Applied Business Question

Applied Business Question 2018

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About the ABQ


1 The Higher Level Leaving Certificate Business Paper consists of three sections.
2 Section 2 which is the Applied Business Question (ABQ) is a compulsory question.
3 The ABQ consists of a single practical Case Study Business Question – 80 marks are available, representing 20% of the total marks.
4 The text and questions of the ABQ are based on three specified units of the syllabus, out of a total of seven units, which alternate (change) on an annual basis. In 2018 the ABQ will be based on Units 5, 6 and 7of the syllabus, similar to the 2008 and 2013 examinations, as the ABQ operates on a five year cycle.

Methodology


  • This section requires you to Name, Explain and Link for each point. A high level of synthesis (i.e. combining different elements into the one answer) must be established and should therefore be done when you are fresh. Evaluation may be also required.
  • In answering the questions on the ABQ candidates must explain and make use of relevant knowledge / theory (and understanding) gained in the subject while studying the course in addition to the relevant links from the ABQ.
  • Linking of points made in your answer with the text by relevant quotes / phrases / statements from the ABQ is essential. It is recommended that you present the link / quote in a different colour ink. A DIFFERENT / SEPARATE link is required for each point of theory made within each part of the ABQ. A link will not be awarded marks without having the relevant theory attached.
  • Read the ABQ provided in full before reading the questions, then go back and highlight the relevant points / links in the text.
  • Present your answers to each part of the question in point form and be sure to link or quote from the text of the ABQ in your answer, even if you are not specifically requested to do so.
  • The methodology that must be used can be seen by looking at the structure of the sample answers shown below.

Sample Q & A


Sample 1 – ABQ suitable for Leaving Cert 2018

Blarney Manor Hotel.

abq2018_01Blarney Manor Hotel recorded its best ever profits in 2017 since it opened 50 years ago. Michael Murphy, one of the three co-owners and the hotel’s General Manager stated that in 2017, revenue increased by 30% and profits grew by 35%. John Murphy, the Functions Manager, stated that their business can be divided into different segments- midweek and weekends. Midweek 90% of their clients are business persons, many from foreign Transnational Companies in the Cork area. John feels that Cork businesses do well because of attracting so many transnational companies to the area. On the weekends, almost all customers are local people socialising.

Mary Murphy, the Human Resources Manager, is responsible for employee numbers. This can be difficult in the hotel sector which tends to have a high staff turnover. Mary empowers staff with the aim of being the best in the hotel (accommodation and catering) business and working together to create a unique experience for guests. Blarney Manor employs 250 people, 100 of whom are temporary and taken on as required for the very busy summer and Christmas periods.

The Government Budget announcement that the minimum wage for experienced workers will increase to €9.55 per hour from January 1, 2018 will significantly increase labour costs for the hotel. However, the 2018 Budget also maintained the special low rate of VAT (9%) for the hospitality / tourism sector. The Murphy family has plans to invest €3 million in redevelopment over the next five years and are presently preparing a business plan to present to their bank when seeking finance.  A Capital Grant will be available to the hotel from Fáilte Ireland. The government-funded tourist marketing campaigns featuring the Wild Atlantic Way and Ireland’s Ancient East have been very successful.

In recent years, the Irish economy, has seen large increases in Corporation Tax returns, an increase in the standard of business management and Transnational companies spending huge amounts in Ireland on the purchase of services and raw materials. Blarney Manor Hotel maintains strong links to the community that support them. The growth of business in the town has resulted in improved infrastructure, such as high speed broadband, river walks and other public amenities.

1(A) (i)
(ii)
Explain the term “business plan”
Draft a Business Plan for Blarney Manor Hotel, using four headings, outlining the contents under each heading.(30 marks)

Sample Answer (1A) (i) – Explain the term “business plan”

A business plan is a written statement / proposal about the business and its objectives (where it wants to go) and strategies in areas such as marketing, ownership, production, finance and the identifying of opportunities. A business plan is important in the context of business start-ups and when looking for finance.

Sample Answer (1A) (ii) – Draft a Business Plan for Blarney Manor Hotel

Business Plan for Blarney Manor Hotel

Description / Ownership of the Enterprise

Business Name:                  Blarney Manor Hotel
Owners:                                Michael Murphy, John Murphy, Mary Murphy
Registered Office:              17, Main Street, Blarney, Co. Cork
Auditor:                                 P. Horgan, Henry Street, Cork
Managing Director:           Michael Murphy
Function Manager:            John Murphy
Human Resources:             Mary Murphy
Banker:                                  Bank of Ireland, Blarney

(This section indicates who the owners of the business are. The quality, experience and training of the management team will have a great effect on the success of the business.)

Product / Services (Operations):

  1. Accommodation and function rooms available.

Link: “Mary empowers staff with the aim of being the best in the hotel (accommodation and catering) business and working together to create a unique experience for guests.”

  1. The hotel has been in business for 50 years.

Link: “Blarney Manor Hotel recorded its best ever profits in 2017 since it opened 50 years ago.”

(This section sets out clearly the identity of the business idea and its objectives. State what the business does e.g. will manufacture a range of specialised chemical additives for use in the petroleum and plastics industries. Any unique product technology, the research and development completed and any licensing arrangements.)

 

Market Analysis:

Blarney Manor Hotel has two main markets –

  1. Domestic / Local

Link: “Weekends almost all customers are local people socialising.”

  1. Commercial

Link: “Midweek 90% of their clients are business persons, many from foreign Transnational Companies in the Cork area,”

(This section gives details on customer preferences and behaviour. The age, sex and socio- economic group of potential customers is important. This shows that the firm knows how to market its products effectively and the competition in the market. Areas such as marketing mix, target market, channels of distribution are covered here.)

 

Financial Analysis:

  1. Final Accounts. (Appendix 1)
  2. Projections for the coming year(s). (Appendix 2)
  3. Details of Redevelopment Proposals (Appendix 3)

Link: “Michael Murphy, one of the three co-owners and the hotel’s General Manager stated that in 2017, revenue increased by 30% and profits grew by 35%. The family has plans to invested €3 million in redevelopment over the next five years and”

(This section shows a projected profit and loss account and balance sheet for three to five years ahead, Cash flow forecasts with inflows and outflows of cash for the same length of time are all provided incorporating details of sources of funds and financial control.)

Signed:          Michael Murphy

Date:              10/1/2018

1(B) Evaluate the impact of foreign Transnational Companies (i.e. foreign direct investment (FDI)) on the economy.

(20 marks)

Sample Answer (1B) – Impact of foreign Transnational Companies

1 Direct employment e.g. approximately 190,000 people are directly employed by foreign multinationals in Ireland. It is estimated that Foreign Direct Investment (FDI) companies give rise to indirect employment of twice that amount. They also employ highly skilled graduates, right up to PhD level, which prevents a ‘brain drain’ from the country. Many of these graduates are engaged in research and development (R&D), an important area in multinational businesses.
Link:Cork businesses do well because of attracting so many transnational companies to the area.
 2 Tax revenue for the Government E.g. Transnationals pay 12.5% corporation tax on their profits. This low rate of corporation tax is a key Government strategy in attracting FDI.
Link: The Irish economy has seen a large increase in Corporation tax returns
 3 Positive spin-off effects for the local economy and local indigenous firms. They source their inputs from domestic companies where possible, thereby increasing employment in those firms. Local taxis, catering firms, cleaners, security firms, local pubs and restaurants all benefit from the presence of a transnational in their locality. They also enhance Ireland’s reputation and act as a catalyst for further FDI. As companies such as Intel and Google have a major presence here, it can be inferred that Ireland is a good place to do business (international goodwill).
Link: “Midweek 90% of their clients are business persons, mostly from foreign Transnational Companies in the Cork area” or “The growth of business in the town has resulted in improved infrastructure, such as highspeed broadband, river walks and other public amenities.
 4 Bring a knowledge base and a business expertise to Ireland in terms of management systems and organisational culture. Irish employees of foreign multinationals learn the best business practices and technologies. The latest technology is introduced based on research carried out in other countries, thereby requiring less Irish expenditure on R&D. Irish managers gain experience and learn from these foreign business executives. Excellent high-tech companies have easy access to international markets.
Link: “The Irish economy ……………an increase in the standard of business management
Evaluation

Some FDI companies are considered Footloose having no loyalty to Ireland. They may leave immediately if operating costs are lower elsewhere. The DELL Limerick move to Poland resulted in thousands of job losses in the Limerick area.

Positive impact on the Balance of Trade– They bring their own business plans and ready-made export markets. Up to 80% of Irish exports come from foreign multinationals (about 50% from just 5 companies). Because of their substantial exports, Ireland hasn’t had a Balance of Payments problem for many years.

1(C) (i)
(ii)
Outline what is mean by the Tertiary (Service) Sector.
Describe how the Government regulates and encourages business, with reference to Blarney Manor Hotel.(30 marks)

Sample Answer (1C) (i)

These are the providers of essential support services to both businesses and consumers. Examples of service industries include financial, medical, transport, tourist and government services. They do not actually produce or make a product but they provide an important service by bridging the gap between producers and the final consumer. This sector is the fastest growing part of the economy – 70% of all employees work in this area.

Sample Answer (1C) (ii)

REGULATES. The government regulates business through its legislation / laws and taxation.  Legislation can protect stakeholders such as consumers, employees, local communities and the general public.
National minimum wage (law): Government sets the national minimum wage (the legal minimum hourly rate of pay) that must be paid to employees thereby protecting low paid employees and avoiding the exploitation of workers. Businesses must abide by the national minimum wage legislation.
Link: The Government Budget announcement that the minimum wage for experienced workers will increase to €9.55 per hour from January 1, 2018 will significantly increase labour costs for the hotel.”
Taxation:   Business Taxation refers to a compulsory payment made by a business to the government to finance the running of the State. Taxation can also be used as a means of changing behaviour and improving public health e.g. sugar tax, tobacco tax.
Link: “However, the 2018 Budget also maintained the special low rate of VAT (9%) for the hospitality / tourism sector.
ENCOURAGES. The government encourages business though its spending on state agencies providing services such as grants, or training.
Finance: The government though various state agencies provides finance / grants for different activities in a business such as capital, training, feasibility, marketing.  A grant is payment made for a specific purpose, subject to meeting certain criteria. The grant is not repayable by the business once the conditions have been fulfilled.
Link: “A Capital Grant will be available to the hotel from Fáilte Ireland. The Government funded tourist marketing campaigns featuring the Wild Atlantic Way and Ireland’s Ancient East have been very successful.

Sample 2 – ABQ and answer from Leaving Certificate Exam 2013 (Units 5,6 and 7)


GALAXY GAMES LTD
abq2018_03Galaxy Games Ltd is a small indigenous company, operating in the new gaming technology sector.  It was founded by two college graduates, David Whelan and Jane Ward.  David is a software engineer and a web architect while Jane is a marketing graduate.   Their design team recently identified some ideas for new games in action-adventure, music, and e-learning.

After reviewing the various ideas put forward, ‘Knights’ Domain’, a new action-adventure game that involved building a fantasy kingdom, was chosen.  The design team decided to use Irish music and cutting-edge graphics to set the game apart.  Jane completed a business report, including a detailed break-even analysis, to determine the potential of ‘Knights’ Domain’.  Following on from this report, the design team introduced more challenging levels to the game and added more 3D graphics.  The game was introduced to a group of transition year students from a local secondary school, who commented positively on the different levels and on its distinctive graphics.  The product ‘Knights’ Domain’ was launched in various games stores with an advertising campaign accompanying the launch.

Social responsibility is a key element in Galaxy Games’ corporate business plan. Funding was invested in supporting the development of a highly skilled customer service department.  Galaxy Games Ltd attracts and retains high quality, creative employees.  A major European venture capital firm has invested €1.5 million in the company to date.  Galaxy Games Ltd maintains good relationships with its suppliers, many of whom have continued a business relationship with the company since its establishment. When choosing a suitable business premises, David and Jane prioritised energy efficiency.

As a result of Ireland’s growing international reputation in the gaming technology sector and Galaxy Games’ successful company presentation at the ‘2012 Dublin Web Summit’, the company became a target for acquisition.  In January 2013 it was taken over by BizzBuzz, a US global gaming company and a market leader in the industry.  BizzBuzz implements a global approach to marketing its games.  All games are available in ten different languages.  Prices per game are set taking account of competitor prices and various economies of scale.  Recent developments in technology enable BizzBuzz to distribute its games worldwide through download from the internet to laptops, smartphones and tablets.  BizzBuzz is a globally recognised brand name and uses the slogan ‘A new game every day’ on its website.

(2A) Outline the stages involved in the product development process of ‘Knights’ Domain’ for Galaxy Games Ltd.

(30 Marks)

Sample Answer (2A)

Idea Generation:  Initial ideas for the new product are thought up systematically. They can be internal or external.  Ideas may be generated by brain-storming sessions, market research, staff / customers suggestions.
Link: “Their design team recently identified some ideas for new games in action-adventure, music, and e-learning
Product Screening: All ideas are vetted and the impractical and unworkable ideas are dropped, leaving the most viable ones for further examination and development.
Link: “After reviewing the various ideas put forward, ‘Knights’ Domain’ a new action-adventure game that involved building a fantasy kingdom, was chosen
Concept Development: This involves turning the idea into an actual product or service that will appeal to / meet the needs of customers. A unique selling point (USP) is identified which will differentiate it from other products on the market.
Link: The design team decided to use Irish music and cutting-edge graphics to set the game apart.”
Feasibility Study:  This is carried out to assess if a product has potential. It looks at whether it can be produced technically (production feasibility) and if it will be profitable (financial feasibility).
Link: Jane completed a business report, including a detailed break-even analysis, to determine the potential of ‘Knights’ Domain’.”
Prototype Development:  This stage involves developing a sample or model of a product. It is produced to see what materials are required to make it and if it appeals to customers.
Link: “Following on from this report, the design team introduced more challenging levels to the game and added more 3D graphics.
Test Marketing / Product Testing:  This involves doing a small-scale trial to identify possible faults and to assess customer reaction. The product is tested on a sample of potential consumers before going into full production to determine customer satisfaction with the product.
Link: “The game was introduced to a group of transition year students from a local secondary school, who commented positively on the different levels and on its distinctive graphics.
Launch:  The product is put into full-scale production and introduced to the market.   The business will select a suitable marketing strategy to persuade consumers to buy the product.
Link: “The product ‘Knights’ Domain’ was launched in various games stores with an advertising campaign accompanying the launch.
(2B) Discuss the social responsibilities of Galaxy Games Ltd to its stakeholders.

(20 marks)

Sample Answer (2B)

Shareholders / Investors:  The company has a responsibility to provide a fair return on the investment by shareholders. It should try to satisfy the shareholders needs by creating wealth in the form of profits, and pay the highest dividend possible, i.e. the highest return on capital. The company must avoid excessive payments to senior management.
Link: A major European venture capital firm has invested €1.5million in the company to date.”
Customers:  Its customers have a right not to be exploited. Firms must avoid producing products that are unacceptably dangerous or have a high level of health risk. Fair and honest advertising of its product. Abide by health and safety regulations; products must be safe. Goods must be of merchantable quality, match their description, fit for purpose. Uphold the right of the customer to complain and to investigate such complaints.
Link: Funding was invested in supporting the development of a highly skilled customer service department
Employees: Staff have a right not to be exploited. The company has both a responsibility not only to create employment, but to maintain and secure jobs wherever possible. It must adhere to Employment Law, Health and Safety Regulations.  It must pay a fair wage to all employees and provide a safe working environment. It must treat employees with dignity and respect and ensure that there is no discrimination. It must provide equal opportunities for promotion to all employees.
Link: Galaxy Games Ltd attracts and retains high quality, creative employees.”
General Public / Community:  The company has a responsibility to be environmentally conscious and to implement environmentally friendly business practices. Co-operation with government offices e.g. EPA and openness and transparency are features of the company’s behaviour. It is in the interests of society and of business to resolve any conflicts that may arise between them and agree a balance between the goals of business and those of society.
Link: When choosing a suitable business premises, David and Jane prioritised energy efficiency.
Suppliers:  All suppliers should be fairly treated.  Amounts agreed should be paid within the time frame agreed. Tendering procedures should be followed where applicable.
Link: Galaxy Games Ltd maintains good relationships with its suppliers,   many of whom have continued a business relationship with the company since its establishment.”
(2C) Evaluate the global marketing mix of BizzBuzz.

(30 marks)

Sample Answer (2C)

Global Product: This is the element of the marketing mix that companies try not to change.  Global businesses aim to sell an undifferentiated product in all markets. They aim to develop a unique selling point for their products and a global brand name. However, the product may need to be adjusted to reflect technical, legal and language requirements e.g. a left hand drive car; packaging may need to be changed to cater for the needs of the local market.
Link: “All games are available in ten different languages.”
Global Price:  Global firms attempt to achieve a uniform price in each market; however, this objective is often affected by the following factors:

  • The cost of living in different countries.
  • The cost of production, distribution, marketing, transportation in different countries.
  • Different tariffs, customs duties and VAT rates.

Local price levels and prices charged by competitors in the market.

Link: “Prices per game are set taking account of competitor prices and various economies of scale.”
Global Place: Global channels of distribution for physical goods tend to be longer, involving more intermediaries such as exporters and agents. However, the nature of the Bizzbuzz product portfolio together with rapid technological developments means that a direct channel of distribution is appropriate. Examples of the various channels available include:

  • Selling directly to customers.
  • Agents – independent person who will act on behalf of the firm generally receiving a commission on sales.
  • Strategic alliance – agreement with a foreign company to produce and/or market products, that is, partners work together for mutual benefit.
Link: “Recent developments in technology enable BizzBuzz to distribute its games worldwide through download from the internet to laptops, smartphones and tablets.”
Global Promotion: Differences in legislation, language and culture need to be recognised in the choice of promotion.  Internet advertising on social media sites, TV and radio advertising of the BizzBuzz website and international trade fairs would be suitable methods of promoting the Bizzbuzz brand, logo and slogan globally.
Link: “BizzBuzz is a globally recognised brand name and uses the slogan ‘A new game every day’ on its website.”
Evaluation:
In my opinion, BittBuzz has an excellent global marketing mix. They sell their games all over the world, treating it as a single market, however, they adapt their products and prices to suit local conditions thereby maximising revenue.

Student Activity – Sample ABQ


The Irish Incense Shop Ltd.

abq2018_02John Murphy and Mary Ahern are co-founders of the Irish Incense Shop. They sell a range of tourist / incense products, such as a little cottage containing mini turf sods and a stone burner with a ceramic cottage for burning incense. Mary estimates that 40% of the company’s products are sold in Ireland, a further 30% are sold in Irish shops in the U.S. and Canada. The company website has given the business a big boost in recent years as they have been able to receive orders from all over the world. The turf cottage and ceramic burner both retail at €15 each.

The challenges of running a business are very significant especially where to find the necessary resources and expertise. John and Mary found the advice, training and mentoring provided by the Galway Local Enterprise Office (LEO) invaluable since neither had business experience – he had been a carpenter and she had worked as a nurse. The 31 LEOs which were established in April 2014, replacing the County Enterprise Boards, foster business start-ups throughout the country. Mary recently attended a Women in Business course run by Galway LEO and they also received a Feasibility grant of €10,000 to cover initial market research.  Irish Incense Shop Ltd. also found the capital grant aid very useful in its start-up phase.

Future plans include marketing its products in all countries of the European Union (E.U.). John and Mary are aware that there is free movement of goods, people, services and capital within the union. Nineteen of the remaining twenty seven members after Brexit share the same currency.  They have been advised by their accountant that it is essential to familiarise themselves with the E.U. policies which affect many aspects of business e.g. recruitment, marketing, finance.

(A) (i) Describe what is meant by Mentoring.

(ii) Describe the other services provided by the Community / Local Development Initiatives such as the Local Enterprise Offices.

Refer to the above text in your answer.

(30 marks)

(B) Discuss the purposes of the European Union policies as they affect the Irish Incense Shop.

(30 marks) 

(C) Evaluate the elements of the Marketing Mix as they apply to the Irish Incense Shop.

(20 marks)

Template for Solution

(A) (i) – Describe what is meant by Mentoring.

Mentoring is designed to provide an experienced and wise helper to the new business. The mentors are mature and experienced business people who understand the difficulties of business start-ups and can plan to overcome them. The mentor’s role includes being a sounding board, offering advice, identifying challenges and suggesting solutions that the business should follow.

(A) (ii) – Describe the other services provided by Local Enterprise Offices

  1. Training: LEOs deliver high quality training courses to meet the needs of start-up businesses. Courses include Start Your Own Business, Managing Your Business e.g. Marketing, Sales, Financial Management, Strategy and Business Planning.

Link: “Mary recently attended a Women in Business course run by Galway LEO.”

  1. Feasibility Study Grants: They are designed to assist the promoters.

 

Link:

 

  1. Priming grant:

 

Link:

(B) – Discuss the purposes of the European Union policies

(i) Economic and Monetary Union (EMU).

All EU member countries (whether inside or outside the euro) are part of the economic and monetary union (EMU), a framework for economic cooperation designed to promote job creation and sustainable growth. The two main elements are the single currency (Euro) and the Stability and Growth Pack (SGP).

  • Euro: Used by 19 countries, almost 340 million EU citizens. The single currency benefits everybody. People no longer need to change money when travelling or doing business within the euro area, thereby saving time and transaction costs.
  • Stability and Growth Pact (SGP): This places greater emphasis on reducing high levels of government debt. SGP enforces fiscal (tax and spending) rules and includes penalties for euro-zone area countries that breach fiscal rules.

Link: “nineteen of the remaining twenty seven members after Brexit share the same currency.

(ii)  European Union Competition Policy

It ensures the best chance for the Irish consumer of getting quality goods

 

Link:

 

(iii) European Union Social Charter

The EU Social Charter sets out fundamental social rights of workers these include the following:

  • Free movement of Labour
  • Employees have rights
  • Health protection and safety at work
  • There are EU laws to limit

Link: “They have been advised by their accountant that it is essential to familiarise themselves with the E.U. policies which affect many aspects of business e.g. recruitment.

(iv) Single European Market

This removes customs duties and barriers to trade in the member states.

Link:

 

(C) – Evaluate the elements of the marketing mix

Product The physical good or service provided.

Link:  “They sell a range of tourist/incense products, such as a little cottage containing mini turf sods and a stone burner with a ceramic cottage for burning incense.”

Price is what one pays for a product. It is also the representation of the value

Link:

 

Promotion is concerned with letting existing and possible future customers know

Link:

 

Place Firms must use the most suitable and cost-effective way of distributing

Link:

 

Evaluation / judgement of the overall marketing mix

In my opinion, Irish Incense Shop has a…