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BUSINESS IN FOCUS

Questions:Explain why Marks and Spencer’s managers maintained the dividend even though profits had fallen.

Answers may include:

• to sustain the share price

• to maintain confidence

• to keep their jobs

• because they were delaying expansion plans and investment plans and did not need to retain profits.

Examine how the changes in the external environment identified in the passage above seem to affect thesuccess of Marks and Spencer.


• Economic recession leading to less spending and a fall in sales.

• Recession is affecting consumer confidence, which is further reducing sales.

• Bank of England is cutting interest rates, which might promote more spending over time.

Analyse the impact of these changes on Marks and Spencer.


• Concerns over demand are putting investment and expansion plans on hold.

• M&S may have to rethink marketing approach, e.g. focus on the more value ranges.

• May have to find ways of being leaner to ensure profit margins can be maintained even if prices arereduced.

Discuss whether Marks and Spencer plc is right to continue its expansion plans in China.


• greater sales

• faster growth

• new market opportunities

• may result in a loss of profits if unsuccessful.

Depends on:

• likely demand and returns

• likely costs

• opportunity cost

© Hodder Education 2009

Section 6: Managing change

Introduction to change 23Cha

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• returns relative to other options

• risk

• likelihood of success

• attitude to risk.

BUSINESS IN FOCUS

Question:How might the managers of Panasonic now react to the global economic downturn and the strong yen?

• Attempt to rationalise to control costs.

• Look to target markets where there is some growth (if they can find any).

• Rethink the company’s product portfolio to offer products that clearly offer better value for money andare aimed more clearly at customers who may suffer from falling incomes.

• Focus more clearly on the benefits of the products to justify the prices (especially if the yen is strong,making its products more expensive abroad); look to develop more, and stronger, USPs.

• Look to produce within countries rather than export to them to avoid the problems of a strong pound.

It depends on,

• How long the downturn and strong yen are likely to last.

• How severe the downturn is and how strong the yen is.

• The internal position of the business, e.g. the financial position and its ability to survive on lower profitmargins if required.

• The extent to which all economies are affected in the same way, e.g. is there a downturn everywhere?

BUSINESS IN FOCUS

Question:Discuss the possible effects on Boeing of a 58-day strike.


• loss of customer goodwill

• loss of future orders

• compensation payments

• additional costs to get it finished, reducing profits.


AQA Business Studies for A2 23Cha

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Should Boeing managers have agreed to the employee demands at the start of the dispute?

Answers may include impact on:

• costs

• future deals

• perceived management strength

• sales.

Depends on:

• perceived strength of employees

• ability to survive a dispute

• extent to which a dispute damages the business

• management attitude to employees.

How might the dispute affect the relations between managers and employees in the future?

• Worsen if the agreement is felt to be unsatisfactory.

• Improve if the agreement reached works.

Depends on:

• nature of the agreement

• attitudes of the two sides to the dispute, to the way the agreement was reached and to the actual agree-ment itself.

PROGRESS QUESTIONS

1. Outline two changes that have occurred at your school or college in the last few years. (6 marks)

• May refer to the exams offered, the curriculum, the management, the intake, the rules, the facilities.

Credit any relevant change.

2. Outline one way in which you have personally changed in the last year. What caused the change? (5marks)

• May refer to changes in attitudes, values, friends, knowledge, hobbies, interests etc.


3. Outline a change in the UK economy in the last year. Explain, with examples, how this is an opportunityfor business. Explain how it may be a threat. (8 marks)

Could refer to:

• a recession



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• opportunity for some businesses, e.g. pizza, camping, budget holidays

• threat for some businesses, e.g. restaurant, luxury holidays, car manufacturer.


4. Outline a change in the UK social environment in the last decade. Explain, with examples, how this is anopportunity for business. Explain how it may also be a threat. (8 marks)

• Could refer to, for example, ageing population, more divorces, later marriages.

• Could consider impact on demand (e.g. increased demand for some products) or supply (e.g. targetolder workforce).

• May mean new markets, new opportunities to recruit.

• May reduce market size and make recruitment more difficult.


5. Explain two possible causes of internal change within a business. (6 marks)


• employees expecting more from their jobs (e.g. better educated workforce)

• new staff joining; other staff leaving

• poor business performance, making managers rethink.

6. Explain two ways in which a significant fall in income in the economy might affect a business. (6 marks)


• Likely to affect demand – demand may fall for some products, e.g. luxury meals, but increase for others,e.g. low-price stores.

• May affect unemployment rates and therefore the labour market, e.g. high unemployment may makerecruitment easier.

• If it is due to a fall in demand it might also reduce demand for land and other resources, making themcheaper and more available for firms that are still growing.

Good answers may refer to the fact this is a ‘significant’ fall.

7. Explain two ways in which a fall in the exchange rate might affect a business. (6 marks)

• May make it cheaper for overseas buyers to purchase UK products, so may promote exports(depending on where the pound fell in value and where the business exports).

• May make importing more expensive, which may lead to more domestic demand or to higher pricesfor imported products including inputs. Higher input prices may cause lower profit margins or higherprices.

8. Explain two ways in which an ageing population might affect a business. (6 marks)

• May change demand, e.g. more demand for some products (such as healthcare) and less demand forothers (such as hip-hop downloads).



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• May affect the nature of the labour market and the way staff have to be managed, e.g. the rewardsoffered.

9. Explain two ways in which the launch of a new product by a competitor might affect a business. (6marks)

• May reduce sales of your product and therefore affect workforce planning, operations scheduling andcapacity utilisation.

• May force the business to upgrade/innovate its offering.

10. Explain two ways in which the law can affect a business. (6 marks)

• Can increase costs by increasing the responsibilities on a business, e.g. health and safety measures.

• Can restrict actions the business can take, e.g. the claims that can be made in advertising, the way aproduct is described and how to promote some products (e.g. cigarettes).

• Can create opportunities, e.g. a trade agreement opening a new market.

ANALYSIS AND EVALUATION QUESTIONS

1. Analyse the effect of one recent change in the external environment on UK retailers. (8 marks)

Depends on the change, but might expect the analysis to focus on:

• output and sales

• profit margins and profitability

• workforce planning

• marketing activities

• could analyse demand and supply-side issues.

Needs to be in a retail context for application, e.g. analysing issues to dowith stock, sales staff, product display.

Content2 marks

Application3 marks

Analysis3 marks

Level 3 3 marksCandidate applies knowledgeeffectively to the scenario.

3 marksGood analysis of argument.

Level 2 2 marksCandidate offers two or morerelevant points or showsgood understanding of theterm or a combination.

2 marksCandidate makes reasonableattempt to apply knowledgeto the scenario.

2 marksReasonable analysis ofargument.

Level 1 1 markCandidate offers singlerelevant point or shows someunderstanding of the term.

1 markCandidate makes limitedattempt to apply knowledgeto the scenario.

1 markLimited analysis of argument.


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• effect on demand

• effect on supply, e.g. may be easier to recruit or find land to build on.

Depends on:

• type of hotel and how much the recession affects demand

• how the hotel management responds

• whether the recession was anticipated and planned for

• the target market segment

• how the recession affects different parts of the UK and how this relates to where the hotels are.

Application must come from the hotel sector and the recession.


Content3 marks

Application3 marks

Analysis4 marks

Evaluation5 marks

Level 3 3 marksCandidate identifiestwo or more relevantpoints and showsunderstanding of theterm.

3 marksCandidate appliesknowledge effectivelyto the scenario.

4 marksGood analysis ofargument.

5–4 marksCandidate offersjudgement plus fulljustification.

Level 2 2 marksCandidate offers twoor more relevantpoints or shows goodunderstanding of theterm or acombination.

2 marksCandidate makesreasonable attemptto apply knowledgeto the scenario.

3–2 marksReasonable analysisof argument.

3–2 marksCandidate offersjudgement pluslimited justification.

Level 1 1 markCandidate offerssingle relevant pointor shows someunderstanding of theterm.

1 markCandidate attemptsto apply knowledgeto the scenario.

1 markLimited analysis ofargument.

1 markCandidate offersundevelopedjudgement based onevidence.


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2. Discuss the factors likely to determine whether a recession in the UK is an opportunity or threat for aUK hotel chain. (15 marks)



• An outline of external and internal changes in a given context and an analysis of the possible effects.

Depends on:

• how either or both are handled

• the nature of external and internal change

• whether change is anticipated and prepared for

• the strengths and weaknesses of particular business or industry in relation to a given change

• may be an opportunity rather than being dangerous

• it will vary from situation to situation and depend on the change and the business.

CASE STUDY

Questions1. Explain two factors in the external environment (apart from the economy) that might affect Wal-Mart.

(5 marks)

Content3 marks

Application3 marks

Analysis4 marks

Evaluation5 marks














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3. Using examples of businesses and industries you know, to what extent do you think external change ismore dangerous than internal change? (15 marks)


Content2 marks

Application3 marks

Level 3 3 marksCandidate applies knowledge effectively tothe scenario.

Level 2 2 marksCandidate demonstrates goodunderstanding.

3–2 marksCandidate explains effectively in relation tothe scenario.

Level 1 1 markCandidate demonstrates limitedunderstanding.

1 markCandidate attempts to explain in relation tothe scenario.


• Legal environment, e.g. limiting where it can locate stores, how it can promote, pricing strategies.

• Social environment changing the nature of the target population, e.g. their demands; also affecting thesupply of labour.

• Technological environment, e.g. online shopping and better stock control.

2. Specify two changes in the economic environment of the UK and analyse how they might affect a retailersuch as Wal-Mart. (8 marks)

Content2 marks

Application3 marks

Analysis3 marks










• In 2008 the UK went into a recession; this led to less spending generally, although some customersswitched to more budget stores such as Wal-Mart.

• Interest rates fell in 2008 and 2009; this was meant to promote borrowing and spending; this mighthave a limited effect on spending, including spending at Wal-Mart.

• Lower rates of inflation may mean the business does not want to increase prices as much as it mightotherwise do.


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3. Discuss the factors likely to determine the success of Wal-Mart’s smaller store formats. (12 marks)


• where they are located

• what they stock

• how they are run

• what competition there is in the area

• the amount of investment.

Depends on:

• the degree of planning by Wal-Mart

• the external environment

• competitors’ actions

• how success is defined.

The context is a major store with a lot of buying power and a successful track record; this may influence thelikely success of the new stores (i.e. not a newcomer doing this).

Content2 marks

Application3 marks

Analysis3 marks

Evaluation4 marks

Level 3 3 marksCandidate appliesknowledge effectivelyto the scenario.


4 marksCandidate offersjudgement plus fulljustification.



2 marksReasonable analysisof argument.







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• May create more sales as people switch to Wal-Mart.

• May make land cheaper if it wants to expand.

• May make it easier to recruit staff.

• May make it cheaper to borrow if the Bank of England cuts the interest rate to encourage borrowing.

Depends on:

• the extent of the recession

• the extent to which Wal-Mart is seen as a better option for customers

• how Wal-Mart reacts to the recession – has it planned for it already?

• Wal-Mart’s resources, e.g to be able to exploit the recession by pressurising suppliers, buying up cheapland.

Content3 marks

Application3 marks

Analysis4 marks

Evaluation5 marks














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4. To what extent is a recession really likely to be an opportunity for Wal-Mart? (15 marks)

BUSINESS IN FOCUS

Questions:Discuss the factors that might have determined how much RBS paid for ABN Amro.


• Own financial resources.

• Strength of the balance sheet.

• Extent of the fit.

• RBS’s objectives and strategy; degree of strategic fit.

Depends on:

• desire of the managers to acquire ‘at any cost’

• how much ABN’s shareholders expect to sell for

• how much other bidders want to buy the company

• forecasted profits of the combined businesses.

What do you think are the possible consequences of RBS paying too much for ABN?


• Damage own profits and therefore dividends, share price and investment.

• Damage the reputation of managers; may lead to sackings, replacements.

Depends on:

• how much it overpaid

• how the other aspects of RBS were doing, nature of any other deals being done

• media coverage and shareholder reaction.

BUSINESS IN FOCUS

Questions:Analyse the possible reasons why Coca-Cola wanted to buy Huiyuan.


• to access the Chinese market quickly

• to buy local knowledge and understanding


AQA Business Studies for A2

Internal causes of change 24Cha

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• to access the skills and resources of the company

• to grow

• to access new markets and access new brands quickly.

Discuss the factors likely to determine whether this takeover is successful.


• benefits from synergy

• benefits from shared resources

• benefits from economies of scale

• danger of diseconomies of scale.

Depends on:

• extent of culture clash/match

• how it is managed, e.g. the process of takeover and the businesses post takeover

• how success is measured.

Context: major US business with Chinese juice brand; some overlap but also likely to be some significantdifferences in approach.

BUSINESS IN FOCUS

Questions:Analyse the factors that might have caused a fall in the sales of Magners.


• competitors’ actions

• poor marketing

• external factors, e.g. economic decline, a change in drinking regulations or other laws (such as nosmoking in pubs), tax rates.

Discuss the problems the new chief executive might face bringing about change.


• resistance to change

• lack of resources

• lack of faith in the ability to improve.

Depends on:

• the background, experience and reputation of the new manager



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• the resources available

• the openness of employees to change

• how well the plan is developed, introduced and implemented.

PROGRESS QUESTIONS

1. Give two reasons why a business might want to grow. Explain these reasons. (6 marks)


• to impress investors

• for personal reasons, e.g. a sense of achievement

• to be safer from takeover

• to have more power over stakeholders.

2. What is meant by a takeover? (2 marks)

A takeover is when one business gains control of another, e.g. buys 51 per cent of the shares. Also known asan acquisition.

3. Explain two possible problems of a takeover. (6 marks)


• the cost

• the possible culture clash

• the loss of direction as the two organisations work out how to work together

• diseconomies of scale.

4. Explain, with an example, what is meant by horizontal integration. (3 marks)

One business joins together with another business at the same stage of the same production process, e.g.Pilkington Glass and Nippon Glass.

5. Explain, with an example, what is meant by vertical integration. (3 marks)

One business joins together with another business at a different stage of the same production process, e.g.if a car manufacturer buys a tyre manufacturer.

6. Why do new bosses often make changes? (5 marks)

• To show that they can!

• Because that’s why they have been brought in.

• To impose their authority.

• To turn around the business, e.g. they may have been brought in because of poor business perform-ance.



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7. Explain why poor business performance is often a trigger for change. (4 marks)

• Because otherwise why change? If everything is fine you are likely to leave it as it is.

• Forces you to think again and examine the problems you are facing.

• More pressure to do something (e.g. from investors).

8. Explain two difficulties firms may face when entering overseas markets. (6 marks)


• problems understanding the culture and how things are done

• the problems of exchange rate changes

• communication and control issues

• costs

• may take time to generate a return.

9. Explain how the role of the founders might change over time as the business grows. (6 marks)

• May need to delegate more.

• May need to focus more on managing rather than doing.

• May need to concentrate on coordinating and developing people; have to rely on others much more.

10. Explain two factors that might affect how much a firm pays to take over another. (6 marks)


• perceived benefits of the takeover, e.g. economies of scale

• degree of risk if it goes wrong

• financial resources of the bidder

• whether there are other bidders

• the extent to which the target company fits with the bidder’s plans and strategy.


1. Analyse the reasons why one bank may want to take over another bank. (8 marks)



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Content2 marks

Application3 marks

Analysis3 marks










• To gain from the benefits of synergy.

• To share resources such as databases and customer information.

• To gain market share and power.

• To fulfil managers’ own ambitions.

Answers should apply by referring to the bank context, e.g. to gain size against big firms such as Barclays;to gain a better regional spread; to share skills and information in different segments such as high streetbanking, investment banking or mortgages.

2. Analyse the possible actions the managers of a major construction company might take after a signifi-cant fall in profits. (8 marks)

Content2 marks

Application3 marks

Analysis3 marks










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• May limit expansion plans if demand is not there.

• May have to reduce the workforce if demand is not there.

• May initiate new projects to try and boost profits or may have to cut back because without the profitsthey cannot finance them.

Answers should apply by using the context of construction, e.g. selling off land that will not be developedany more, or speeding up building to sell more quickly; could also pick up on words such as ‘major’ and‘significant’to use in the answer.

3. With reference to companies or industries you know, to what extent is a strategy of growth desirable? (15marks)

Content3 marks

Application3 marks

Analysis4 marks

Evaluation5 marks














• Growth may bring economies of scale or, if the business gets too big, diseconomies of scale. Thesecould be analysed in context.

• Growth may impress shareholders and bring personal satisfaction to managers (e.g. meet ego and self-actualisation needs).

Opportunities for evaluation include:

• Discussing the use of the word ‘desirable’, e.g. desirable to whom?

• Which stakeholder group is being examined?


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Depends on:

• how much growth there is

• how the growth is managed

• the nature of the growth (e.g. internal or external).



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BUSINESS IN FOCUS

Question:With reference to a business of your choice, analyse two significant risks it faces.

Will depend on the context. Could be, for example:

• political

• economic

• social

• technological

• environmental

• legal

• competitive

• or internal.

BUSINESS IN FOCUS

Question:To what extent is planning for terrorist attacks a good use of resources?


• May help prevent the attack happening.

• Can cope better with after effects.

Depends on:

• how likely attacks are

• how serious attacks are

• resources that are available.

Context may refer to present climate and likelihood of terrorist attacks.



Planning for change 25Cha

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BUSINESS IN FOCUS

Question:To what extent would disaster planning be useful for all businesses?

• It may minimise the financial loses and disruption to its operations that a business faces in a disaster.

• It may make it easier for the business to satisfy its responsibilities to stakeholders, e.g. employees maybe better protected if they have had training on what to do in an emergency.

• A company may suffer long-term damage to its reputation if it is seen as unprepared.

It will depend on,

• Costs.

• What is being planned for.

• The consequences if an event happens.

Different businesses are likely to plan for different things.

BUSINESS IN FOCUS

Question:Johnson & Johnson – To what extent would disaster planning be useful for all businesses?

The arguments for and against disaster planning are as above but in the case of Johnson and Johnson:

• The nature of its products, e.g. selling products to be used in hospitals, makes it important to try toprevent anything going wrong and, if something does go wrong it must be able to react quickly andeffectively.

• The mission of the business and the values of its founders mean that it is important to look after itsstakeholders. Having plans in place to protect groups such as patients will be seen as very important inthis business, and probably more so than in some other businesses.

PROGRESS QUESTIONS

1. Explain what is meant by a corporate plan. (2 marks)

• Sets the objectives, strategy and budget for the business as a whole.

2. State three items likely to be in a corporate plan. (3 marks)



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• overall mission of the business

• corporate objectives

• corporate strategy

• the budget.

3. Explain two factors likely to influence a corporate plan. (6 marks)

• the strengths of the business (e.g. financial strengths)

• the weaknesses of the business (e.g. lack of skills)

• the opportunities (e.g. new segments)

• the threats (e.g. new competitors)

• past experience of what has worked

• investor pressure.

4. Explain the links between a corporate plan and the functional plans. (5 marks)

• The corporate plan sets out the direction of the business as a whole; this then has to be put into effectvia functional plans, i.e. the different functions need to work out how they can contribute to theachievement of the corporate plan.

5. Explain two factors that might influence a corporate plan. (6 marks)

In the first printing of this book question 5 inadvertently repeats the question in 3. Please refer to the answer toquestion 3, above.

6. What is meant by a contingency plan? (2 marks)

• This occurs when a business looks ahead and prepares for what may be an unlikely event, such as a fire,computer virus, terrorist attack.

7. What is meant by scenario planning? (2 marks)

• Looking ahead and imagining how the future market situation might appear, based on differentassumptions.

8. Explain two reasons why a corporate plan might go wrong. (6 marks)

• failed to anticipate the right change

• unexpected events

• badly implemented

• badly planned.

9. What is meant by an emergent plan? (3 marks)

• The plan that emerges as a result of events, which may be very different from the plan that you intended!

10. Explain why a plan needs to be reviewed. (3 marks)

• Internal and external circumstances may change.



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• Objectives may change.

• To see what is being done right and what needs to be changed; better to change along the way thandiscover it was wrong at the end.


1. Analyse the likely key elements of a corporate plan for a business such as the BBC. (8 marks)

Content2 marks

Application3 marks

Analysis3 marks










• A definition of a corporate plan.

• Sets out the objectives for the business, e.g. how much digital content, how many online productionsdoes it expect?

• Sets out the budget; in this case mainly from the licence fee.

• Sets out the strategy, e.g. how much in-house development of programmes, how much drama?

Application should be in terms of the BBC or broadcasting generally.


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2. To what extent is contingency planning a worthwhile investment for an airline? (15 marks)


• Benefits of contingency planning, e.g. prepared for a disaster, able to react more quickly and effectively,may minimise the damage.

• Difficulties of contingency planning, e.g. costs, may never use the resources set aside, may plan for thewrong contingency.

Depends on:

• the cost

• whether the contingency happens

• whether the plan works

• the benefits of having the plan

• the opportunity cost.

Application is needed for the context of an airline, e.g. the types of event an airline might plan for (e.g. crashlanding, terrorism); some contingency planning essential in this type of industry, especially nowadays withthe security risk.

Content3 marks

Application3 marks

Analysis4 marks

Evaluation5 marks














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• The benefits of a corporate plan, such as coordinating the activities of the different parts of the busi-ness; pulling together functional plans; setting out the direction of the business.

• The costs and problems of a corporate plan, such as it may not be appropriate for the actual conditions(especially if they change), it may be a bad plan (e.g. not realistic), may lead to managers sticking to theplan even if circumstances have changed so much that it is no longer appropriate.


• Depends on the plan and whether it anticipated the environment correctly.

• Depends whether it builds on strengths, exploits opportunities and protects against threats, i.e.whether it is a good plan or not.

• Depends on how it is implemented.

Application is needed for the context of General Electric, e.g. a huge business that has many differentelements to it. This must make it important to have an overarching sense of direction from which thedifferent business units can see how they fit it. Cannot rely on informal communication and ad hocdecisions – need some form of plan.

Content3 marks

Application3 marks

Analysis4 marks

Evaluation5 marks














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3. To what extent is corporate planning useful for an organisation such as General Electric? (15 marks)


CASE STUDY

Questions1. Explain the features of an effective objective for Sainsbury. (5 marks)

A good objective needs to be:

• specific

• measurable

• agreed with the relevant members of staff

• realistic

• time specific.

Application will come through the context of Sainsbury’s objectives, e.g. reference to suitable objectives fora retailer.

2. Analyse the difficulties Sainsbury might have faced when trying to achieve the objectives it set for thefirst three years. (8 marks)

Content2 marks

Application3 marks

Level 3 3 marksCandidate applies knowledge effectively tothe scenario






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• Resistance from staff who do not agree with the objectives or think it will be too much effort; thetargets set were demanding and so may not have been appreciated by some.

• Lack of resources to put the plans into action.

• Lack of will and belief to pursue the objectives.

• Difficulties achieving the objectives due to competitors’ actions or the external environment.

3. Discuss the targets Sainsbury’s might set for the next three years. (12 marks)

Content2 marks

Application3 marks

Analysis3 marks









Content2 marks

Application3 marks

Analysis3 marks

Evaluation4 marks













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• May focus on targets such as cash flow, profits and store expansion.

• Likely to focus on growth, given where the business is now at and previous success (although factorssuch as the state of the economy may lead to a re-evaluation).

Depends on:

• the desires and objectives of the owners


• how competitors are doing

• the present position of the business and present strengths of the business.

4. To what extent do you think setting the target above would have been useful to the business? (15 marks)

Content3 marks

Application3 marks

Analysis4 marks

Evaluation5 marks














• Provides clear target and something to measure progress against.

• The managers set ambitious targets showing things must change; symbolic.

• Helps managers to coordinate their actions to contribute to the overall corporate plan.

• Gives people something to aim for; motivates.

Depends on:

• Whether the targets were accepted by staff


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• Who was involved in setting the targets, e.g. Are they imposed? Was the process of producing targetsuseful in getting agreement and shared vision between employees?

• Whether the business starts to achieve them; does success motivate people? Sense of achievement?

• How the targets were presented and used to energise staff.



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BUSINESS IN FOCUS

Question:Can you think of any leader in the world of business, sport, politics, religion or any other field that youwould regard as transformational? Justify your choice.

• Answers will depend on whom they choose.

BUSINESS IN FOCUS

Questions:Should Bish-Jones be held responsible for the decline of Woolworth’s?


• As the chief executive he must hold some responsibility; ‘it happened on his watch.’

But,

• External factors no doubt relevant as well, such as the economy and problems getting credit.

• May have had limited resources.

• May have inherited a poor situation.


• Depends on the extent to which the problems are internal v external (difficult to assess from theoutside).

• Other businesses faced similar conditions and survived, so this suggests there was a problem with thestrategy – some of the blame for this must lie with the chief executive.

• As ever, it is likely to be a combination of factors, but the chief executive is ultimately responsible foractions of the managers.



Key influences on the change process: leadership 26Cha

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PROGRESS QUESTIONS

1. What is a leader? (2 marks)

• Someone who inspires others to follow them.

2. Distinguish between a leader and a manager. (4 marks)

• A manager can get things done but may not be so good at looking at what needs to be done differently.

• A leader may be more of a visionary; may help transform people and energise them to transform thebusiness.

3. What is meant by transformational leadership? (2 marks)

• A leader who brings about major change in terms of what the business does, how it does it and/or whatit represents (as opposed to a transactional leader).

4. Outline three sources of power for a leader. (6 marks)


• referent power: based on experience/expertise

• positional power: authority from the job they hold

• physical power

• reward power, e.g. the ability to give out bonuses or pay increases.

5. What is meant by trait theory? (2 marks)

• The theory that effective leadership may be linked to a set of personal qualities (traits), such as extro-version or charisma.

6. Explain two factors that might influence the leadership style adopted. (6 marks)

• the nature of the workforce, e.g. size, how skilled, how new

• the nature of the task, e.g. rapidly changing, long-term or short-term goals

• the amount of time available

• the external pressures, e.g. new competitors, investors demanding high returns.

7. Distinguish between autocratic and democratic leadership styles. (4 marks)

• Autocratic is authoritarian; it adopts a tell approach.

• Democratic is a listening approach where people are consulted.

8. Distinguish between people-oriented and task-oriented leadership styles. (4 marks)



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• People-oriented – focuses on ensuring people feel part of the process, they work well in teams and workwell together.

• Task-oriented – focuses on getting the job done.

9. Outline the key features of the Blake Mouton grid. (5 marks)

• Shows the leadership style in terms of the focus on task v people.

• Styles include country club management (focusing heavily on people) v impoverished management (alack of focus on people or the task) v team leadership (where the team gains focus via the task).

10. Explain two ways in which a leader can affect the success of a business. (6 marks)


• can provide a vision

• can inspire and provide sense of hope

• can make important changes

• can inspire and motivate others to do things.


1. Analyse the difference between a leader and a manager. (8 marks)


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• A leader provides vision and direction; should inspire.

• A manager may focus more on the short term and getting things done.

Context can come through examples.


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2. With reference to organisations or industries that you know, discuss the ways in which a leader can affectthe success of a business. (15 marks)


• May provide direction.

• May inspire and motivate.

• May coordinate.

• May bring about change.

• May change the culture.

Depends on:

• how successful the leader is at bringing about change

• how much resistance there is to the leader

• external factors.

Application will come from the context chosen.

3. To what extent do you think a leader is born rather than made? (15 marks)

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• May be possible to train in some skills.

• You may be born with some personality traits.


• May be a combination.

• May depend on the leader.

• Depends on your theory of leadership, e.g. trait, behavioural theories.

• May be an element of natural qualities and an element of learned behaviour.

CASE STUDY

Questions1. Explain the role of the chief executive of a business such as Marks and Spencer. (5 marks)

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• Oversees the overall plan of the business and the implementation of the strategy.

• Coordinates the different functions.

• Figurehead of the business; the leader; may motivate/inspire.

• Reports to the board of directors.

Context is Marks and Spencer and retail.

2. Analyse the reasons why some analysts do not like the idea of Sir Stuart Rose being the chief executiveand chairman. (8 marks)

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• May lead to a conflict of interests.

• As chairman of the board he is meant to oversee the managers’ actions and question their actions andplans.


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• As chief executive he is the senior manager who is meant to report to the chairman. This means ineffect he is reporting to himself.

• The danger is that he will have too much power and may pursue his own interests rather than those ofthe investors.

3. Discuss how you would recruit someone to replace Sir Stuart Rose. (12 marks)


• Internal – benefits of this are that it may be motivating and you will have good information on thepeople involved.

• External – may have more choice, more experience.

Depends on:

• whether you want ‘fresh blood’

• whether you need major change, which may be more likely with an outsider who has no attachmentsand has not been brought up in the ‘M&S’ way.

The context is a very senior position that could make or break the company, so the directors are likely towant to search fairly widely to make sure they get the right person.

For this sort of job, headhunting may be likely as it is so specialised and you want someone with the rightexperience and a track record; cannot afford to get it wrong.

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• May influence the culture, the objectives, the strategy.

• May affect the morale within the business and the belief that plans can be achieved.

• May affect the quality of decision making.

Depends on:


• the extent to which he is accepted by employees and they are willing to follow him

• competitors’ actions.

Context includes the actions he has taken to change the business and the nature of Marks and Spencer andits environment.

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4. With reference to the case above, to what extent do you think Sir Stuart Rose has contributed to thesuccess of Marks and Spencer? (12 marks)

BUSINESS IN FOCUS

Question:How might these values affect the behaviour of employees in the business?

Might influence the way they:

• allocate resources

• the decisions they take

• the way they act towards others

• the priority given to different issues

• the way they assess staff and reward.

BUSINESS IN FOCUS

Question:Discuss the impact Our Credo might have on the performance of Johnson & Johnson.

Answers may include impact on:

• motivation

• coordination

• controlling and reviewing performance

• actions of employees

• customer service.

Depends on whether:

• it is enforced and referred to or is just a statement

• it feeds into appraisals and employee assessments

• the ‘corporate heroes’ are those that stick to the credo

• the values expressed lead to behaviour that helps the business, e.g. does it improve customer service?



Key influences on the change process: Culture 27Cha

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BUSINESS IN FOCUS

Question:Discuss the ways in which the decisions made regarding the structures of their business might affect orreflect the cultures of WL Gore and Semco.


• Culture may affect approach to spans of control, levels of hierarchy, teamwork, centralisation.

• May affect the way the business is designed.

• Will affect communication, levels of responsibility, control and coordination.

• The two elements are therefore likely to be closely related.


• Culture is not the only factor affecting structure, and vice versa.

• The culture seems to have a particularly strong effect on structure at Gore and Semco, which have takenan unusual approach.

BUSINESS IN FOCUS

Question:Discuss the ways in which the principles of Mars might affect the behaviour of employees and its businessperformance.


• skill

• ability

• experience

• vision

• support from others

• resources

• recognition of the need to change.


• the power of the new manager

• the state of the business, e.g. the resources available

• the extent to which the manager is accepted and followed.



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PROGRESS QUESTIONS

1. What is meant by ‘organisational culture’? (2 marks)

The values, attitudes and beliefs of the employees of an organisation; ‘what we do around here’.

2. How can the culture of a business help its success? (5 marks)

• Can affect behaviour, e.g. whether quality matters, whether the customer is regarded as important,whether to plan for the short term or long term.

• Can affect decision making and priorities.

3. Explain two influences on the culture of a business. (6 marks)


• the leadership

• the background of staff, e.g. experience and attitudes

• the rewards system (what rewards are linked to)

• the external environment (e.g. providing pressure to change).

4. Why might it be wrong to try and describe ‘the’ culture of a business? (4 marks)

Because the culture varies from department to department, office to office, region to region and division todivision; there will be considerable variations in different parts of a business.

5. Outline four different types of culture according to Handy. (8 marks)

• Power culture: focuses on key people at the centre; tends not to work well in bigger organisations.

• Role culture: focuses on individuals’ role within the organisation.

• Task culture: focuses on the task and using people as and when they can contribute to this task.

• People culture: tends to consist of qualified individuals who run their own areas of a business.

6. Explain one reason why the culture of an organisation matters. (3 marks)

Determines what is done, how it is done, the levels of motivation and priority given to different issues.

7. Hofstede found fivedimensionsonwhichnational cultures candiffer.Outline thesedimensions. (5 marks)

• tolerance for ambiguity

• individualistic or collectivist

• short-term or long-term orientation

• masculinity v femininity

• power distance.

8. Why might changing the culture of an organisation be difficult? (5 marks)

• People may:



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• see change as a threat

• prefer things as they are

• fear change

• not agree with it.

• Values and attitudes may be deeply ingrained and so it may be difficult to challenge the way you thinkabout things – likely to take time to change these.

• May lack resources, vision or determination to bring about change.

9. Why is it difficult to identify an organisation’s culture from the outside? (3 marks)

Need to understand what e.g. different signs, symbols, rituals actually mean and to do this it helps if you arewithin the business; difficult to interpret signs etc. from outside.

10. Outline the organisational paradigm of your school or college. (6 marks)

This will depend on the structures, rituals, stories, power structures, control systems; the paradigm shouldsummarise the essence of the school or college – what its key values are.


Analyse the ways in which the culture of a school might affect its success. (8 marks)

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Might affect:

• attendance

• work rate

• teamwork

• focus on academic v other interest


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• happiness of staff and students

• added value

• personal development of staff and students.

2. Discuss the problems new managers might have changing the culture of a highly successful premier foot-ball team. (15 marks)

Resistance to change due to fear of change, disagreement over the methods of or reasons for change, fearthey will not fit in to the new approach or will not be picked.

Depends on:

• the success of the team

• the track record of the manager

• the nature of the players

• the extent to which the team think in similar ways; how open they are to change.

Application should refer to premier league clubs, e.g. highly paid, highly skilled staff, the pressure for results,the desire to be picked,

3. Discuss how new managers might change the culture of a failing business. (15 marks)

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May:

• train

• educate

• reward those who change

• punish those who do not change.

Depends on:

• the skill of the new managers

• whether the new managers are accepted and respected

• how bad the situation is

• the extent to which a new plan is accepted and seen to offer hope.

Application could refer to the fact the managers are new and/or the fact the business is failing.

CASE STUDY

Questions1. Explain the possible benefits of centralised decision making at Daimler. (5 marks)

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• May lead to faster decision making, which may be important if the market conditions change fast.

• May leave decision making in the hands of those who are best placed to make a decision.

• Means that decision makers have an overview of the business and the car market.

Context is that of a huge, multinational car company and an industry that has been struggling recently.

2. Analyse the cultural differences at Chrysler and Daimler.

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Differences focused on:

• the leadership style

• the way decisions were made

• the attitudes to authority

• their priorities, e.g. price v product


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• attitudes towards staff and how to treat staff

• the length of time they plan for.

3. Discuss the factors that might have led to the merger of Chrysler and Daimler. (12 marks)

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Answers may include desire for:

• growth

• economies of scale

• power

• personal achievement.


• May be several reasons, not just one.

• Motives may have been different on either side.

• Motives may have differed between those involved.


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• culture clashes

• have to recover the costs of the deal

• may have experienced diseconomies of scale.

Depended on:

• how it was handled

• many mergers do fail, so the odds were against success

• how similar the two businesses were.

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4. To what extent was the merger of Chrysler and Daimler bound to fail? (15 marks)

BUSINESS IN FOCUS

Questions:Why do you think Sony is so concerned about climate change?


• Genuine concern for the environment and the future of the planet.

• Believes it can save resources and money.

• Believes it can attract investors, customers, employees and suppliers, i.e. satisfy stakeholders.

• Have to meet government regulations; may be anticipating further changes and trying to be prepared.

Depends on:

• attitudes of owners and managers

• attitudes of stakeholder groups

• extent to which climate change is on the agenda for change

• perceived costs and benefits of being concerned.

Why do you think Sony produces a Corporate Social Responsibility report?


• To review its activities so it can assess the success of any actions that have been taken and to decide onpriorities for future steps.

• To prove to stakeholders what it is doing and that it is transparent about its actions.

• To assess its performance on a wide range of criteria, not just profit.

Depends on:

• how detailed the report is

• who produces it

• what it says

• what actions Sony takes as a result.

Why do you think Sony has external verifiers?


• to show that it genuinely wants to assess its activities

• to try to prove it is an independent assessment

• to get an objective view so it can plan properly.



Making strategic decisions 28Cha

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PROGRESS QUESTIONS

1. What is meant by scientific decision making? (3 marks)

• A logical approach to decision making based on data rather than hunch; systematic and rational.

2. What is meant by a decision tree? (2 marks)

• An approach to making a decision that sets out the options, the expected outcomes, the probability ofdifferent outcomes.

• Part of a scientific approach to decision making.

3. What is meant by probability? (2 marks)

• The likelihood of something occurring.

4. What is meant by expected value? (2 marks)

• The weighted average of a particular outcome.

5. Explain two benefits of using decision trees. (5 marks)

• Helps identify the options and think through the likelihood of different outcomes and the likely conse-quences of a decision.

• Makes managers quantify the likelihood of an outcome and the consequences of this.

6. Explain one limitation of a scientific approach to decision making. (3 marks)

• May be difficult to gather or estimate data, e.g. if the decision is unfamiliar.

• May be difficult to quantify outcomes, e.g. if the benefits are mainly qualitative (such as the impact onbrand image or morale).

• May miss out on decisions that break convention and go against the trend.

7. Explain two reasons why strategies can go wrong. (6 marks)

• The external environment may have changed significantly.

• May have wrongly assessed the strengths and weaknesses of the business.

• May be overambitious.

• May be badly implemented.

8. Explain two reasons why information management can help a business compete. (6 marks)


• can help make better decisions

• can reduce risk

• can help understand customers better

• can help make fast decisions and provide better links with stakeholders.



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9. What is meant by a management information system? (2 marks)

• It collects data, analyses and distributes information to managers to help them understand a situationand make a decision.

• It is a set of people, procedures and resources that collects and transforms data into information anddisseminates this information.

10. What is good-quality information? (3 marks)

• Information that arrives on time and is relevant, cost effective, understandable and in an appropriateformat.


1. Analyse the benefits of a scientific approach to decision making when undertaking a major strategicchange. (8 marks)

Content2 marks

Application3 marks

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• May reduce the risk of error by basing decisions on data.

• May lead to more efficient and better decisions.

The context is a major strategic change and so getting it right is particularly important.

2. Discuss the possible reasons why managers of Nintendo might choose to change the strategy of a busi-ness. (15 marks)


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• Because the existing approach is not working.

• Because they anticipate change in the external or internal environment.

• Because new managers want to show they want to do things differently.

• Because of competitors’ actions.

• Because conditions and/or objectives have changed.


• How big a change in strategy it is.

• May be many reasons.

• May be different reasons for different changes.

Context should be Nintendo – a large, successful business in a market where change is occurring all thetime, e.g. the need to develop new products

3. With reference to organisations and industries you know, discuss how managing information can affectthe success of a business. (15 marks)

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• Can help understand customers better.

• Can help reduce risk of errors.

• Can help to make better decisions.

• Can reduce waste and inefficiency.

• Can lead to quicker response times.

• Can help managers understand a situation more effectively.


• how well information is managed

• the cost of managing information

• other factors, such as the external environment (i.e. information management is only one elementcontributing to a firm’s success).

Context will come from the selected industries.

CASE STUDY

Questions1. Explain the key elements of the Tesco strategy. (5 marks)

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• go international

• broaden the range away from just food

• have a range of different types of stores.

2. Analyse the factors Tesco takes into account when operating internationally. (8 marks)

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• size of market

• competition

• shopping habits, e.g. this will influence the product range

• cultural issues, e.g. holidays

• distribution


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• the appropriate marketing mix

• likely returns on investment

• risk.

3. Discuss ways in which effective information management might help Tesco. (12 marks)


• help knowing what to stock

• help informing customers of what offers etc. are on

• help understand customers and the market better

• better links with suppliers

• enable managers to make better decisions.

Depends on:

• cost of the information management systems

• the external environment – this also affects success

• competitors’ actions – can affect success

• other resources, i.e. can it take the action it needs to?

Could consider the changing role of information management as information technology improves andgets cheaper.

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• By using information this should reduce risks, should make better decisions as they are based on data.

• Tesco makes many big decisions such as launching new products, entering new markets, which they arelikely to want to get right and so are likely to use data; they have the resources to gather and analysedata effectively.

• Tesco has made many decisions already and has a great deal of experience; this provides the data forscientific marketing.

Depends on:

• the type of decision, e.g. has it been made before?

• the culture of the business

• the risk involved in a decision

• the availability of data.

In general you would expect Tesco to have access to and be expected to provide data to make decisions ofany scale.

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4. To what extent do you think Tesco managers make decisions scientifically? (15 marks)

BUSINESS IN FOCUS

Question:Discuss the factors that are likely to influence the ability of a new manager to change the culture of a busi-ness.

• The extent to which things were going badly before – this will influence the extent to which the needfor change is accepted.

• The track record of the manager – what has she/he done before? The greater the level of previoussuccess the more likely it is that her/his changes will be accepted.

• The extent to which changes are explained and understood by the team.

• The extent to which the team agrees with the changes.

• Theearly successesof themanager– if he/shewins somevictoriesquickly thiswill tend towinover the team.

PROGRESS QUESTIONS

1. Outline Lewin’s model of the forces of change. (5 marks)

• Highlights that at any moment there are forces pushing for change and other factors resisting change.

• A business stays in a particular position if these forces balance each other.

• To bring about change you need to increase the forces for or reduce the forces resisting.

2. What might increase the forces for change? (4 marks)


• greater explanation of why it is necessary

• greater appreciation of the dangers of not changing

• more resources, e.g. greater rewards for changing

• failing performance.

3. Explain two reasons, apart from employee resistance, why change may be difficult to bring about. (6marks)


• costs

• time

• lack of understanding of what needs to be done

• problems getting the resources to implement it.



Implementing and managing change 29Cha

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4. Explain two reasons why employees often resist change. (6 marks)

• fear they lack skills to cope

• prefer things the way they are

• do not understand the reasons behind change

• think they know better.

5. What is meant by project management? (3 marks)

• Managing a series of activities to complete a project in time and to meet set criteria.

• A project occurs when an individual or team attempts to accomplish a specific objective by completinga set of interrelated tasks.

6. Explain two features of effective project management. (6 marks)

• Need to be able to coordinate and organise.

• Need to manage time effectively.

• Need to be able to plan ahead but also cope with problems as they emerge.

• Need to be able to communicate.

7. Explain two reasons why change can go wrong. (6 marks)


• misunderstanding the situation

• rate of change is faster than expected

• more resistance than expected

• lack of resources.

8. Explain two ways of overcoming resistance to change. (6 marks)


• force it through

• reward those who change

• punish those who do not change

• lead by example

• deal with the key people who resist

• show that it can work.

9. Using an example, explain why one stakeholder group might welcome change while another might resistchange. (6 marks)

Some may win while others lose, e.g. as a business shifts resources from one section to another or changespriorities.



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10. Explain two factors that might help make employees open to change. (6 marks)


• failure, so they appreciate that what they are doing at the moment does not work

• high rewards, so they are attracted by change

• evidence that it works

• faith in the leadership and the plan.


1. Analyse the reasons why employees might resist the introduction of new manufacturing technology. (15marks)


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Content3 marks

Application3 marks

Analysis4 marks

Evaluation5 marks





Level 2 2 marksCandidate offers twoor more relevantpoints or shows goodunderstanding of theterm or a combination.




Level 1 1 markCandidate offerssingle relevant point orshows someunderstanding of theterm.



1 markCandidate offersundevelopedjudgement basedon evidence.


• Do not want to learn new skills.

• May fear redundancy.

• Fear they will lose status and power in a new system.

• They think the new technology is wrong.

• They do not like who is introducing it or the way it is introduced.

The context is new manufacturing technology.

2. With reference to examples you know, discuss the best way to overcome resistance to change. (15 marks)



• force it through

• train

• educate

• win friends

• show the benefits

• offer rewards

• punish those who disagree.

Depends on:

• the degree and nature of resistance

• the person making the change, their power and resources

• the perceived need for change.

May be a combination of ways, not just one.

The best way may vary according to factors such as the nature of the change, the technology, the resourcesavailable, the employees.

3. To what extent is funding the key to effective project management? (15 marks)

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• May help to make sure the resources are there and that more can be found if necessary.

• May help to get the right inputs, e.g. suitably skilled people and the best, most reliable suppliers.

• May help to provide rewards for those who work well.

• But there are other factors, e.g. external factors may disrupt suppliers.


• Depends how much funding is needed and whether getting it has been a problem.

• Funding will not in itself guarantee completion or quality; resources have to be managed effectively aswell.

• Money is only one resource, e.g. have to have the right idea to begin with, plan the different elementsof the project and make sure they happen when and as planned.

• Need to be able to react if they do not happen as expected.

CASE STUDY

Questions1. Explain the possible costs of the problems experienced when Terminal 5 opened. (5 marks)

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• Bad publicity – may deter people from travelling from there and airlines from using it.

• Costs of compensating people for the inconvenience or lost baggage.

• Costs of lost business on the day as people did not travel.

2. Analyse the reasons why people might have objected to Terminal 5. (8 marks)

Content2 marks

Application3 marks

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• impact on pollution

• impact on congestion

• impact on house prices

• general environmental impact, e.g. some people object to airline travel

• belief that the money could be better spent elsewhere in the economy


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• belief that a new terminal would be better at a different airport.

3. Discuss the possible reasons why the opening of Terminal 5 may have gone wrong. (12 marks)


• Those involved may never have dealt with a project of this scale.

• Unforeseen problems, e.g. let down by suppliers.

• Technical difficulties constructing a building of this size.

• Lack of planning or resources.


• May have been many reasons, not just one.

• This was a major project and a one-off; this can cause problems because there is no experience to basedecisions on.

• May have been too much focus on some aspects and not enough on others, e.g. may have neglected thetraining and preparation of staff.

4. With reference to organisations or industries that you know, to what extent is effective project manage-ment a key element of the success of a business?

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• Effective project management can save time and cut costs.

• It can lead to greater efficiency, fewer mistakes being made and projects being completed on time andto the right standard.

• It can help to win orders and build a reputation.


• Depends on the industry – some industries likely to have more projects than others, e.g. computer soft-ware development is likely to regularly have new projects; having said this, all businesses will have someprojects.

• Managing projects obviously important but is just one element of success and need to consider others,e.g. the external environment, competitors’ actions, whether the project is actually the right one in thefirst place.

Context will come from the chosen industry or organisation.

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