Question
Refer to the Multi Marketing (MM) case study
a. Outline two benefits for $M M$ of outsourcing human resource management (HRM) (lines 51-54).[4]
b. Explain how $M M$ has differentiated itself.[6]
▶️Answer/Explanation
Ans:
a. Possible benefits include:
MM staff are not specialists of HRM: they know a lot about marketing, design and communications, but not about HRM. Outsourcing HRM means that they can focus on their core business, and let specialists from an HR agency deal with all HR tasks (recruitment, contracts etc.).
As MM becomes more international, HRM is getting more complex and requires a lot of advanced HR knowledge, as labor laws vary from country to country, for example between UK and India (about working conditions, workers’ rights etc.).
Outsourcing HRM will help MM deal with difficult situations, which could prove costly (and even give a bad image of MM to external stakeholders), for example if they are taken to court by dissatisfied employees, such as the ones who feel bullied by Claire.
When they have HR questions, for example about payment schemes or holidays, MM employees will benefit from working with HR specialists: this will aid communication, which is better for the business.
Reduction in costs. HRM managers no longer required.
May lead to a consistency of HR operations across the whole of MM.
Accept any other relevant benefits.
Mark as a 2 + 2.
Award [1] for each relevant benefit identified and an additional [1] for further outline in context. Award a maximum of [2] for each benefit.
b.
Refer to Paper 1 markbands for May 2016 forward, available under the “Your tests” tab > supplemental materials.
This question assesses candidates’ knowledge and understanding of differentiation, both in general (what it means, how it may be achieved) and in the specific case of MM.
Companies differentiate themselves from their competitors in many ways, such as:
through their products (USP of their goods and services), or the range/portfolio of products they may offer their customers;
through their pricing strategies (e.g. price leadership or premium pricing);
through the relationships they build with their customers (customer service);
through their reputation and image (branding);
through other marketing aspects, such as the packaging they use, or the type of promotion and advertising they do;
through their ethical objectives (CSR) and particular values they may defend;
through their workforce (e.g. talented creative workers, cultural diversity);
through their operations (e.g. what they do, where, how);
through their innovative practices (e.g. R&D leading to particular product features or performance);
through their strategies (e.g. franchising, international growth etc.).
The case study explicitly mentions about customer service, as MM “aims to respond to customers more quickly than others in the industry” (line 65). Other methods of differentiation are implied, for example MM has strong ethical objectives (e.g. only accepting customers with strong equal opportunities policies) and highly values cultural diversity (e.g. having multicultural content in the marketing strategies it creates). Their competitors may share those same ethical objectives and value cultural diversity too. The case study does not provide much information about MM competitors, yet this is not a problem to answer this question:
Accept any other relevant explanation.
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 about differentiation.
Award a maximum of [4] for a descriptive answer.
Question
Refer to the Ducal Aspirateurs case study (DA)
a. With reference to $D A$, outline two suitable methods of sampling (lines 112-113).[4]
b. Explain the factors that $D A$ would need to consider before deciding to outsource some of its production (line 110).[6]
▶️Answer/Explanation
Ans:
a. DA used sampling for recognition of brand name. It would have used sampling to set up focus groups and surveys. It also used focus groups in five different European countries for click and fix.
Context can be achieved by making reference to:
The market(s) that DA operate in (mass vs niche)
The geographical markets (five European countries)
The need for DA to gain information within financial constraints
The type of information required (brand awareness, customers in Europe etc)
Methods could include:
quota
random – may not be suitable as customer population is only a small part of whole
stratified/systematic – probably for 5 European countries
cluster
convenience – most convenient unlikely to be those influenced by brand, bias
snowball – but for the European market?
Award [1] for each suitable method identified and [1] for a description of how that method relates to DA. Award a maximum of [2] per method. Unsuitable methods cannot get context mark.
b.
Refer to Paper 1 markbands for May 2016 forward, available under the “Your tests” tab > supplemental materials.
Factors include:
Quality: DA produces high quality products for the top end niche market, would outsourcing produce this quality
Employment issues: DA currently looks after its employees. How would this continue if work is sent elsewhere? Redundancy costs.
Control: To what extent to they want to keep in control of everything. It’s a family business so this may be important
Costs: They are already under cost pressure. Would outsourcing help or hinder?
Production issues: Could they benefit from better production techniques at the outsourced business? (No evidence of this in the case)
Logistical issues: Possibly greater flexibility but no evidence
Customer issues: Would they know? Would it make a difference? Maybe ‘upmarket’ customers would prefer locally made products.
Accept any other relevant explanation.
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, often a pre-prepared textbook answer or if there is only one factor.
Award a maximum of [5] if the explanation is mainly descriptive, but in context.
Question
Refer to the Radeki de Dovnic Manufacturing (RDM) case study .
While identifying a location for the new factory, Zylstra Industries (ZI), a large manufacturing company located not far from Location A, presented RDM with another possibility: a strategic alliance. Thus, RDM have two options to consider.
Option 1: Purchase land and build a new automated factory. The potential location is summarized in Table 1.
Table 1: Information on Location A
Location A is in an economically depressed area of northwestern Europe, where land values nevertheless remain high. Location A has an old industrial tradition with a long tradition of poor industrial/employee relations.
Option 2: A ten-year strategic alliance with $Z I$. ZI has proposed that RDM uses some of its vacant manufacturing space in exchange for assistance in transforming $Z$ /’s manufacturing process into a highly automated one using robots. Twenty RDM engineers and computer scientists would:
- transform Zl’s current factory into an automated one
- train Zl engineers
- monitor the factory for the duration of the strategic alliance.
ZI would pay all capital expenditures and RDM would employ the twenty engineers and computer scientists. Average salary and other financial rewards of one highly skilled employee would be $\$ 150000$ per year. In exchange, RDM would get free usage of factory floor space. RDM would buy its own equipment at a cost of $\$ 6000000$.
$R D M$ estimates that leasing space similar to what $Z l$ is offering would cost $\$ 3000000$ a year.
a. State two reasons for selecting a specific location for production.[2]
b.i. Using the information in Table 1, calculate for Location A the payback period (show all your working).[2]
b.ii.Using the information in Table 1, calculate for Location A the average rate of return (ARR) (show all your working).[2]
c. Explain two types of financial rewards, other than salary, that RDM might offer its engineers and computer scientists.[4]
d. Recommend whether RDM should choose Option 1 or Option 2.[10]
▶️Answer/Explanation
Ans:
a. Reasons for selecting a specific location of production include:
- Access to resources or raw materials.
- Access to appropriate technologies, including infrastructure.
- Proximity to markets.
- Proximity to suppliers, including suppliers of financial services.
- Proximity to other firms in the industry or related (clustering)
- Access to available appropriate workforce.
- Access to transportation systems.
- Cost of land.
Accept any other valid reason.
Award [1] for each reason identified up to [2]. Maximum award: [2].
b.i. \$16.0M per year profits. Cost: $\$ 64.0 \mathrm{M}$.
$
\frac{64}{16}=4 \text { years }
$
or
Capital outlay $\$ 64000000$
Expected yearly profit $\$ 16000000$
Answer: exactly 4 years
Award [1] for the correct workings and [1] for the correct answer with the unit “years”.
b.ii.
ARR = [(80 000 000 − 64 000 000) ÷ 5 ÷ 64 000 000] × 100 = 5 %
Award [2] for correct answer with working and with the percentage sign.
Award [1] if the percentage sign is missing,
Do not credit the formula alone.
c. Types of financial reward other than salary that RDM might offer its engineers and computer scientists include:
commission – but difficult for these types of employees
profit-related pay – could be suitable
performance-related pay (PRP) – but may be difficult to measure performance for individual employees
employee share ownership scheme – could be suitable
fringe payments (perks) – such as company car, health care, etc.
Accept any other relevant financial reward.
Mark as a 2 + 2.
Award [1] for an appropriate financial reward identified and an additional [1] for explanation and application. Award a maximum of [2] for each financial reward identified, explained, and applied to the stimulus. Maximum award overall: [4].
d. Refer to Paper 1 markbands for May 2016 forward, available under the “Your tests” tab > supplemental materials.
With Option 1, advantages for RDM include:
Retention of “proprietary” hold on its knowledge of automation and robotics.
Continuation of operating in a market (medical devices) that is growing and where RDM is known and has a solid performance.
Remaining free from relationships with other companies, which can cause conflicts. Conflicts could emerge with ZI operational details. They could also emerge because of conflicts of culture in the two organizations. Jan has worked for years to create a democratic, innovative culture at RDM, which could conflict with the more traditional industrial culture at ZI.
Disadvantages of Option 1 include:
Need of capital, which will have to be raised either through issuance of shares or debt.
If long-term finance comes from share capital, dilution of the ownership of the Radeki de Dovnic family will occur.
Loss of opportunity to work closely with another company, from which other opportunities may emerge.
Accept any other relevant advantage or disadvantage of Option 1.
With Option 2, advantages for RDM include:
Substantially lower capital outlay ($6.0M versus $50.0M or $24.0M).
On balance, a good location near highly profitable markets.
Potential opportunities that could occur by forming an alliance with ZI. In light of RDM’s flexibility in manufacturing, it could easily fill some types of orders for ZI or even become one of its suppliers.
The infusion of innovative ideas from the expansion of RDM’s labour force of engineers and computer scientists.
Disadvantages of Option 2 include:
Loss of proprietary knowledge of automation and robotics, which would be passed on to another company that, after the period of the strategic alliance, could potentially become a competitor.
The need to expand significantly the recruiting and training function to find twenty more computer scientists and engineers.
ZI will not want new hires from RDM overseeing the reconfiguration of its processes, which will require RDM to transfer many of its experienced people to the new location. They may not want to do that (affecting motivation) or may refuse to do it (thus leaving RDM and taking their expertise elsewhere).
Potential problems that come from relationships with other companies: conflicts over operation operational details, culture conflict, etc.
Accept any other relevant evaluation.
Marks should be allocated according to the paper 1 markbands for May 2016 forward section B.