SECTION 2 – APPLIED BUSINESS QUESTION

– 80 marks

● When practicing ABQs use THREE different coloured

highlighters for each part of the question (A, B, C). This will allow you to clearly spot the linkages between the text and the question and ensures you include a correct link (quote) for each part. ● To decide on the number of points to give in a section, like with the long questions in Section 3, a good rule of thumb is to divide the total number of marks in each section by 5. For

example: 20 marks = four fully developed points @ 5 marks each. ● Ensure you begin each part of the ABQ on a new page. ● Ensure you understand the outcome verb (the question cue) within the question. ● Most questions in the ABQ require the same layout: State, (State your point, with a red pen/underline) Explain (with 2 points/sentences of relevant information), Link (direct quote from text). This quote cannot be just one word; it needs to be a full sentence. Do not use the same quote twice in the same part of the question.

Lakeview Furniture

When receiving the Exporter of the Year Award from Enterprise Ireland, Sean Burke made the point that he is now managing a large manufacturing company dealing with issues such as maintaining the quality of the furniture and coordinating the work of various departments. His father, Joseph, had shown enterprise when he established the company in 1990. He bought a piece of land on the main Dublin to Cork road with two craftsmen and began manufacturing furniture. Early customers included Arnotts and Brown Thomas. Joseph had been able to price competitively by buying fabrics straight from mills in Belgium, Italy, Turkey and America.

Sean took over the management of the company in 2014 when annual sales were at €7m. Sean is a good listener and adopts a hands-on approach. He can be seen daily walking around the factory, talking to staff and getting feedback. Sean has great contacts in business through his role as president of Dublin Chamber and spends a lot of time networking, asking other members what they are doing to cope with various issues such as a shortage of suitable staff. Lakeview Furniture has increased staff numbers from 40 to 60 in the past two years. Sean motivates staff by paying them well, having as many employees as possible organised into teams and involving them in making decisions.

Part of the factory was converted into a showroom. A website was set up and in September 2016 Lakeview Furniture opened to the public for the first time. “Five retailers who previously had sold our furniture did not like us selling the same goods cheaper than they were and stopped dealing with us,” said Sean. However, the move proved successful and sales are up 20% since then. The opening of the factory shop did not affect the company’s relationship with retailers in other European markets which accounts for 40% of revenue. (A) Analyse the relationship between Lakeview Furniture and the furniture retailers. (25 marks) (B) Evaluate how Sean can use his management skills to ensure the continued success of Lakeview Furniture. (Evaluate each of the three skills separately).

(30 marks) (C) Explain the differences between the activities of enterprise and management using appropriate examples from the text. (25 marks)

Sample answer

(A) Analyse the relationship between Lakeview Furniture

and the furniture retailers.

A competitive relationship occurs when a business such as Lakeview Furniture seeks to take advantage of stakeholders, such as the furniture retailers, and views the relationships between different stakeholders as being either win or lose ones. It assumes that only one party can win and therefore stakeholders must compete to gain a commercial advantage over the others. 5 marks A competitive relationship would exist between producers in the same line of business, such as Lakeview Furniture and the other furniture retailers, if there is ongoing competition in areas such as sales to customers,

quality of goods and services provided, selling prices charged and employing staff. Lakeview furniture and the various furniture retailers compete with each other for market share, and Lakeview Furniture is managing to charge more competitive prices for the furniture. 5 marks Link: A website was set up in September 2016 and Lakeview Furniture opened to the public for the first time. “Five retailers who previously had sold our furniture did not like us selling the same goods cheaper than they were and stopped dealing with us.” 3 marks

A co-operative (partnership) relationship occurs when a business, such as Lakeview Furniture, seeks to work with stakeholders, such as the furniture retailers, so that both sides gain. It views the relationship between different stakeholders as a potential win/win one for all sides. A business with a co-operative approach will seek opportunities to work in partnership with stakeholders and not against them. 5 marks

A co-operative relationship would exist if the supplier, Lakeview Furniture, provides good quality furniture and products and where the retailers pay fair prices and honour contracts. Lakeview Furniture has maintained a co-operative relationship with furniture retailers in other European countries and continues to supply to them, which is hugely important for the survival of the company. 5 marks Link: The opening of the factory shop did not affect its relationship with retailers in other European markets which accounts for 40% of revenue. 2 marks (B) Evaluate how Sean can use his management skills to ensure the continued success of Lakeview Furniture Ltd. (Evaluate each of the three skills separately). Leadership 2 marks Leadership refers to the ability to influence other people to go in a particular direction and achieve a particular goal. It involves directing staff, setting

examples of what is expected of others, and delegating work to staff. Sean Burke uses his skill of leadership to effectively manage Lakeview Furniture Ltd. 2 marks

There are various types of leadership styles including autocratic, democratic and laissez-faire. Sean displays a democratic leadership style, as he is willing to discuss issues with staff and listen to their feedback. The fact that he values their opinions results in better decisionmaking. 2 marks Link: He can be seen daily walking around the factory, talking to staff and getting feedback. Or Sean has great contacts in business through his role as president of Dublin Chamber and spends a lot of time networking, asking other members what they are doing to cope with various issues such as a shortage of suitable staff. 2 marks Evaluation: In my opinion Sean is a democratic leader who adopts a facilitative approach to managing. This seems to be working well as sales are up 20%. I believe Sean is an effective and successful leader, who has used his leadership skills to create a business climate that values staff and their opinions. 2 marks Motivation 2 marks

Motivation is the willingness of people to work and to contribute their best effort. It is what drives, influences and encourages people to work towards a particular goal.

There are two important theories of motivation used by leaders such as Sean Burke to motivate people: Maslow’s Hierarchy of Needs and McGregor’s Theory X and Theory Y. 2 marks

Sean seems to have adopted Mc Gregor’s Theory Y approach to motivation. His staff at Lakeview Furniture are highly motivated and valued, receiving good rates of pay for what they do. Theory Y managers, such as Sean, believe employees do not dislike work, can enjoy it and find it very satisfying and that strict control over people is not necessary if they are all committed to shared objectives. Sean would believe that the satisfaction of self-actualisation is the best way to get effort from people and they can be taught to accept and seek responsibility as long as their job is interesting and challenging. 2 marks

Link: Sean motivates staff by paying them well, having as many employees as possible organised into teams and involved in making decisions. 2 marks Evaluation: In my opinion there appears to be a very positive work atmosphere in Lakeview Furniture Ltd. The employees have accepted the changes to working conditions. Sean is very good at motivating the staff and has adopted a Theory Y approach. 2 marks Communications: 2 marks

Communications refer to the transfer of information between people. They can be verbal (meeting, telephone, radio), written (letter, report, email), visual (diagrams) or physical (personal appearance, body language). The objective of communication is for a message to be received, understood and acted upon where relevant.

It is very important in any business such as Lakeview Furniture Ltd. 2 marks

Sean Burke communicates regularly with staff, and actively encourages staff to put forward suggestions for improvements, for which they are rewarded.

Upward communications refer to staff reporting up the chain of command to their supervisors and managers. This type of communication could be complaints, suggestions or reports. It is important that such information is not ignored and is acted upon in the immediate future. Sean actively encourages this form of communication from his staff and values their feedback. 2 marks Link: Sean is a good listener and adopts a hands-on approach. 2 marks Evaluation: In my opinion Sean communicates regularly with staff, and actively encourages them to put forward suggestions for improvements. He values his staff and recognises the contribution they have made to the business. He encourages feedback from staff. This allows any confusion or misunderstandings to be resolved quickly. 2 marks (C) Explain the differences between the activities of enterprise and management using appropriate examples from the text. Enterprise involves risk-taking and innovation: Risk takers: 1 mark Entrepreneurs are realistic risk takers, as they take a personal and financial risk in setting up a new business with no guarantee of success. They are not afraid of failing, but they are only willing to take risks (such as giving up a job, investing money) if they think the probability of success is reasonably high. Sean’s father, Joseph, took the personal and financial risk of setting up business in manufacturing furniture. 3 marks Link: He bought a piece of land on the main Dublin to Cork road and with two craftsmen began manufacturing furniture. 1 marks Innovative/creative: 1 mark The entrepreneur must be “visionary” and have a constant urge to develop new ideas or find a better way of doing things. Entrepreneurs show imagination, resourcefulness and readiness to undertake new projects. They think outside the box to develop new products or new versions of existing products. Joseph Burke used his innovativeness when he sourced cheap fabrics from abroad and used these to manufacture furniture which he could charge competitive prices for as a result. 3 marks Link: Joseph had been able to price competitively by buying fabrics straight from mills in Belgium, Italy, Turkey and America. 1 mark

Management Controlling: involves Planning, Organising and 1 mark Planning is the setting down of specific goals and objectives and the putting in place of strategies that allow the achievement of these stated goals and objectives. Planning is important as it allows a clear direction to be set for the business. Manpower planning is very important for Lakeview Furniture, as it ensures the right staff are in the business when it requires them, which appears to be an issue. 3 marks Link: asking other members what they are doing to cope with various issues such as a shortage of suitable staff. 1 mark Or Lakeview Furniture has increased staff numbers from 40 to 60 in the last two years. 1 mark Organising means building a structure in an organisation such as Lakeview Furniture, so that its activities are coordinated and its objectives are achieved. It involves bringing people and resources together effectively to implement plans.

Possible organisational structures for a business such as Lakeview Furniture are functional or matrix structures. 3 marks Link: …coordinating the work of various departments. 1 mark 1 mark

Management control for a firm such as Lakeview Furniture refers to the continuous monitoring and checking of results to see they are in line with the goals and targets set out in the plans. If there is a divergence, then managers must find out why and make appropriate changes.

The main types of management control that Sean Burke would need to concern himself with for his manufacturing firm are stock control, quality control, credit control and financial control. 3 marks Link: …dealing with issues such as maintaining the quality of the furniture. 1 mark