Question
Refer to the Megamin Mining case study
a.Describe one advantage and one disadvantage for MM of decentralization (lines 44–45).[4]
b.Explain how MM could reduce stakeholder conflict in relation to its gold mine in Egypt (lines 103–107).[6]
▶️Answer/Explanation
Ans:
Decentralization: Some decision making is delegated to lower level managers – in this case to subsidiary businesses.
Advantages
Decision-making delegated to the mines (operations, wages, contracts) and hotels (prices and menus)
Not all decisions will be decentralized (in this case strategic decisions remain with the Board)
Better focus on core activities
Better understanding of local issues (hotels are in Europe which might face completely different problems from mines in Africa)
Disadvantages
Decision-making is not necessarily strategic as hotel managers and managers at mines are not part of higher level decision-making process at board level
More difficult to ensure consistent practices and policies across different locations. Hotel customers may prefer consistency
More difficult to achieve financial control if individual managers have more budgetary autonomy.
As contexts and needs are different, some conflicts may arise or may lead to inter-divisional rivalry if divisions compare each other, when making decisions on budgets, wages, employment, contracts, etc. (i.e. wages in Canada vs. in Africa)
Accept any other reasonable advantage/disadvantage.
Award [1] for each advantage and one mark for each disadvantage up to a total of [2].
Award [1] for putting each advantage and [1] for putting each disadvantage into context up to a total of [2].
a.
Refer to Paper 1 markbands for May 2016 forward, available under the “Your tests” tab > supplemental materials.
Stakeholder issues can include:
Managers: Technical problems, safety issues, risk of flooding. These will be difficult to manage, and will have conflict with which employees who are threatening strikes. Costs will then have an impact on shareholders through lower prices.
Employees: Threatening strikes over pay and other issues with the way mines are managed. Will want spending conflicts with owners/managers.
Shareholders: Will want dividends maintained but mine producing below breakeven and this affects profits. Will want costs reduced, profit increased. Will not want safety issues to get out of hand – bad publicity and impact on share price. High dividends may prevent investments, may put pressure on wages. Conflict with managers/employees.
Other stakeholders may include government (taxes, licenses), the general public, pressure groups but these do not feature much in gold mines so are non-contextual.
Resolution of conflict: Safety is important to all – should be resolved with managed costs.
Strikes are damaging to shareholders. Employees will lose pay. So communicate and work towards a solution.
Managers need to create a less combative environment and find satisfactory ways of reducing costs and solving problems without upsetting employees.
Some possible solutions could be:
identify technical problems in advance and improve processes
think of a maintenance plan to prevent production outages
invest more in industrial safety (but this will increase costs – possible conflict managers vs. shareholders?)
improve employees’ motivation and job satisfaction, focusing on employees’ needs or maybe adopting a reward programme and/or health insurance (this will increase costs: will shareholders be happy with that?)
find a way to improve sales (look for new markets, segments, etc.), reduce costs or/and add value to their products in order to increase profits.
The use of stakeholders might be implied especially when referring to ‘conflict with the business’. In this case the ‘business’ might mean managers, shareholders or owners if the candidate makes this clear without using any of those terms.
Accept any other reasonable explanation/application of stakeholder conflict.
Marks should be allocated according to the paper 1 markbands for May 2016 forward section A.
Award maximum 2 marks for only explaining one strategy.
Award maximum 3 marks for a theoretical answer or an answer that describes two (or more) strategies without explaining them.
Award maximum 5 marks if the explanation is mainly descriptive but in context.
Ans:
Question
Refer to the Radeki de Dovnic Manufacturing (RDM) case study
a.With reference to RDM, describe how changes in operations management altered its relationship with two other business functions.[4]
b.Explain how RDM’s transformation of its manufacturing process from traditional mass production to highly automated production affected the interests of internal stakeholders.
▶️Answer/Explanation
Ans:
a.
PLEASE NOTE: This content is not included in the syllabus for 2024 exams onward. Related parts of this multi-part question may be used.
The shift in operations management from a traditional industrial manufacturing process to an automated process altered its relationship with the following business functions:
Human resources: RDM changed its recruitment from semi-skilled young people who had just completed their education at a local technical secondary school to university graduates with degrees in engineering or computer science. This shift almost certainly necessitated a shift in approaches to leadership and motivation.
Marketing: In the process of becoming an automated manufacturing process, RDM fundamentally changed its marketing mix. Though the decision to shift from kerosene stoves was market driven (declining demand), the automated process allows RDM to customize products and make, as in the case of the aluminum water bottles, wholly new products.
Accounting and Finance: Prior to automation, RDM made uniform products on a large scale. Pricing decisions would have been relatively rare – setting a fixed price for a product. Now that the business is making customized products, pricing decisions have to be made with virtually every order, which involves people from the accounting department. Whereas RDM had capital expenditures prior to full automation, it also had substantial revenue expenditures in the form of payroll.With automation, the mix of capital versus revenue expenditures shifted in the direction of more capital expenditures. This shift requires significantly different approaches to finance.
Candidates should name the functions, but they can be implicit.
N.B. R&D is not a business function.
Accept any other relevant changes.
Mark as a 2 + 2.
Award [1] for an appropriate business function identified and an additional [1] for some description of changes in context. Award a maximum of [2] for each function described.
b.
Refer to Paper 1 markbands for May 2016 forward, available under the “Your tests” tab > supplemental materials.
Employees – jobs will change, different skills, highly trained engineers and computer scientists.
Managers – tasks will change, management role different.
Shareholders – may have sacrificed dividends for investments but reaped benefits later.
Accept any other relevant internal stakeholders.
Marks should be allocated according to the paper 1 markbands for May 2016 forward section A.
Award a maximum of [3] for a theoretical answer, or for only considering one internal stakeholder.
Award a maximum of [5] if the answer is mainly descriptive but in context.
Award a maximum of [6].