TIME ALLOWED:

3 hours, plus 10 minutes to read the paper.

INSTRUCTIONS:

This is a closed-book examination.

Marks for each question are shown. The pass mark required is 50% in total over the whole paper.

You are reminded that candidates are expected to pay particular attention to their communication skills and care must be taken regarding the format and literacy of the solutions. The marking system will take into account the content of your answers and the extent to which answers are supported with relevant legislation, case law or examples, where appropriate.

NOTES:

You are required to answer Question 1. You are also required to answer any three out of Questions 2 to 5. (If you provide answers to all of Questions 2 to 5, you must draw a clearly distinguishable line through the answer not to be marked. Otherwise, only the first three answers to hand for Questions 2 to 5 will be marked).

MANAGEMENT FUNDAMENTALS FOUNDATION LEVEL EXAMINATION

SAMPLE PAPER 2021

MANAGEMENT FUNDAMENTALS FOUNDATION LEVEL EXAMINATION – SAMPLE PAPER 2021

Question 1: Answer any four of the following:

a) Describe the various types of organisation structures and recommend a suitable structure for a small start-up company, stating your reasons for your recommendation.

b) Discuss the advantages and disadvantages of franchising in relation to the fast food industry.

c) Describe the different types of branding strategies a firms can use, illustrate your answer with examples from an industry of your choice

d) List the different functions of a company’s Chief Information Officer and the IT department and assess the importance of these roles in the current business environment.

e) Discuss the different systems of ethical conduct.

(4 x 10 marks each)

[Total: 40 Marks]

Question 2:

a) Define motivation? Discuss the traditional theories of motivation. (10 marks)

b) Describe how one of the theories you have explained above can be used to increase

levels of motivation in the workplace. (10 marks)

[Total: 20 Marks]

Question 3:

a) Outlining the human resource management (HRM) process, explain the functions of HRM. (10 marks)

b) What is planning? Discuss the various types of organisational plans and suggest

examples of each type of plan for a start-up organisation. (10 marks)

[Total: 20 Marks]

Question 4:

a) Explain the marketing concept, and discuss how does the marketing process work? (10 marks)

b) Describe the elements in a promotional mix and illustrate your answer with examples

from a organisation of your choice. Discuss the advantages and disadvantages of each element.

(10 marks)

[Total: 20 Marks]

Question 5:

a) Define Corporate Social Responsibility (CSR)? Discuss the five pillars of CSR. (10 marks)

b) Outline approaches by which companies can develop and maintain an ethical environment.

(10 marks)

[Total: 20 Marks]

END OF PAPER

THE INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS IN IRELAND

MANAGEMENT FUNDAMENTALS FOUNDATION LEVEL EXAMINATION – SAMPLE PAPER 2021

SOLUTION 1

a) Organisation structures

Organization structure are the set of elements that can be used to configure an organization. How an organization configures itself depends on a variety of factors, such as, number of employees, collaborative nature of the work, decision making process etc. The common types of organization structures are:

• Functional • Conglomerate • Divisional • Matrix

A functional structure is an organizational design that groups similar or related occupational specialties together. Generally organized around the functions of operations, finance, human resources, and product research and development. It can be regarded as an appropriate organisational structure for a start-up because, the advantages are economies of scale, minimizes duplication of personnel and equipment, and makes employees comfortable and satisfied because it gives them the opportunity to talk the same language as their peers. Weakness of the functional structure is that no one function is totally responsible for results, so members within individual functions become insulated and have little understanding of what people in other functions are doing.

A conglomerate structure used by an organization made up of a set of unrelated businesses. Essentially a holding company results from unrelated diversification. A general manager oversees each business and is responsible for profit/loss, acts independently. Basic shortcomings are complexity.

In divisional structure departmentalization is done based on the product/product line, the process or project performed, or the geographical location. In this case, it is possible for one division to have several departments under it, which is why it is ideal for organizations with complex nature of operations and products or product lines. Its benefits are increased operational efficiency and improved capability and expertise of the members of the division. While disadvantage being too much diversification tends to make the organization lose focus, and could also lead to duplication of tasks in the different divisions.

The matrix organizational structure basically combines two or more structures. For example the departments could be divided based on their functions, but then are subsequently grouped according to the products they are associated with.

SUGGESTED SOLUTIONS

Advantages are decentralization of decision-making and increased operational efficiency While disadvantages being increased possibilities of conflicts brought about by confusion on authority, responsibility and accountability.

(10 marks)

b) Advantages and disadvantages of franchising

Franchising is a form of contractual agreement in which a franchisee enters into an agreement with a franchisor (a producer) to sell the goods and services for a specified fee or commission.

The Advantages of Franchising in relation to the fast food industry are:

1. Promotes Multi-Unit Expansion – franchising allows to achieve the multi-unit

expansion of a franchisor business. 2. Creates Capital for Expansion – Multi-unit expansion requires capital for the

development and operation of new locations. Franchisees invest their capital, to fund the development and establishment of a new franchised locations.

3. Supplies Managerial Talent – Multi-unit expansion requires skilled, trained, and motivated. individuals to manage and operate new locations. Franchisees supply the managerial talent needed for new locations and, most important, they have a vested interest in the success of the business.

4. Promotes Economies of Scale – Franchising is all about unit expansion and replicating business systems, sources of supply, and uniformity of operations. Franchising allows to increase purchasing power and achieve economies of scale with suppliers and vendors. These economies of can even extend to marketing where franchisor and franchisees can pool resources and establish common funds.

5. Creates New Revenue Streams – When one franchise they are creating a new business and will benefit from fees and royalties paid by franchisees. When franchisees come on board and sign a franchise agreement they pay an initial franchise fee and, on-going, franchisees pay weekly or monthly royalty fees that are typically a percentage of their gross sales.

The Disadvantages of Franchising in relation to the fast food industry are:

1. Cost – Even after franchisor invest in franchising the business, on-going, franchising

requires investing time and capital. 2. Regulation – Franchising is a regulated industry and requires time and effort for

complying to the regulations. 3. Franchise Sales are Competitive – Franchisors need to attract qualified franchisees

and this means that they will need to invest in marketing, public relations, and relationships with franchise brokers.

4. Less Control – Compared to organic expansion, when businesses are franchised the franchisor are giving up some control to the franchisees who will own and operate their franchised locations.

5. Misunderstanding - Franchise is a complex procedure and disputes may arise between the franchisee and franchisor.

(10 marks)

c) Branding strategies A branding strategy helps establish a product within the market and to build a brand that will grow and mature. The following are commonly used branding strategies:

Branded House/ Manufacturer’s Brand Strategy A “branded house” strategy uses a strong brand—typically the manufacturer’s name—as the identifying brand name for a range of products (for example, Mercedes Benz or Black & Decker) or a range of subsidiary brands (such as Cadbury Dairy Milk or Cadbury Fingers).

House of Brands/ Individual Brand Strategy With the “house of brands” strategy, a company invests in building out a variety of individual, product-level brands. Each of these brands has a separate name and may not be associated with the parent company name at all. These brands may even be in de facto competition with other brands from the same company. For example, Kool-Aid and Tang are two powdered beverage products, both owned by Kraft Foods.

Umbrella Branding/ Family Brand Strategy A family brand is a brand that markets several different products under the same brand name. For instance, consumer products powerhouse Procter & Gamble manages many popular brands including Tide (laundry detergent), Pampers (disposable diapers), Ivory (soap), and Olay (skin care and beauty products) among many others. Each of these brands constitutes its own family, with multiple products carrying the same brand name.

Private-Label or Store Branding Also called store branding, private-label are brand created by a distributor or middleman . In cases where the retailer has a particularly strong identity, the private label may be able to compete against even the strongest brand leaders and may outperform those products that are not otherwise strongly branded. E.g. Tesco private labels

Co-Branding Co-branding is an arrangement in which two established brands collaborate to offer a single product or service that carries both brand names. In these relationships, generally both parties contribute something of value to the new offering that neither would have been able to achieve independently. Effective co-branding builds on the complementary strengths of the existing brands. E.g. Delta Airlines and American Express offer an entire family of co-branded credit cards.

No-Brand/ Generic Branding A number of companies successfully pursue “no-brand” strategies by creating packaging that imitates generic-brand simplicity. “No brand” branding can be considered a type of branding since the product is made conspicuous by the absence of a brand name.

Attitude Branding Attitude branding is a strategy of representing the larger feeling that a brand comes to embody. The idea is that the brand’s feeling or “attitude” transcends the specific products being consumed. Examples of companies that use this approach effectively include:

• Nike: “Just do it” • Apple: “Think different”

Component Branding Some suppliers of important product or manufacturing components try to guarantee positions of preference by promoting these components as brands in their own right. For example, Intel created competitive advantage for itself in the PC market with the slogan “Intel Inside.”

(10 marks)

d) Functions a Chief Information Officer

A company’s chief information officer (CIO) is the executive in charge of information processing, including systems design and development and data centre operations. The person is also responsible for the following:

System design and Development

• Determining how systems should be designed and developed and the software programs installed on it.

Currency of Systems • Deciding whether a firm should update or replace its computer systems and software • Introducing new technologies

Budgets • Managing a budget that balances the benefits of technology against the ever-rising

costs of having the latest systems Policies

• Setting policy for privacy and security concerns

The IT department also has the following tasks:

• Maintaining security both in response to computer virus attacks and emergency recovery from power outages and system failures

• Keeping all of an organization’s computers, printers, scanners, and other equipment operational and current

• Designing networks used within a company and databases where information is stored • Selecting or creating software programs used by the business and providing software

training to employees • Maintaining and managing the use of mobile computing throughout a company • Implementing remote access to computing resources, such as employees’ access to

work files or e-mail when they are working from home

Digital transformation is changing every corner of business, from how companies source parts to how they deal with customers. Each change, both large and small, creates a demand for technology expertise and leadership. CIO’s role is hugely important is driving and managing technology changes. Beyond technology in customer relationships, the use of big data and analytics, as well as more technology in the supply chain, are other major aspects influenced by CIO and IT department.

(10 marks)

e) Systems of ethical conduct

Ethics is the study of the general nature of morals and the specific moral principles that govern a person’s behaviour. Ethics represents the guidelines one uses to make decisions every day. But not all people share the same ethics. Many systems of ethical conduct exist. Some are based on religious systems, some are cultural or national, and some have been passed from generation to generation within a specific ethnic group.

Ethical systems include the following: • Moral relativism, a perspective that holds that there is no universal moral truth but

instead only individuals’ beliefs, perspectives, and values • Situational ethics, which encourages people to make ethical decisions based on the

circumstances of a particular situation, not on fixed laws

• Systems defined by religious traditions, such as Judeo-Christian ethics, which refers to the common set of basic values shared across both Jewish and Christian religious traditions

(10 marks)

[Total: 40 Marks]

SOLUTION 2

a) Define motivation? Discuss the traditional theories of motivation.

Motivation refers to the process by which a person’s efforts are energized, directed, and sustained toward attaining a goal.

Several theories have been proposed to explain how and why people are motivated. The traditional theories focused on the content perspectives of motivation i.e. approach to motivation that tries to answer the question, what factor or factors motivate people. The four early motivation theories:

• Maslow’s hierarchy of needs • Theories X and Y • Herzberg’s two-factor theory • McClelland’s three-needs theory

Maslow’s Hierarchy of Needs Theory In his theory of motivation, Abraham Maslow suggests that humans have a hierarchy of needs and that primary needs must be met first before higher-level needs can be addressed. Within every person is a hierarchy of five needs: 1. Physiological needs: A person’s needs for food, drink, shelter, sex, and other physical requirements. 2. Safety needs: A person’s needs for security and protection from physical and emotional harm as well as assurance that physical needs will continue to be met. 3. Social needs: A person’s needs for affection, belongingness, acceptance, and friendship. 4. Esteem needs: A person’s needs for internal esteem factors such as self-respect, autonomy, and achievement and external esteem factors such as status, recognition, and attention. 5. Self-actualization needs: A person’s needs for growth, achieving one’s potential, and self- fulfilment; the drive to become what one is capable of becoming.

McGregor’s Theory X and Theory Y Douglas McGregor proposed two assumptions about human nature: Theory X and Theory Y. Theory X is a negative view of people that assumes workers have little ambition, dislike work, want to avoid responsibility, and need to be closely controlled to work effectively. Theory Y is a positive view that assumes employees enjoy work, seek out and accept responsibility, and exercise self-direction. McGregor believed that Theory Y assumptions should guide management practice and proposed that participation in decision making, responsible and challenging jobs, and good group relations would maximize employee motivation.

Herzberg’s Two-Factor Theory Frederick Herzberg’s two-factor theory (also called motivation–hygiene theory) proposes that intrinsic factors are related to job satisfaction, while extrinsic factors are associated with job dissatisfaction. The extrinsic factors are the factors that remove job dissatisfaction and were called hygiene factors. When these factors are adequate, people won’t be dissatisfied, but they won’t be satisfied (or motivated) either. To motivate people, Herzberg suggested emphasizing motivators, the intrinsic factors having to do with the job itself.

Three-Needs Theory David McClelland and his associates proposed the three-needs theory, which says three acquired (not innate) needs are major motives in work. These three are the need for achievement (nAch), the drive to succeed and excel in relation to a set of standards; the need for power (nPow), the need to make others behave in a way they would not have behaved otherwise; and the need for affiliation (nAff), the desire for friendly and close interpersonal relationships.

(10 marks)

b) Describe how one of the theories you have explained above can be used to increase levels of motivation in the workplace.

Most managers are likely use a mixture of Theory X and Theory Y. Although both styles of management can motivate people, the success of each largely depend on the team's needs and wants and the organizational objectives.

Managers may use a Theory X style of management for new starters who will likely need a lot of guidance, or in a situation that requires managers to take control such as a crisis. But managers wouldn't use it when managing a team of experts , who are used to working under their own initiative, and need little direction. If they did, it would likely have a demotivating effect and may even damage their relationship with them.

However, both theories have their challenges. The restrictive nature of Theory X, for instance, could cause people to become demotivated and non-cooperative if your approach is too strict. This may lead to high staff turnover and could damage managers reputation in the long term. Conversely, if they adopt a Theory Y approach that gives people too much freedom, it may allow them to stray from their key objectives or lose focus. Less-motivated individuals may also take advantage of this more relaxed working environment by shirking their work.

(10 marks)

[Total: 20 Marks]

SOLUTION 3

a) Outlining the human resource management (HRM) process, explain the functions of HRM.

Human resource management (HRM) is the organizational function that encompasses every aspect of the “human” in a business, including hiring, training, motivating, evaluating, and compensating personnel. To ensure that an organization has qualified people to perform the work that needs to be done, specific HRM activities need to be performed. These activities compose the HRM process.

The different functions performed by HRM include:

Planning for staff- Staff planning involves determining how many employees a company needs. A workforce profile is compiled as a form of “personnel inventory” and includes information about each employee. The future demand for employees is determined by a process called forecasting.

Recruitment & Hiring- Recruitment is the process of finding, screening, and selecting people for a job. Hiring - begins by narrowing down the number of applicants who are qualified for a job. They are then interviewed by human resources personnel and the job’s manager and sometimes the other people he or she supervises.

Orientation & Trainings - Orientation integrates new employees into an organization so they become productive faster, feel part of the organization, and do not quit shortly after being hired. Other forms of training include on-the-job training, apprentice training programs, and simulation training.

Evaluating - A performance appraisal is a formal evaluation of an employee’s performance. Providing feedback and suggestions to employees for improvement, coaching and encouraging them, and helping them set goals are parts of appraisals.

Compensating - Compensation, or payment for work performed, consists of financial and nonfinancial payments.

Terminating - Termination is when companies permanently lay off workers as a result of poor performance or a discontinued use for their services.

(10 marks)

b) What is planning? Discuss the various types of organisational plans and suggest examples of each type of plan for a start-up organisation.

Planning involves defining the organization’s goals, establishing an overall strategy for achieving those goals, and developing plans for organizational work activities. Planning can be informal or formal. The four purposes of planning include providing direction, reducing uncertainty, minimizing waste and redundancy, and establishing the goals or standards used in controlling.

Organizational plans can be categorised in terms of breadth (strategic or operational), time frame (short-term or long-term), specificity (directional or specific), and frequency of use (single use or standing).

Strategic plans apply to the entire organization and seek to position the organization in terms of its environment, while operational plans detail how objectives are to be achieved and cover shorter period of time. For example strategic plan for a healthy food delivery service start-up could be to expand the service to all major cities in a country in next 7 years. While operational plan could be to allocate 30% of their annual income for the planned expansion.

Long-term plans are those with a time frame beyond five years. Short-term plans cover one year or less. For example long term plan could be acquisition of all vehicles used for the delivery service. Short term plan could be updating booking systems to manage rising demand.

Specific plans have clearly defined objectives. Directional plans identify more general guidelines. For example directional plan for expansion could include accessing the healthy food delivery market in the target cities. While specific plans could include listing and contacting healthy food suppliers/providers in the target cities.

A single-use plan is a one-time plan designed to meet the needs of a unique situation. Standing plans are on-going plans that provide guidance for activities per-formed repeatedly. For example single use plan for the healthy food delivery start up could be specific budgets to meet the economic scenario during the Covid-19 pandemic. While standing plan could be delivery schedules for peak delivery times.

(10 marks)

[Total: 20 Marks]

SOLUTION 4

a) Explain the marketing concept, and discuss how does the marketing process work?

The marketing concept is the belief that companies must assess the needs of their consumers first and foremost. Based on those needs, companies can make decisions in order to satisfy their consumers’ needs, better than their competition. Companies that hold this philosophy believe that their consumers are the driving forces of their business. It also focuses on aligning all functions of the organization to meet or exceed the customer’s needs by providing superior products and customer service. In addition, the marketing concept focuses on satisfying customers over the long term.

The marketing process involves the following steps:

1. Identifying a market need. Identifying a market need is the first step in the marketing

process, if there is demand in the market.

2. Conduct market research and develop a marketing plan. This involves analysing the marketing environment, if any political, economic, societal, or technological factors could affect the business and its profitability. In addition, an internal analysis that includes evaluating potential customers, competitors, and collaborators. These analyses form the foundation for his marketing plan.

3. Identify target customers. Businesses must then consider who their ideal customers

are and what they think and want and then use this information to inform their marketing decisions.

4. Implement the marketing mix. Having identified a customer need and developed a

product that not only meets that need but also fulfils it better than the competition,

businesses then need to contemplate the pricing strategy to ensure that a profit is made and that they remain competitive. Pricing strategy, needs to be sensitive to any other direct or indirect costs that the customer may incur from using the service. The place component of the marketing mix involves deciding how the product will be distributed to the customers. Promotion, is the most visible part of the marketing mix. It involves creating a memorable brand name for the business to distinguish it from all others. To decide how to communicate with the marketplace, to engage with his current customers and attract new ones.

5. Maintain good customer relationships. The final step in the marketing process is to

establish and nurture long-term, trusting relationships with customers to foster their loyalty and get repeat business.

(10 marks)

b) Describe the elements in a promotional mix and discuss the advantages and disadvantages of each element.

A promotional mix is the strategic combination of promotional tools used to reach customers to achieve a product’s marketing objectives. Included in the mix are advertising, public relations, personal selling, and sales promotions.

Advertising Advertising is a form of marketing communication directed towards a consuming audience produced with the intent of raising awareness or attention towards a product, service or cause for a business or organization. For example Coca-cola uses TV, radio, billboards for advertising its products.

Public Relations Public Relations is a form of marketing communication that is subtle and intends to enhance the public’s favour towards a company or organization. Public relations may take the form of new product announcement, the acquisition of another company, the announcement of an employee’s promotion or charitable work that the company is doing in the community. Public relations communication tends to promote a company’s goodwill. For example Coca-cola undertakes projects like project Unnati that supports farmers in India. Also sponsors events in sports and music.

Sales Promotions Sales promotions are incentives and discounts marketers use to achieve near-term or immediate results such as a sale to boost revenue performance at the end of a quarter or year. Sales Promotions are also used to move inventory, or at a more sophisticated level, used to manage demand itself. For example Coca-cola runs campaigns like “drivers drink free on us”; “get your Christmas caravan pack-redeem tokens from participating brands”; “under the crown scheme”.

Personal Selling Personal selling is the most engaged and interactive form of marketing communication. Sales is a function of marketing and salespeople execute the marketing plan by informing, advising, offering, accepting and completing transactions. For example Coca-cola uses social media sites to directly connect with their customers.

The advantages and disadvantages of each element are summarised below:

(10 marks)

[Total: 20 Marks]

SOLUTION 5

a) Define Corporate Social Responsibility (CSR)? Discuss the five pillars of CSR.

Corporate social responsibility (CSR) is defined as a company’s obligation to conduct its activities with the aim of achieving social, environmental, and economic development. Corporate responsibility can cut across almost everything a business does. It can involve a range of CSR activities, such as:

• environmental management, eg waste reduction and sustainability • responsible sourcing, eg using only fair trade ingredients • improvement of working standards and conditions • contributing to educational and social programmes • employee volunteering • socially responsible investment • development of employee and community relations

Being socially responsible requires a company to make good decisions in the following five major areas or the 5 pillars of CSR are:

1. Human rights and employment standards in the workplace 2. Ethical sourcing and procurement 3. Marketing and consumer issues 4. Environmental, health, and safety concerns 5. Community and good-neighbour policies

Community and good-neighbour policies The Community pillar relates to how businesses interact with community and voluntary organisations in their local communities. Building trust and developing strategic partnerships in the communities businesses operate in is essential to secure long-term sustainability. It can increase staff loyalty, attract new talent whilst making a positive impact on society.

Human rights and employment standards in the workplace The Workplace pillar is concerned with how a business supports, engages and motivates their employees. It looks at issues such as work-life balance, employee health and wellbeing, diversity and inclusion, organisational culture and volunteering. Motivated and engaged employees are more productive and people prefer to work for employers they can trust.

Marketing and consumer issues The Marketplace pillar relates to how an organisation manages its relationship with its customers and suppliers. Buying and selling products or services is intrinsic to business - ensuring this is done in an ethical and sustainable manner is key to a company’s reputation and long-term viability.

Ethical sourcing and procurement The governance and communication pillar relates to how businesses support, manage and communicate their responsible and sustainable business practices within their organisations. A fundamental aspect is the involvement of stakeholders in identifying the most material areas that responsible/sustainable activities should address.

Environmental, health, and safety concerns The Environment pillar relates to the management of a company’s impact on the environment. Leading businesses know that they have a role to play in managing the world’s resources efficiently and in combating climate change. Sound environmental strategies are essential to the sustainability of a business and can also reduce costs.

(10 marks)

b) Outline approaches by which companies can develop and maintain an ethical environment.

The culture of a company influences the moral judgment of employees and stakeholders. Companies that work to create a strong ethical culture motivate everyone to speak and act with honesty and integrity. Approaches by which companies can develop and maintain an ethical environment include:

1. Top Management Leads Ethics by Example

One of the most noticeable ways that companies can demonstrate their commitment to creating an ethical organizational environment is to ensure that top managers and leaders lead by example. Employees look to the behaviour of top management as an example of the type of behaviour that the company finds acceptable in the workplace.

2. Communicate Clear Expectations of Good Ethics

Companies that create and disseminate an official code of ethics send a clear message of the expectations for their employees. A code of ethics or code of conduct clearly outlines the organization’s primary values and ethical rules that they expect everyone to follow.

3. Offer Formal Ethics Training

A formal ethics training program sends a strong message about a company’s ethical stance. Seminars, workshops, and other ethical training programs reinforce the organization’s

standards of conduct and clarify the types of behaviours that the company deems permissible or out of bounds.

4. Provide Protection for Employees

There are several ways that companies can assure their employees that they can safely report unethical behaviour without fear of losing their jobs or getting some sort of punishment or consequence. An objective third party such as an ethics counsellor, ethics officer, ombudsman, or ethics consultant can be helpful in these situations. An ombudsman can get the tools and resources to help with a consultation or investigation of a complaint about ethical behaviour.

(10 marks)

[Total: 20 Marks]

Images Source: MICHAEL, R., SOLOMON, P., ANNE, M. and MARTIN, K., 2017. Better Business Plus Pearson Mylab Business with Pearson eText. PEARSON EDUCATION Limited.