HONG KONG ASSOCIATION FOR BUSINESS EDUCATION

HONG KONG DIPLOMA OF SECONDARY EDUCATION

EXAMINATION 2014 / 15

BUSINESS, ACCOUNTING AND FINANCIAL STUDIES

MOCK EXAMINATION

PAPER 2B
BUSINESS MANAGEMENT MODULE

Marking Scheme for Markers’ Use Only

 Business Management Module (BAFS Mock Examination)2014/15
SECTION A
Answer ALL questions in this section.

1. TWO external factors affecting the wage policy of a company. (4 marks)

The company’s ability to pay – if the firm is marginal and cannot afford to pay competitive
rates, its employees will generally leave it for better-paying jobs

The company’s productivity – higher productivity usually with higher pay, but still relate to the
inflation, rate in the economy

The company’s internal demand for labour – it still link with the supply of labour in the
economy (any 2x2m@=4m)

2. TWO different promotion mix strategies suitable to the buying behaviour of industrial buyers and (4 marks)
individual consumers.

for industrial buyers, more emphasis will be put on personal selling because the products are
usually more complex and customaries

for consumers, mass advertising will be used more often since there are larger number of buyers
and they are more dispersed (any 2 x 2m@ =4m)

3. Two methods to increase the cash level in a small business without affecting its capital structure.

Sales promotion (4 marks)

Factoring trade debtors to financial institutions

Obtain trade credit . (Any 2 x 2@=4m )

An online bookstore can make use of information technology to expand its market :

The store can provide better service to customers by building a system which allows its customers to
trace their shipments anytime on its website.
4.
The store can search information about their customers on the Internet. It can thus better know their (6 marks)
customers and tailor products to their needs.

The store can find new customers via the Internet. By using search engines such as Google and Yahoo!,
it can locate customers it intends to target.

The store can build a website so that customers can easily get information about the company online.
(Any 3 x 2 @ = 6m)
EOQ Total Costs if each order is 500 units:
=√2(D)(CPO)/(UC)(ICC) =Total carrying costs + Total ordering
=√2(16,000,000/4000)($200)/$4000(1%) =500/2x($4000)(1%)+4000/500($200)
=200 units (1m) =$10,000+$1,600
=$11,600 (1m)
5 Total Costs if adopts E.O.Q : Costs saved: (6 marks)
=200/2x(4000)(1%)+4000/200($200) =$11,600-$8,000
=$4,000+$4,000
=$8,000 (1m) =$3,600 (1m)
From the calculation, it shows that Fortune company can use the EOQ method that aims at finding the
optimal order quantity to minimize its total inventory cost. (2m)
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 Business Management Module (BAFS Mock Examination)2014/15
SECTION B

Answer ALL questions in this section.

6. (a) Core customer value--the essential benefit that the customer is really buying, e.g. conservative of the environment,
understanding culture, health purpose, eco education, etc.
Augmented product-- additional consumer services and benefits around the core benefits and actual product, e.g. insurance,
first-aid kids, briefing and debriefing sessions, etc.
(2 marks for each level of product with appropriate example; max. 4 marks)

(b) Eco-tour is now at the growth stage because of growing market size and number of competitors.

(1 marks for identification of stage with brief explanation, max. 1 mark)

The marketing mix could be:

 Product : offer product extensions, service, warranty, e.g. offering different routes, briefing sessions for the activity,
free pick-up services

 Price : lower price with passage of time, e.g. gradual reduction of price, quantity discount, seasonal discounts,
promotional pricing (special event pricing), etc.

 Place : build intensive network of outlets, e.g. open more branches, online reservation, etc.

 Promotion : appeal to mass market to build awareness and interest, e.g. keeping or slightly increase promotion
spending, build conviction and purchase.

(1.5 marks for each marketing mix element; max. 6 marks)

(c) The personal factors are:

 Age and life-cycle stage: the age of the retired people may have direct relationship with their physically capability to have
outdoor activities

 Economic situation: the availability of financial resources may have effect on their purchasing power and their ability to
afford local Eco-tour

 Lifestyle: the pattern of acting and interacting in the world may affect retired people’s choice. Some may like to have
outdoor activities and join local Eco-tour, but some may not.

 Personality: some retired people who are high on sociability will like to join the tour to have more interaction with others.
(any 3 factors, each carries 1 mark; max. 3 marks)

(d) The motivational theories may be:

i. Hierarchy of needs
Safety needs: job security, safety, family stability, economic security.
e.g. provide long-term contract, stable income, insurance, retirement scheme, medical allowance for tour guides
Social needs: to belong, to interact with others, to have friends, to love and be loved
e.g. formal and informal social gatherings (lunch, breakfast, birthday celebration of every month etc.) between
manager and employees or among themselves
Esteem needs: respect and recognition from others. e.g. promotion, praise, “tour guide of the month”
Self-actualization needs: to realize one’s potential, to grow, to be creative, and to accomplish
e.g. chance for training and development – sponsorship in tourism relevant courses, more autonomy in developing
various routes or itineraries
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 Business Management Module (BAFS Mock Examination)2014/15

ii. Dual factors theory

Hygiene factors : sources of job dissatisfaction, relating to job context
e.g. company policy and administration, supervision, relationship with peers and manager

Motivators : sources of job satisfaction, relating to job content

e.g. autonomy, recognition, increase responsibility, growth .
(Other motivation theories, such Theory X and Y is also accepted)
(2 marks for each way with other relevant theory; max. 4 marks)
7.(a) Ways to revise credit policy:

 tightening credit standards: not to offer credit to everyone and decrease credit limit

 shortening credit period: decrease credit period to a lower period that is compatible in the industry

 increasing cash discounts: increase early payment discount to encourage early payment from debtors

 strengthening debt collection policy: take immediate actions to deal with overdue payments

(2marks for each relevant way, max. 4 marks)

   
() (   )= + + + − 
( + %) ( + %) ( + %) ( + %)

= 239.95- 250 = -10.05

As the value of NPV is negative, the company should not accept the project.

(1 mark for calculation and 1 mark for conclusion, max.2 marks)

(c)Disadvantages of debt financing:

 Loss of flexibility: an interest burden as the company must pay the interest no matter there is a profit or loss

 Worsening cash flow position: cash flow will be affected when repaying loan installments and loan renewal may also be
needed

 Low priority in repayment: in case of liquidation, debt holders receive loan amount before owners/investors

(2 marks for each disadvantage, max. 4 marks)

(d)Steps of manpower planning

 forecast manpower demand based on company plan, e.g. to determine the new production target

 forecast manpower supply, e.g. to find out how many staff will be staying in the company

 compare the supply with demand, e.g. to find out how many is the discrepancy

 design human resource plans to deal with the predicted gap, e.g. to develop recruitment plans for insufficient manpower
supply to cope with the expansion plan . (1 mark for each step, max 4 marks)

(e) advantages of the recruitment method

 less expensive due to the cost saving of advertisement on newspaper

 immediate available of suitable applicants due to the quick referral by existing staff

 team spirit may be promoted easily (2 marks for each advantage, max. 4 marks)

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SECTION C

Answer ONE question in this section.

8. (a) Criteria for assessing credit standing of customers:

Character: The degree to which a borrower feels a moral obligation to pay his/her debts, measured by the credit and
payment history.

Capacity: Judgment of customer's ability to pay. The capacity to repay is the most critical of the five factors. E.g. The bank
will consider the cashflow of the lender, the timing of repayment, and the probability of repayment.

Capital: The amount of capital of the lender is equal to the total of capital from debt and equity. Banks prefer low
debt-to-asset and debt-to-net worth ratios. These indicate financial stability.

Collateral: An asset owned by the borrower, but promised to the bank against non-payment of the loan. Collateral may
include the home of the lender, inventory and equipment of a firm.

Condition: Impact of general economic trends on firm or special developments in economy affecting ability to meet
obligations. ( 2 marks for each relevant criteria; max. 8 marks)

(b) Methods for handling default risk:

Risk avoidance: Not to engage in any activity in order to avoid its associated risk (keeping away situations that can be
lead to risk). E.g. avoid granting loans to those customers who have poor credit standing; avoid lending too much money
to a single customer / customers in the same industry.

Risk prevention/reduction: Taking measures to prevent or reduce the chance of the unfavourable events from occurring.
E.g. obtaining a guarantor who shares the responsibility.

Risk assumption: A bank may decide to accept or assume a risk. E.g. make an appropriate provision on doubtful debts.

Risk shifting: Risk can be shifted to other parties. E.g. some of the outstanding loans can be securitized by forming
collateralized debt obligations (CDOs). CDOs are securities backed by a pool of bonds, loans and other assets. Such CDO
products can be sold to investors.
(4 marks for any 3 relevant method; max. 12 marks)

9. (a)Management techniques used to improve hotel and resorts services:

intangibility of service:
- to provide tangible evidence, e.g. décor of hotel, creation of hotel image

Inseparability, presence of customers in the production of service:
- for high contact services such as the catering service, the process is emphasized to create satisfaction;
- for low contact services such as hotel security, more mechanization could be employed

Heterogeneity, variability of service, needs customization:
- e.g. special requests of customers are recorded to provide for tailored made service every time

Perishability, services cannot be inventoried, needs to overcome fluctuating demand:
- e.g. overbooking, reservation of rooms, bulk purchase contract with travel agents
( 2 marks for each characteristic, max. 8 marks)

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 Business Management Module (BAFS Mock Examination)2014/15
(b)Possible measures to retain well-performed staff in hotels and resorts :

Job analysis – analyse the jobs and provide clear job descriptions, facilitate the application of job
design techniques (e.g. job enrichment, job enlargement and job rotation) to bring about higher job
satisfaction for keeping those well-performed employees who are dissatisfied with jobs

Manpower planning – accurate and systematic manpower planning to avoid prolonged under-staff,
make clear the succession plans to retain capable staff.

Employment – proper recruitment and selection practices/procedures to hire right persons to right
positions as they are more likely to stay, more comprehensive orientation programs to quickly build up
sense of belonging, adopt promotion-from-within policies for well-performed employees.

Training and Development – offer development to supervisors, provide training to satisfy

employees' higher level needs, and serve as a motivator to retain employees.

Performance appraisal – adopt fair and open performance appraisal system  give feedback to
employees so that they are clear about their performance and motivated to work towards future targets for
developing themselves in the company.

Compensation – offer competitive compensation and maintain equities, reward loyal and
well-performed staff, incorporate seniority-based elements into the compensation package.

Maintenance and labour relations – show concerns about employees' needs and build trust, provide
healthy and safe work environment, learn employees' dissatisfaction by conducting surveys and
interviews, maintain harmonious industrial relations to retain employees

(3 marks for every relevant action with explanation, max 12 marks)

End of Paper