AB (Chapter 1)

Define the following items:

 Organisation (purpose/features/difference)

 Types of organosational industries

 Types of business organisations

 Public vs. Private sector

 Stakeholders (three categories)

 Stakeholder conflict

1. The industrial sector can be classified into primary sector, secondary sector, tertiary sector
and quaternary sector. Primary industries are essentially:
A. Extractive industries
B. Engaged in provision of service
C. Manufacturing units
D. Engaged in providing intellectual services

2. ‘World Action Now’ is dedicated to engaging in activities for conserving nature and the
environment. It has in the past been able to engage prominent scientists and use famous
publications to spread awareness about how commercial activities have led to climate
change. What type of organization is World Action Now?
A. Cooperative
B. Non-government organization
C. Public sector organization
D. Commercial organization

3. Which of the following provides an example of a ‘boundary’ separating an organization

from its environment?
A. A divisional structure
B. Systems and procedures
C. Factory gates
D. Recruitment policy

4. A mobile phone company has just found out that there is demand for a low cost basic
phone as consumers like having a phone with basic functionality. They would like to find out
more about which consumer group will be interested in these phones and what specifications
they would like.
A. Purchasing, Research and Development
B. Research and Development, Marketing
C. Purchasing, Manufacturing
D. Sales, Purchasing

5. Andy and Jane are studying types of organizations. According to Andy: The word “limited”
is used in the case of private limited companies because their ownership is not open to the
public and is restricted to a lower number of owners than public limited companies. Jane
disagrees, according to her: ‘limited’ is used for private limited companies because the
liability of the owners of the organization is limited to their investment in the company.
Whose statement is incorrect?
A. Jane
B. Andy

6 Andrea is new to ABC Ltd and doesn’t fully understand the agency theory. Which of the
following is the main objective of the agency theory?
A. Address the nature of relationship and problems between the principal and the agent
B. Control agency related costs
C. Ensure profit maximization of organizations
D. Control agents

7. Which of the following statements is true about connected stakeholders?

A. Connected stakeholders do not have a financial link with the organization.
B. Connected stakeholders have a financial link with the organization.
C. Connected stakeholders are concerned with the daily operations of a business
D. Pressure groups are an example of connected stakeholders.

8. Lye Plc is a manufacturing organization. It is a public company and 49% shares are owned
by one institutional shareholder. The shareholder is not very active and only attends general
meetings. The Executive Board has voting rights on decisions and all members head
important departments in the organization including finance department, marketing, sales
etc. Which TWO of the following options are correct?
A. Institutional Shareholders: Low interest, low power group
B. Institutional Shareholders: Low interest, high power group
C. Executive Board: High interest, high power group
D. Executive Board: High interest, low power group

9. Which of the below two stakeholder groups are most likely to have similar objectives?
A. Creditors and shareholders
B. Customers and employees
C. Suppliers and environment activists
D. None of the above

10. For DigiTech, Tom Fire is a billionaire investor who bought millions of the company’s
shares. His holdings amount to close to 10 percent of DigiTech’s stock. Tom closely follows
the operations of the company and actively pushes for reforms. Which category of
stakeholders does Tom Fire belong to?
A. Minimum Effort
B. Keep Informed
C. Keep Satisfied
D. Key Player

11. Which of the following is true?

12.

13.

14. Which of the following would be regarded as a connected stakeholder?

A. Customer C. Director
B. Government D. Employee
THE BUSINESS ORGANISATION AND STAKEHOLDERS

1 Which of the following is NOT a key feature of an organisation?

A Controlled performance
B Collective goals
C Social arrangements
D Creation of a product or service

2 Which of the following organisations is normally found in the public sector?

A Schools
B Charities
C Clubs
D Businesses
3 The public sector is normally concerned with:
A making profit from the sale of goods
B providing services to specific groups funded from charitable donations
C the provision of basic government services
D raising funds by subscriptions from members to provide common services

4 A Co is a company which specialises in forestry. It has recently purchased B Co, which

runs a chain of recreational resorts. A has allowed B to build several new resorts on land
which is owned by A, but which it is no longer able to use. The resorts have proven highly
profitable and popular. Which of the following best explains the reason for the improved
performance of the combined entity?
A Specialisation
B Social interactivity
C Synergy
D Service

5 Which of the following statements regarding limited companies is correct?

A Public limited companies have access to a wider pool of finance than partnerships or
sole traders
B Both public and private limited companies are allowed to sell shares to the public
C Companies are always owned by many different investors
D Shareholders are liable for any debts the company may incur

6 Consider the following list of different organisations:

(i) Government departments
(ii) Partnerships
(iii) Charities
(iv) Companies
Which of these organisations would normally be classified as BOTH a not-for-profit
organisation AND a private sector organisation?
A (i) and (iii) only
B (iii) only
C (i) only
D (ii) and (iii) only
7 ‘An organisation that is owned and democratically controlled by its members.’
To which type of organisation does this definition relate?
A Charities
B Non-governmental organisations
C Co-operatives
D Private limited companies

8 Westeros is an organisation which imports computers into country A and sells them the
public in order to make a profit. It is owned by fifteen individual investors, each of whom
owns an equal number of shares in Westeros. Westeros is not a public limited company.
Which of the following is likely to be the most appropriate source of finance for
Westeros?
A Central government funding
B The existing owners of Westeros
C Issue of shares to the public
D Donations from the public
9 Consider the following statements:
(i) Not-for-profit organisations (NFPs) have varied objectives, which depend on the
needs of their members or the sections of society they were created to benefit.
(ii) The primary objective of government-funded organisations is to reduce costs of their
operations and thus minimise the burden on tax payers.
Which of these statements is/are correct?
A (i) only
B (ii) only
C Both
D Neither

10 Consider the following statement:

Charities would usually be classified as a type of non-governmental organisation (NGO)
Is this statement TRUE or FALSE?
A True
B False
11 Employees are ______ stakeholders, while finance providers are _______ stakeholders.
Which two words fill the gaps in the above sentence?
A Internal, Connected
B External, Internal
C Connected, Outsiders
D Internal, Suppliers

12 Stakeholders can be classified in several different ways, including:

(i) Primary
(ii) External
(iii) Connected
(iv) Secondary
Which TWO categories would pressure groups usually be included within?
A (i) and (iii)
B (i) and (iv)
C (ii) and (iv)
D (iii) and (iv)
13 A is a large company whose shares are owned by a large number of individual investors,
who do not wish to engage with company’s decision making despite having full rights to
do so. When using Mendelow’s matrix this stakeholder group would be classed as:
A minimal effort
B keep informed
C keep satisfied
D key players

14 A company is using a communication strategy aimed at explaining the rationale behind its
actions to its stakeholders. Using Mendelow’s matrix, these stakeholders would be
categorised as ‘minimal effort’.
Is this statement TRUE or FALSE?
A True
B False

15 The interests of customers and shareholders can often appear to conflict – for example in
the quality of goods and services.
Is this statement TRUE or FALSE?
A True
B False

16 According to Mendelow, which of the following is an appropriate approach to take

towards stakeholders who have low levels of power and low levels of interest?
A minimal effort
B keep informed
C keep satisfied
D key players
17 F Co is attempting to classify its stakeholders. It wishes to analyse them into one of
the following two categories:
A Internal
B Connected
Required:
Classify the following stakeholders as either A (internal) or B (connected):
(i) Employees
(ii) Shareholders
(iii) Customers
(iv) Directors

18 F Co wishes to use Mendelow’s matrix to decide on what approach to take to each

stakeholder. The matrix suggests four possible approaches:
A Keep informed
B Key players
C Keep satisfied
D Minimal effort
The following sentences contain gaps which specify which approach to stakeholder
management should be taken.
1) F Co is partly owned by H, who is considered to have high power and low interest
F Co has therefore decided to use a _____ strategy to manage this stakeholder.
2) F Co is aware that its actions are regularly commented on by HHH, which would be
classified by Mendelow as ____. HHH has a high level of interest, but low power.
Required:
(i) Select the type of organisation that appropriately fills gaps above; i.e. select
A, B, C or D.

19 FFD Co is a large national manufacturer of animal feed based in country T. FFD sells dried
food – primarily for chickens and sheep. This is not a competitive market and FFD’s large
number of small farmer customers have little alternative but to purchase FFD’s products for
their animals. The farming industry is struggling in country T with farmers earning very low
margins and many being forced out of business.
The Government of country T has publically expressed concerns about the state of the
national farming industry and has vowed to do whatever is necessary to protect farmers
from what one minister has referred to as ‘money-making corporations that are making
excessive profits from farmers.’
FFD’s shares are mainly held by individual investors – many of whom have invested a
significant amount of money into FFD. No one shareholder in FFD has more than 4% of the
total share capital of the company.
FFD’s employees are largely unskilled and are not members of any union.
FFD is currently considering raising its prices by around 15% to improve its margins. It has
identified four main stakeholder groups who may be affected by the decision. These have
been allocated to the quadrants in the matrix shown below.
Stakeholder interest
High Low
Stakeholder power High A B
Low C D
Required:
Indicate which quadrant of the matrix each stakeholder group has been allocated to
by
writing the appropriate letter (A, B, C or D) against the name of the group.
(i) Customers
(ii) Government
(iii) Shareholders
(iv) Employees

20. W Co is a bank and has many stakeholders – including many different types of organisation, including a:
A Non-governmental organisation
B Public limited company
C Private limited company
D Public organisation
The following sentences contain gaps which specify a particular type of organisation.
1) W Co is partly owned by Z, a ____ that has recently sold a large number of its shares on the open
market in order to raise finance.
2) W Co is aware that its actions are regularly commented on by VVV, which is a ____. VVV campaigns
for fair banking and has recently been granted charitable status.
Required:
Select the type of organisation that appropriately fills gaps above; i.e. select
A, B, C or D.