Chapter 5 Key Business Functions

Answers to Think It Over

1 Mr Chow should invite managers of five departments to the meeting. These departments are:
human resources, operations, marketing, finance and risk management.

2 The departmental managers should help Mr Chow solve the problems through the use of
different business functions.
 The human resources manager is responsible for recruiting 200 new workers in Thailand.
 The operations manager is responsible for finding a location in Thailand for the new
factory. He should also decide on the production capacity and design the facility layout.
 The marketing manager should analyse the market and develop marketing strategies to
promote the product.
 The finance manager should decide how to obtain the HK$10 million for the investment
plan, by borrowing from a bank or issuing new shares to existing shareholders or new
investors, etc.
 The risk management manager should evaluate the risks involved in this investment and
choose the most suitable way to manage the risks.

Answers to Try This Activity

A5-1 a Training programmes offered or sponsorship for further study
b Monetary rewards such as salaries, allowances, and non-monetary benefits such as
annual leaves, etc.

A5-2 a Human resources management may support the finance department in the following
ways:
 Determine the compensation packages and salary adjustments for employees
working in the finance department
 Recruit competent workers for the finance department
 Provide training programmes on finance-related skills to finance staff
(Any other reasonable answers)

b Human resources management may support the production department in the

following ways:
 Determine the compensation packages and salary adjustments for workers in the
production department
 Recruit competent workers for the factory
 Provide training programmes to production workers
(Any other reasonable answers)

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 c Human resources management may support the marketing department in the following
ways:
 Determine the compensation packages and salary adjustments for employees in
the marketing department
 Recruit competent workers for the marketing department
 Provide training programmes on marketing-related skills (e.g., communication
skills) to salespeoples
(Any other reasonable answers)

A5-3 a Financial management may support the marketing department by obtaining funds to
carry out promotional activities. For example, a company may decide to take out
short-term loans to air TV commercials.

b Financial management may support the risk management department by developing

budgets for implementing risk management strategies. For example, a hotel may
decide to spend a certain amount of money replacing existing furniture with fire-proof
ones.

A5-4 Free answer

A5-5 Operations management may support the marketing department in the following ways:
 Make sure that inventory is available for sale when needed
 Assure that product quality is up to the standard so that customer complaints can be
reduced
 Produce products and services according to the comments that the marketing
department collects from customers
(Any other reasonable answers)

A5-6 Free answer

A5-7 a Marketing management may support the operations department in the following ways:
 Collect customer feedback which helps the operations department improve
product quality
 Help the operations department determine what products are to be produced
based on market information
 Collect competitors’ product information so that the operations department can
improve the company’s products
(Any other reasonable answers)

b Marketing management may support the human resources department by finding out
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 what customers need so that the human resources department can provide training to
employees. For example, considering the increasing number of Mainland students,
tertiary institutions may provide Mandarin classes for their staff.

A5-8 a Marketing information that should be uploaded includes: the products (i.e., different
kinds of cakes with pictures) and their prices, outlet addresses, the procedure for
ordering, promotional details (if any), etc.

b I may use the website to promote my products in the following ways:

 Upload information about new cakes regularly
 Allow customers to order cakes directly on the website
 Offer discounts to customers who buy cakes online
(Any other reasonable answers)

A5-9 a Information management may support the human resources department in the
following ways:
 Keep employees’ attendance records
 Store employees’ personal data
 Handle the payroll
(Any other reasonable answers)

b Information management may support the finance department in the following ways:
 Keep accounting records
 Manage the accounting systems
(Any other reasonable answers)

c Information management may support the risk management department in the

following ways:
 Report the number of accidents
 Report the number of employees injured
(Any other reasonable answers)

A5-10 a Risk management may support the production department in the following ways:
 Identify potential risks in the production process
 Determine the risk management method to deal with the risks
(Any other reasonable answers)

b Risk management may support the marketing department in the following ways:
 Identify the risks in different market segments
 Identify the risks in launching a new product or service
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  Determine the risk management method to deal with the risks

A5-11 a Insurable risks: fires, thefts

For example, if a fire breaks out or properties are stolen, the hotel can apply for
compensation from the insurance company.

Non-insurable risks: act of terrorism, war

For example, if a hotel was damaged by terrorists or in a war, the loss would not be
covered by insurance.

b To deal with the risk of fire, the hotel may install fire alarms or automatic sprinkler
system to reduce the loss (Risk reduction).
To deal with the risk of thefts, the hotel may employ more security guards (Risk
reduction).
To deal with the risk of an act of terrorism or war, the hotel may eliminate the risk by
relocating to a safe country (Risk avoidance).
(Any other reasonable answers)

Answers to Check Your Progress

Q5-1 a Training and development
b Human resources planning, recruitment and selection

Q5-2 B
Q5-3 D

Q5-4 a Personal savings

b Personal savings or admitting new partners
c Issuing new shares to existing shareholders or to new investors

Q5-5 D
Q5-6 D
Q5-7 C
Q5-8 A

Q5-9 Operations management tasks involved include:

 Forecasting demand: estimate customer demand for the canteen’s services. This
estimate is used to plan the capacity of the canteen. Customer demand should be
proportional to the number of students in the university.
 Planning for capacity: determine the capacity of the canteen, i.e., the size of the
canteen and number of seats inside.
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  Choosing a facility location: the university finds a location for the canteen, which
should be easily accessible to students.
 Designing a facility layout: determine the physical arrangement of resources (e.g.,
kitchen, cashier) needed to produce goods and services.
 Scheduling work: determine how long each production task (e.g., cooking) takes to
complete and establish starting and ending times for each task.

Q5-10 a Geographical structure

b Product structure
c Functional structure

Q5-11 C

Q5-13 Data are raw facts which are just numbers, names or quantities. When data are processed
and analysed, they become information. Information has meaning.
For example, the number of returned products is data but, by analysing the causes, it
becomes information which can help managers identify potential production problems.
(Any other reasonable examples)

Q5-14 B

Q5-15 Bad weather:

 Not dispatch goods to customers in bad weather (risk avoidance)
 Buy insurance (risk transfer)
Fire:
 Buy insurance (risk transfer)
 Install smoke detector and an automatic sprinkler system (risk reduction)
Accident:
 Provide training to staff on industrial safety (risk reduction)
 Buy insurance (risk transfer)
Theft:
 Employ more security guards (risk reduction)
 Install anti-theft system (risk reduction)
 Buy insurance (risk transfer)
Labour strike:
 Provide employees with better benefits and services which can strengthen their
commitment to the company (risk reduction)
 The human resources department of the firm can do a better job in handling grievances
from employees, and in promoting a good relationship between the company, the
employees and the labour union. (risk reduction).
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 Bad weather, fire, accidents, and theft are insurable risks. However, a labour strike is a
non-insurable risk.

Q5-16 a Risk transfer

b Risk avoidance
c Risk reduction

Q5-17 A

Q5-18 C Hiring security guards is a risk reduction strategy because this reduces the risk of theft.

Answers to Discussion Questions (p. 175)

1 This is because its employees need to take tour groups abroad and are required to take charge
of the entire tour arrangements and handle all of the problems themselves. Management skills
can help them perform their jobs effectively.

Besides, they have to deal with customers personally every day. Communication skills help
them build a good relationship with customers.

2 Training can help improve the service quality of Hong Thai’s employees. Hong Thai can thus
provide customers with better service than other competitors. As a result, its competitiveness
is enhanced.

3 Skills that Hong Thai can add to its training programme include:
 First aid training: First aid can save lives in case an accident occurs during the trip.
 Crisis management: Tour guides can learn how to handle crises, such as accidents.
 Interpersonal skills: Tour guides can be trained to effectively deal with local guides, tour
members and different parties/associates in foreign countries. It is important for tour
guides to know how to fit in with others’ ideas and constraints.
 Organisational skills: Tour guides can be trained to do a better job at making tour
arrangements.
 Presentation/Negotiation skills: This ensures that tour guides can effectively
communicate with tour members.
 Stress management: Tour guides may need to work under stress. They should learn how
to handle stress in order to maintain a balanced life.
 English: Tour guides may need to communicate with associates and other parties in
foreign countries. Very often, English is the common language of communication.
(Any one of the above or any other reasonable answers)

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Answers to Discussion Questions (p. 187)
1 Maxim’s Cakes’ marketing strategy (4Ps) is as follows:
(i) Product: Sells a variety of cakes and breads. Different cakes are produced in different
seasons and for special festivals. It regularly introduces products with creative designs
and new flavours.
(ii) Price: Keeps its prices competitive
(iii) Place: Shops are located in MTR stations and major residential and commercial areas.
Customers can also order cakes via the internet.
(iv) Promotion: Offers a discount to customers who use certain credit cards to buy cakes or
cake coupons.

2 This is because it helps attract more customers and differentiate their products from other
cake shops.

3 Any reasonable answers, including inviting a celebrity to be the spokesperson, TV

advertisements, lucky draws, free gifts, discounts, coupons, etc.

Answers to Assessment
MCQ
5.1 A
5.2 A
5.3 B
5.4 D
5.5 B
5.6 B
5.7 B
5.8 A
5.9 C
5.10 D
5.11 D
5.12 C
5.13 D
5.14 D
5.15 A
5.16 B
5.17 C
5.18 C
5.19 A
5.20 D
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Short Questions
5.21 Problems include:
 Inexperienced workers
 Low quality raw materials
 Old or ageing machines
 Poor quality assurance
(Any three of the above, 1 mark for each point)
(Any other reasonable answers)

5.22 A financial plan is a forecast of a company’s financial needs over a period of time. (1 mark)
It outlines the means of obtaining and utilising funds to meet those needs. (1 mark)
If expenses are expected to be higher than income next year, the finance manager should
find ways to obtain funds. (1 mark)

5.23 a Information needed includes:

 Sales forecast which helps determine the production capacity of the firm and thus
manpower of the firm needed
 Skills required for production activities
 Labour supply in the market
(Any two of the above, 1 mark for each point)
(Any other reasonable answers)

b Information needed includes:

 Projected sales of the new product
 Production cost of the new product
 Expected rate of return
(Any two of the above, 1 mark for each point)
(Any other reasonable answers)

5.24 A business function often depends on other business functions to provide the required
information, resources and/or services. Without support from other business functions, it
would not function effectively. (2 marks)

For example, when a company produces goods or services (operations management) and
promotes them to customers (marketing management), it should first hire workers (human
resources management) to perform these tasks. (2 marks)

5.25 Information management can help the bank manager collect customer complaints each
month. (2 marks)
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 The bank manager can then analyse and identify the causes of those complaints. (1 mark)
Improvement plans can thus be made based on the results of the analysis. (1 mark)
Or
Information management can help the bank manager find out in what ways customers use
banking services. (2 marks)
For example, the login rates of the bank’s website can reveal the frequency with which
customers use online banking services. (2 marks)
(Any other reasonable answers)

5.26 Human resources management tasks that can contribute to improving employees’ job
performance include:
 Recruitment and selection: Ensure that the company hires workers who possess
appropriate skills for the jobs.
 Training and development: Help improve workers’ knowledge and skills to better
perform their jobs.
 Performance appraisal: Help managers evaluate workers’ performance and identify
ways to improve workers’ job performance.
 Compensation and benefits management: Develop a fair and competitive compensation
system which can motivate workers to perform their jobs well.
(Any three of the above, 2 marks for each point)

5.27 Risks in running a warehouse and ways to handle those risks are as follows:
 Fire: Buy insurance and install fire alarms and automatic sprinkler system
 Theft: Buy insurance and hire security guards
 Machine breakdown: Check machines regularly and have back-up machines
 Injuries: Buy insurance and provide work safety training for workers
(Any three of the above, 1 mark for listing the risk, 1 mark for the method suggested)
(Any other reasonable answers)

5.28 The finance manager should develop a financial plan to forecast the company’s financial
needs for the expansion. (2 marks)
He should also list ways to obtain and utilise funds to meet those needs. (2 marks)
A budget with details on the expansion project’s income, costs and expenses should be
developed to estimate the flow of money into and out of the business. (2 marks)

5.29 Marketing management helps a company generate revenue by providing customers with
goods and services that can satisfy their needs. (2 marks)
The marketing department should first divide the market into small consumer groups and
select the target market(s) to serve depending on their resources and marketing objectives.
(2 marks)
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 The marketing department then finds out what their target customers need and develops an
effective marketing strategy consisting of four key elements (i.e., product, price, place and
promotion). (2 marks)
The marketing department then implements the marketing plan by collaborating with other
departments on product design, pricing, distributing, branding, packaging and promoting.
When all these functions are performed well, the company will be able to provide goods and
services that can satisfy customer needs and generate revenue. (2 marks)

5.30 The major marketing tasks involved in the expansion of the supermarket include:
(i) Marketing planning: Segments the market into smaller groups and selects the target
market(s) to serve. Then develop an effective marketing strategy which consists of four
key elements (i.e., product, price, place and promotion). (2 marks)
(ii) Marketing organising: Determines how marketing activities concerning the expansion
plan should be coordinated and organised. (2 marks)
(iii) Marketing implementation: Works with other people both inside (e.g., finance
department and human resources department) and outside (e.g., real estate agents,
suppliers) the company to carry out the expansion plan. (2 marks)
(iv) Marketing controlling: Measures and evaluates the results of the expansion plan.
(2 marks)

Application Problems
5.31 a The recruitment and selection function can help the park select and hire workers who
have previous working experience in the service industry and who have the required
skills. (2 marks)

b The training and development function (e.g., providing Putonghua courses) can help the
park improve workers’ knowledge and skills in providing good customer services.
(2 marks)

c The performance appraisal can help the park evaluate workers’ performance in
providing good customer service and help them identify ways to improve their
performance. The park can then reward those who have good performance in order to
retain talent. (2 marks)

5.32 a To apply the risk avoidance strategy, the hotel can prohibit residents from smoking in
the hotel. This can eliminate the risk of fire due to smoking. (2 marks)

b To apply the risk reduction strategy, the hotel can install an automatic sprinkler system
to reduce the damage when the fire breaks out. (2 marks)

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 c To apply the risk transfer strategy, the hotel can take out fire insurance and transfer the
risk to insurance companies. (2 marks)
(Any other reasonable answers)

5.33 a Information management can help collect all revenue (i.e., income) and expense data.
(1 mark)
The movement of cash into and out of the business can then be monitored and analysed.
(1 mark)
If it is found that a large amount of money is usually needed at the end of the month
(e.g., paying flower suppliers and settling bills), a sufficient amount of money should be
set aside for that purpose. (1 mark)

b Information management can help keep track of the daily sales of floral products.
(1 mark)
These figures can be turned into sales trends for different floral products. This enables
the florist to detect changes in customer tastes. (1 mark)
If it is discovered that sales of roses are rising, the florist should purchase more roses
from suppliers or import a greater variety of roses. (1 mark)

c Information management can help collect the daily purchases and sales of different
floral products. (1 mark)
This enables the florist to monitor the stock on hand on a daily basis. (1 mark)
If it is found that the inventory of roses is dwindling, the florist can contact the supplier
to purchase more immediately. (1 mark)

5.34 a Sales data over a period of times provide information on the product trends of different
models of computer printers. (1 mark)

b To investigate the sales problem, the marketing manager needs to know about the
following information:
 The economic condition of the market
 Competitors’ printers
 Competitors’ marketing strategies
(Any two of the above, 1 mark for each point)
(Any other reasonable answers)

c The major problem with Tai Fat’s information management is that it does not provide
timely and complete sales data (i.e., the sales data from the previous month for the new
printer model) and market information to assist the marketing manager in making
decisions. (2 marks)
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 d Information management collects sales data about different printer models and other
useful market information. (1 mark)
These help the marketing manager develop an effective marketing strategy. (1 mark)

5.35 a Human resources management tasks needed include:

 Human resources planning: Ensure that outlets in China have the right number and
kinds of workers
 Recruitment and selection: Hire workers for outlets in China
 Training and development: Provide training to store managers and workers in China
 Compensation and benefits management: Develop a fair and competitive
compensation system for staff in China
(Any three of the above, 2 marks for each point)

b World Toy Ltd can finance the new business venture by:
 Obtaining a bank loan (1 mark)
 Issuing new shares to existing shareholders or to new investors (1 mark)

c Information management can help collect important information (e.g., labour regulation,
strike frequency, crime rate of various provinces/cities) on running a business in China.
(1 mark)
This helps the company assess and identify the risks incurred in this business venture
and develop the most suitable methods to control those risks, e.g., labour strike,
employees’ safety, social stability, law and order. (2 marks)

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