General Certificate of Education Advanced Level

BUSINESS STUDIES                                                                                                            9198/2


NOVEMBER 2010 SESSION                               3 hours

TIME 3 hours


Answer all  questions in Section A and any three from Section B.

Write your answers on a separate answer sheet.

The number of marks is given in brackets

[] at the end of each question or part question.

The businesses described in this paper are entirely fictitious

You are reminded of the need for good English and clear presentation in your answers

Calculators may be used.

Section A: Data Response [25 marks]

Answer all questions.

1. Read the passage below and answer the questions that follow.

Farm Tools Ltd

Farm Tools Ltd is a medium-sized business that manufactures farm equipment. It started by making simple hand tools aimed at the newly resettled small-scale farmers and later on diversified into modern farm equipment. Currently, two of the best selling product lines are the “Straight Harrow”, which sells well to the medium-scale farmers and the “Automated Combine Harvester”, which is popular with large-scale farmers.

Despite the successful launch of these two product lines, Farm Tools Ltd has been affected by serious problems that have threatened its continued existence. Its total sales have grown at a slower rate in recent years compared to that of the whole market. Shareholders have raised concern over the firm’s lack of clear business objectives.

The Human Resources Director, Alex Nkomo, is concerned about the rising staff turnover. During one of the exit interview, one of the workers complained that workers are never given a chance to express their opinions. The worker also disclosed that management set production targets and introduced new ones without consulting the workers.

The directors have suggested that Farm Tools Ltd embark on Research and Development to introduce a new combine harvester that will also mill grains into finished products. This equipment will be produced at low costs  and is expected to appeal to both domestic and foreign farmers.

The following are the projected cash flows and the discount factors at 10%.


YearCashflows ($ million)Discount Factors (at 10%)

It is hoped that the introduction of the new equipment will help reduce Farm Tool Ltd’s viability problems. The other directors have tasked the Finance Director to calculate the net present value of the new equipment.

(a) Explain the term “staff turnover” (line 13) as used in the passage.   [13]

(b) Using the information in the passage calculate:

(i) pay back period.                                  [3]

(ii) net present value.                               [4]

(c) Analyse the information in the passage and recommend to the directors of Farm Tools Ltd whether the new combine harvester should be accepted.                       [5]

(d) Evaluate how communication between management and staff might be made more effective within Farm Tools Ltd.                                                 [10]

Section B: Essays [75 Marks]

2     (a)  Discuss the contribution of ratio analyis to the effective management of working capital.          [10]

        (b) Evaluate the methods a business might use to improve its liquidity.            [15]

3     With reference to appropirate theories, evaluate the importance of strategies management might use to improve the productivity of employees. [25]

     (a) Explain how ethical issues might influence business objectives.    [10]

         (b) To what extent is Management by Objectives important as a means of ensuring and developing a                          more effective management team?                 [15]

5      Two giant supermarkets have proposed to merge.

        (a) Discuss the factors the two supermarkets might have considered before making the decision to merge.

        (b) Critically discuss the likely impact of the merger on each of the following stakeholders:

(i) government,

(ii) workers,

(iii) customers.                                                         [15]

6       Discuss how changes in technology might affect businesses in your country.     [25]

7     (a) Discuss the factors a firm might consider when choosing a source of finance.  [10]

        (b) Evaluate possible methods a firm might use to finance the purchase of machinery. [15]

8     (a) Why might a manufacturer not be keen to use flow production techniques?   [10]

        (b) Evaluate how value analysis might affect the success of a business.      [15]

9     A clothing manufacturer is considering entering the fashion market.

        (a) Discuss the factors that might influence the manufacturer’s marketing strategy.  [10]

        (b) Evaluate the methods the manufacturer might use to collect the information from the fashion                                market.                 [15]

10   (a) Assess the importance of bench marking as a method of ensuring quality.   [10]

         (b)  Evaluate the contribution of product quality to the success of a business.  [15]