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

Time allowed: 2 hours 15 minutes

This paper must be answered in English

INSTRUCTIONS:

1. There are three sections in this paper: Section A (24 marks), Section B (36 marks) and Section C
(20 marks).

2. All questions in Section A and B are compulsory. You are required to answer one of the two
questions in Section C.

©Hong Kong Association for Business Education

 Business Management Module (BAFS Mock Examination) 2014/15
SECTION A

Answer ALL questions in this section.

1. List and explain two external factors affecting the wage policy of a company. (4 marks)

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

3. Suggest two methods to increase the cash level in a small business without affecting its capital
structure. (4 marks)

4. How can an online bookstore make use of information technology to expand its market? Describe
three ways. (6 marks)

5. Fortune Company is a newly established camera wholesaler. The estimated annual sales are $16
million. The price of each camera is $4000. It is estimated that the total inventory carrying cost of
each camera is 1% of the price of the camera per year if a camera is kept at stock. The ordering
cost is $200 per order. Currently, the company is ordering 500 units each time. Calculate and
explain why Fortune Company should adopt the EOQ model in its inventory management.

(6 marks)

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©Hong Kong Association for Business Education
 Business Management Module (BAFS Mock Examination) 2014/15
SECTION B
Answer ALL questions in this section.

6. Sunshine Holidays is a medium-sized travel agent and has commenced business for more than ten
years. It specializes in the provision of long-haul overseas tours for the middle and high-income
groups. Sunshine Holidays managed to earn higher profits in the past but the margin declined rapidly
owing to keen competition from other travel agents. In view of the deteriorating situation, the senior
management met to discuss remedial actions.

Tony, the managing director, suggested, “We can introduce local Eco-tour to our customers. This
market is expanding and more and more travel agents are interested in this growing market. They
provide various kinds of attractions and activities for this type of tour. With increasing popularity to
join local Eco-tour, our company can rapidly raise sales and profitability if we can expand to this
business sector. We should take immediate action and develop an appropriate marketing mix
strategy.”

Karen, the marketing manager replied, “Before developing a marketing mix strategy for local
Eco-tour, it is important to determine our marketing objective and select our target market. We may
target at the retired people as this market segment is growing. Nevertheless, we need to understand
how they make the purchase decision.”

Ron, the human resources manager worried, “The salary of tour guides is dependent on their basic
salary, shopping rebates and tips from tourists. If we urge them to work for local Eco-tour, we need
to increase their basic salary as compensation for the loss of shopping rebates. Despite no change in
income, I am afraid some will be reluctant to work in the Eco-tour division.”

(a) With reference to the concept of product levels, explain with example of the core customer value
and augmented product for Sunshine Holidays local Eco-tour. (4 marks)

(b) Identify which stage of product life cycle local Eco-tour is in, and develop an appropriate
marketing mix strategy at that stage. (7 marks)

(c) List three personal factors in the consumer behavior that influence the retired people to join local
Eco-tour. (3 marks)

(d) Using any one motivation theory, suggest two ways that can encourage the tour guides to work
for local Eco-tour. (4 marks)

(Total: 18 marks)

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©Hong Kong Association for Business Education
 Business Management Module (BAFS Mock Examination) 2014/15

7. Henry and Tony began making wooden writing pens and pencils as a hobby ten years ago. They
own a small factory with 50 employees. The products are sold to gift specialty shops in Hong
Kong on credit and the credit policy is very generous in order to attract sales.

In a meeting, Henry said, “In light of the expected growth in sales, I suggest expanding our scale of
operation by moving to a larger factory premises together with acquisition of new production
facilities. The initial investment is estimated to be HK$250 million and the project can last for 4
years. The expected net cashflow for this project is estimated to be HK$60, 80, 80 and 50 million
for year 1, 2, 3 and 4 respectively.”

Tony responded, “I have some reservation on the expansion plan at this moment as our financial
condition is not very strong. We need to explore different sources of fund. Indeed, I think we
need to revise our credit policy; our working capital is greatly affected because of our very lenient
credit period. “

Tony continued, “Other than financial problem, we need to think about such problems as manpower
planning and recruitment of additional staff.”

Henry said, “Well, we can either borrow from our banker or invite others to be our company’s
shareholders. I personally prefer the first option because of its advantage of preserving our
autonomy. Also, by simple calculation, we can see that it is a wise investment as the cash inflow is
greater than cash outflow. It is really a problem to estimate the human resources need in the future
and to recruit new staff. Do you think it is a good idea if we encourage our staff to recommend
their friends?”

Tony said, “There is always the other side of the coin. I am not going to challenge you but we need
to consider the opposite points of view.”

(a) Suggest two ways to Tony how to revise the credit policy to make the company have more
working capital. (4 marks)

(b) Assuming the discount rate is 5%, calculate NPV to justify whether Henry is right or wrong
about the expansion project. Show your working. (2 marks)

(c) State two disadvantages of Henry’s proposed method of financing. (4 marks)

(d) Explain to Tony the steps of manpower planning. (4 marks)

(e) Discuss two advantages of the recruitment method suggested by Henry. (4 marks)
(Total: 18 marks)
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©Hong Kong Association for Business Education
 Business Management Module (BAFS Mock Examination) 2014/15
SECTION C
Answer ONE question in this section.

8. Granting loans to customers to earn interest is still the core business of many banks in Hong
Kong. However, the banks have to face the risk of default on payment.

(a) Describe the criteria that can be used by a bank to assess the credit standing of its
customers. (8 marks)

(b) Discuss the methods that can be used by a bank to handle the risk of default on payment
by its customers. (12 marks)

(Total: 20 marks)

9. Quality services provided by hotels and resorts can give them a competitive edge over their
competitors.

(a) With reference to the characteristics of service marketing, what management techniques
can be used to improve hotel and resort services? (8 marks)

(b) From the human resources management prospective, suggest the possible measures to
retain well-performed staff for the provision of quality services in hotels and resorts.
(12 marks)

(Total: 20 marks)

END OF PAPER

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©Hong Kong Association for Business Education