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General Certificate of Education Advanced Level

MANAGEMENT OF BUSINESS                                                                            9198/2

NOVEMBER 2007 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 businesses described in this paper are 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.

    T-Car LTD

    T-Car Ltd is a leading car manufacturer in Zimbabwe. Tendai is the product manager for the firm and she has to recommend a pricing strategy for a new model to be launched. This new model will be a top of the range car with some important new features; light to drive, efficient fuel use and speedy.

    The marketing strategy for the new car is to target some market segments which the existing cars have not fully penetrated. Although the new features  give this model considerable advantages, the car’s technical superiority is likely to be short-lived since the innovations are the result of development by South African component manufacturers.

    To take advantage of these technical advances and to keep fixed costs to a minimum, all component s of the new car are to be imported. Only final assembly will take place in Zimbabwe.

    Tenda has received estimated costings for the components and the manufacturing process. Assuming, an order for quantities for at least 10 000 cars, the total cost of components is $80 per car. The cost of assembling each vehicle will add a further #30. The promotional budget has been set at $200 000 for the first year. A further allocation to central overheads to cover Research and Development  (R &D), central services and finance costs has been estimated at $300 000 per annum. The final price of the car to the use will have to take into account the retailer’s margins. Most of these retailers add a mark-up of 40% to their buying price.

    ” First, I must decide what my pricing strategy will be,” thought Tendai. “do I take advantage of the technical superiority of my new product and make good profits quickly through pricing-up, in the market segment that I know will pay? Or do I look for longer term profits, keep my price down and broaden my appeal to more segments in the hope that I can take significant market share?”

    a) Giving examples define the following terms:

         i) marketing strategy    [3]

         ii)  promotional budget  [3]

    b) Identify the factors that might influence pricing decisions in this case.       [4]

    c) Calculate the following:

          i) total fixed cost

         ii) total variable costs

        iii) total costs                                  [5]

    d) Evaluate the two alternative pricing strategies that Tendai is considering to adopt.   [10]

    Section B: Essays [75 marks]

    Answer any three questions from this section.

    2   Evaluate the significance of setting objectives to a business organisation. [25]

    3   Assess the importance of the following activities in an organisation.

              a) Job evaluation       [9]

              b) on-the-job training           [8]

             c) collective bargaining  [8]

    4     a) Under what circumstances might the use of a fixed budget be appropriate? [10]

           b) ” Borrowing is as beneficial as it may be undesirable.” Evaluate this statement. [15]

    5     a) Why might the span of control differ from one organisation to another? [12]

           b) Discuss the effectiveness of hierarchical organisation structures. [13]

    6   ” The Just in Time method of stock management is not compatible with flow production.”

          a) To what extent do you agree with this statement?   [10]

          b) Evaluate the appropriateness of flow production to a soft drink manufacturer. [15]

    7 Evaluate the impact of economic and social constraints on the success of  business in your country.   [25]

    8  a) Evaluate the contribution of advertising towards the marketing of goods and services.  [12]

       b) Evaluate the usefulness of market segmentation to a manufacturer of clothes.   [13]

    9  a) Explain the distinction between financial and management accounting.  [5]

        b) Discuss the importance of ratio analysis to the following stakeholders:

            i) managers

           ii) creditors

          iii) shareholders

         iv) workers                       [20]

    10 Evaluate the usefulness of installing and using computers to the management of a large manufacturing firm. [25]

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