General Certificate of Education Advanced Level

BUSINESS STUDIES                                                                                              9198/2


NOVEMBER 2012 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.

If you use more than one sheet of paper, fasten the sheets together


The number of marks is given in brackets

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

You are advised to spend not more than 45 minutes on Section A.

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.

Techno-call (Pvt) Ltd

Techno-call (Pvt) Ltd is a cellular network service provider in a country with three cellular network providers. It is registered as a private limited company. Techno-call manufactures and sells recharge cards to customers subscribing to its cellular network. With a subscriber base of 200 000, the company is ranked third in the country. There are one million subscribers in the country and the markets leader’s market share is 45%.

Although Techno-call has been realising modest profits since its inception three years ago, of late the company has been experiencing a decline in sales. It is estimated that if management does not take action, the subscriber base is likely to decline to 15% by year end. The subscriber base for rival firms has been growing and this has prompted a board meeting for Techno-call. In the board meeting, the Technical director suggested that more base stations be constructed. The effect would be to increase the company’s network coverage, earn economies of scale, become more competitive and attract more subscribers. “We could even purchase recharge card materials at a discount if we bought them in bulk.”

A major setback faced by the directors is how to raise $3 000 needed for the construction of more base stations. The forecasted net cash flows for this investment are shown in the table below.

End of YearNet Cash Flows10% Discount Factors
1$1 2000.91
2$1 4000.83
3$1 8000.75
4$1 6000.68

Despite the setbacks likely to be faced in raising the needed capital, all the directors agree that growth will ensure survival. They have tabled the following strategies for survival.

  • merge with the second-largest network service provider in the country.
  • offer a rights issue.
  • subcontract manufacturing of recharge cards.

The directors are resolute that if adopted, these strategies will revive the declining market share.


(a)   Explain the meaning of the term economies of scale (line 12) as used in the passage. [3]

(b)   Calculate

(i) Techno-call (Pvt) Ltd’s market share.    [2]

(ii) the Net Present Value (NPV) of constructing more base stations using the discount factors                               provided.                 [4]

(c) How and to what extent might your calculations in 1 (b) influence the decision to construct more                        base stations.                             [6]

(d) Evaluate the three survival strategies Techno-call directors  wish to adopt.  [10]

Section B: Essays [75 marks]

2     With reference to Taylor and Hezberg’s motivation theories, evaluate the importance of financial                            as a way of improving the productivity of shopfloor workers.     [25]

3     (a) Explain  the criteria that a business might use to assess the effectiveness of its communication                              systems.                                  [12]

         (b) Critically examine the importance of informal communication to businesses. [13]

4      To what extent do you agree with the statement that “product quality guarantees business success”? [25]

5      (a) Explain the usefulness of the elasticity of demand concept to managers of a business.  [10]

          (b) Discuss how and why a marketing manager might change a firm’s promotional activities at different                     stages of a product’s life cycle. [15]

6      Evaluate the usefulness of the Profit and Loss Account and Balance Sheet to managers of a business. [25]

7       Discuss the likely effects of changes in technology to businesses in your country. [25]

8      An operations manager has decided to change from a batch to a flow production process.

         (a) Explain how this change might be viewed by:

(i) production workers,

(ii) customers of the business                            [10]

(b) Evaluate the significance of the flow production technique to a manufacturer of motor vehicles. [25]

9     (a) Explain the factors a finance manager might consider when selecting appropriate sources of finance.

(b) Evaluate the role of the Stock Exchange to the economy of your country. [15]

10    Evaluate the importance of the following techniques to an organisation.

(a) Boston Matrix,                      [9]

(b) Lean Production,                  [8]

(c) Linear Programming.           [8]