load and stream faster. According to Google, it has
never been easier for businesses to establish an online presence to market themselves on the internet.
Nevertheless, traditional mass media, like television and newspapers, continue to be the main way through which
Kenyans gain information. Most businesses still prefer to use these traditional methods to advertise their goods and
services as they have a more tangible return on investment. Still, with the increased use of mobile devices in Kenya,
the trend is likely to change.
Source: Adapted from Crazy Nairobi Magazine (http://crazynairobian.com), accessed 8th January 2014
Continued...
Item 3a - Kenyan shilling (KES), Jan 2010 - Jan 2014
Jan 2014:
85.37KES
Jan 2013:
85.49KES
Jan 2012:
85.07KES
Jan 2011:
78.28KES
Jan 2010:
73.67KES
Item 3b - Kenyan shilling, 5-year trend (KES per USD)
Source: Oanda.com
Item 4- Kenya Vision 2030
"to create a globally competitive and prosperous nation with a high quality of life by 2030"
Vision 2030 is the development programme of Kenya, for the period 2008 to 2030, launched by President
Mwai Kibaki. The objective is to transform Kenya into a middle-income country (currently GDP per
capita of $10 000), with a clean and safe environment by 2030. The vision includes the statement "We
want a Kenya that is capable of bringing in more business and employing more Kenyans."
This is to be achieved in three dimensions: economic, political and social development. One of the
priorities for economic development is to drive tourism in Kenya. Under the Vision 2030 plan, Kenya also
expects to meet all eight of its United Nations Millennium Development Goals by 2015.
Source: Adapted from http://www.vision2030.go.ke/
Continued...
Item 5a - Mombasa travel warning issued
A travel warning has been issued to holidaymakers over a possible attack in Mombasa, 24th Oct 2013
The Australian government has issued a travel warning to its citizens about possible attacks on nightclubs
and popular tourist attractions in Mombasa, Kenya. The alert suggested that rebels may target foreign
visitors around the Malindi Road area in Mombasa, home to dozens of luxury hotels and beachside villas
that are popular with Western holidaymakers.
The warning follows last month's four-day siege at the Westgate shopping mall in Nairobi, the Kenyan
capital, which resulted in at least 67 deaths. Travellers are advised to avoid the cordoned area around the
shopping centre.
Source: Adapted from The Telegraph, 24th Oct 2013
Item 5b - UK government announces travel warning to Kenya on 2nd January 2014
The Foreign and Commonwealth Office (FCO) has advised against all but essential travel to areas within
60km of the Kenya-Somali border. There is a high threat from terrorism and frequent incidents of violent
crime including mugging, armed robbery and carjacking, particularly in the large cities (such as Nairobi
and Mombasa). Attacks have previously occurred in Nairobi (especially the area of Eastleigh), Coast
Province including Mombasa, and North Eastern Province. Further attacks are likely.
On 12th December 2013 a failed grenade attack on a vehicle took place in the Likoni area of Mombasa.
On 14th December 2013 six people were killed and a further 24 injured in an explosion on a public bus in
the Pangani area of Nairobi.
On 2nd January 2014, a number of people were injured in a grenade attack on a nightclub in Diani Beach,
about 15 miles from Mombasa.
Official figures showed that 185 967 British nationals visited Kenya in 2012. Most of these visits were
trouble-free.
Source: adapted from https://www.gov.uk/foreign-travel-advice/kenya (accessed 8th Jan 2014)
SECTION C
Answer the compulsory question from this section.
5.
(a)
(i)
Define the term workforce planning (line 148).
[2 marks]
(ii)
In the context of The Imperial, distinguish between internal recruitment and external
recruitment (Appendix 3).
[3 marks]
(b)
Using Appendix 1, calculate the capacity utilization rate (occupancy rate) of hotel
accommodation in 2008 and 2011 and comment on your findings.
[4 marks]
(c)
Examine the possible ways for Martin Kimathi to overcome the apparent conflict with Susan
Chapman.
[9 marks]
(d)
Using a PEST analysis framework and using information contained in the case study including
the additional Items 1 - 5, recommend to Martin Kimathi which strategic option should be
implemented at The Imperial.
[12 marks]