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General Certificate of Education Advanced Level

MANAGEMENT OF BUSINESS                                                                            9198/2

JUNE 2008 SESSION        3 hours

TIME 3 hours


  • Answer all  questions from Section A and any three  from Section B.
  • Write your answers on the separate paper provided.
  • 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.
  • The business described in this paper is entirely fictitious.
  • You are advised to spend no longer than 2 hours on Section A.
  • 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 all the questions that follow.

    The New Farmer

    Murime was resettled in 2002 as a new farmer on a 200 hectare piece of land. Murimi specialises in dairy farming and the milk he produces is sold to a parastatal called The Dairy Marketing Board. This marketing board has just informed him that it will reduce its milk purchases in response to a decline in the demand for milk in the country.

    In response to this perceived in demand for milk, Murimi is considering two important issues which will have a great impact on the viability of his business. He is planning to engage in the processing of milk, or alternatively the selling of milk abroad. The cost outlays for the two options are:

      i) Selling milk abroad-$80 million

     ii) Processing milk $100 million

    Estimated cash inflows for the two investment options in the first 5 years are shown below.

    YearSelling Milk Abroad Cash inflow ($m)Processing Milk Cash inflow ($ m)

    Murimi hopes that these investment options will have the following effects;

    employment of new workers

    retraining of workers

    spillover benefits to surrounding farmers

    To achieve his objectives, Murimi plans to employ a full-time marketing manager to spearhead product positioning and an operations manager to plan and coordinate production resources.

      a) What is product positioning?   [2]

      b)  i) Calculate the payback period for each investment option and state the investment option Murimi should adopt. [5]

          ii) Using information in the table above, explain the limitation of basing investment decisions on payback period.            [2]

     c) Discuss the effects of the following to Murimi

            i) employment of new workers;      [3]

           ii) retraining of workers.     [3]

    d) If you were employed by Murimi as a Marketing Manager, explain you how would devise a marketing strategy so as to spearhead product.  [10]

    Section B: Essays [75 marks]

    Answer any three questions from this section.

    2  Evaluate the usefulness of any three motivation theories manager might use to improve worker performance. [25]

    3  a) How might a merger be viewed by each of the following stakeholders.

             i) goverment;       [6]

           ii) workers?           [6]

       b) Evaluate the contribution of a merger to a furniture manufacturer. [13]

    4  a) Assess the role of effective communication within a business. [13]

        b) Discuss the constraints to effective communication within within a business. [10]

    5  “Maintain effective promotional activities is the most important factor when marketing any good.” Evaluate this statement.  [25]

    6  a) Why is it important for a business to have accurate cost information? [10]

        b) Evaluate the usefulness of distinguishing between fixed and variable costs. [15]

    7 Assess the usefulness of the marketing department to a business of your choice.  [25]

    8 To what extent might hire purchase be an important source of finance?  [25]

    9 Comment on the usefulness of using the following as aids to business decision-making:

        a) break-even analysis;                     [13]

        b) network analysis (critical path analysis)        [12]

    10  a) Why might a firm set profit maximisation as an objective?   [10]

          b) Evaluate the methods that a bus company might use to depreciate its assets. [15]

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