Applied Business Question 2020

Applied Business Question

business_square2

About the ABQ


1 The Higher Level Leaving Certificate Business Paper consists of three sections.
2 Section 2 of 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 2020 the ABQ will be based on Units 2, 3 and 4 of the syllabus, similar to the 2005, 2010 and 2015 examination, 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. 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 model answers that follow below.

Sample Q & A


Sample 1 – ABQ suitable for Leaving Cert 2020

Biotech Animalcare Ltd
animal_careEdward Brown had long thought about setting up his own business. He was ambitious well-educated and had worked successfully for a number of large multinational companies. He felt that he had a lot of fresh ideas and was not afraid to try them out. In 2016, Edward decided to establish Biotech Animalcare Ltd, which developed a portable blood analyser for veterinarians (vets) who needed rapid diagnostic results at the animal’s side. At present blood samples are collected and have to be sent to a clinic for analysis whereas with the new technology results would be available in minutes. In 2017, Edward left his secure position in a Multinational company to work full time in Biotech Animalcare LTD because of all the challenges to be met in a new start up.

Initially, Edward got financial advice from Joseph Ferris, a local bank manager. Joseph states that the availability of working capital and finding suitable sources of finance are two important issues. Biotech Animalcare Ltd will need money to pay regular bills, such as electricity, telecommunications, wages and the purchase of stock. Machinery for the production of the blood analyser, office equipment and delivery vans will be required. As a start-up company they may not be in a position to purchase a premises and will have to consider leasing a suitable location.

Edward is a good listener and adopts a hand on approach. He can be seen daily walking around the premises, talking to staff and getting feedback. Edward has great contacts in business through him been President of the local Chamber of Commerce and spent a lot of time networking, asking other members what they are doing to cope with various issues such as shortage of suitable staff. Biotech Animalcare has to increased staff numbers from 10 to 25 in the last two years. Edward motivates staff by paying them well, having as many employees as possible organised into teams and involved in making decisions.

1(A) Being decisive, creative and prepared to take risks are the personal characteristics often associated with an entrepreneur.
Discuss these characteristics and support your answer with reference to Edward Brown.
(20 marks)

Sample Answer (1A)

1 Decisive: Entrepreneurs have the ability to make quick and clear decisions so as not to miss opportunities, the issue of timing may be crucial (e.g. decisiveness when dealing with suppliers and contractors). They take full personal responsibility for the actions and decisions they make.
Link: In 2016, Edward decided to establish Biotech Animalcare Ltd, which developed a portable blood analyser for veterinarians (vets) who needed rapid diagnostic results at the animal’s side.
2 Creative: Entrepreneurs are good at coming up with new ideas or new ways of doing things, ‘thinking outside the box’. They expand their minds to what is beyond the ordinary through research and the collection of data. They have the ability to see things in new ways. They are prepared not only to be different but also tend to have a vision of the future.
Link: Edward felt that he had a lot of fresh ideas and was not afraid to try them out.
3 Take Risks: Successful entrepreneurs are not afraid of failing. They embrace failure as a learning experience. They take both financial risks and personal reputational risks but try to minimise both. They take measured and calculated risks which provide a reasonable and challenging chance of success. They take chances when opportunity strikes.
Link: In 2017, Edward left his secure position in a Multinational company to work full-time in Biotech Animalcare Ltd because of all the challenges to be met in a new start up.
1(B) (i) Explain the term “Working Capital.”
(ii) Identify and describe the most appropriate source of finance that Bank Manager, Joseph Ferris would have recommended to Edward Brown.
(30 marks)

Sample Answer (1B)

(i) Working Capital = Current Assets – Current Liabilities.
The money available for the day-to-day running of the business. If a firm does not have enough working capital it has a liquidity problem and may be unable to pay its debts as they fall due.
(ii) Sources of finance:
These can be classified under short, medium or long-term. Biotech Animalcare Ltd. will need finance under each of these headings.
Short Term – Finance available for less than one year e.g. Creditors, Taxation.
Bank overdraft is when the holder of the account is granted permission from the bank to withdraw more money than is in the account, up to a specified limit.
Link: Biotech Animalcare Ltd. require finance to pay regular bills such as electricity, telecommunications, wages and purchases of stock.
Medium Term – Finance available for more than one year and less than five years. This includes hire purchase, leasing and medium term loans.
Hire purchase – Refers to the buying of assets where an initial deposit is paid and the balance is paid through instalments. The buyer does not become the legal owner until the final instalment is paid.
Link: Machinery for the production of the blood analyser, office equipment and a delivery van will be required.
Long Term – Finance available for over five years. These include long-term loan, retained earnings, owner’s capital and share capital.
Mortgage – Is a long-term loan where property is offered as security. This means the title deeds are given to the lender and if the borrower defaults the financial institution can sell the asset to recoup the amount of the loan outstanding.
Link: As a start-up company, Biotech Animalcare Ltd. were not in a position to purchase premises and had to consider leasing a suitable location.
1(C) Evaluate how Edward can use his management skills to ensure the continued success of Biotech Animalcare LTD. (Evaluate each of the three skills separately)

In my opinion there appears to be a very positive work atmosphere in Biotech Animalcare LTD. The employees have accepted the changes to working conditions. Edward is very good at motivating the staff

Sample Answer (1C)

Communication Communication is concerned with the processes of transferring of ideas, information, and messages from a sender to a receiver with the main purpose being the understanding by the receiver of the sender’s message. Downward Communications: Instructions go from a superior to a subordinate. Upward Communications: Allow suggestions to be reported to the superior by the subordinate. New and changed work practices should be made in consultation with staff-consultation implying good two-way communication exists. The advanced ICT allows communication to be efficient, speedy, and accurate.
Link: “Edward is a good listener and adopts a hands on approach. He can be seen daily walking around the factory, talking to staff and getting feedback.”
Evaluation: In my opinion Edward communicates regularly with staff, and actively encourages staff to put forward suggestions for improvements. He values his staff, and recognizes the contribution that they have made to the business. He encourages feedback from staff and customers. This allows any confusion or misunderstandings to be resolved quickly.
Motivation Motivation involves putting factors in place that cause people to behave in certain ways. Motivation may be defined as the factors that cause people to act or behave in certain ways. People’s behaviour can be influenced (controlled) by motivating them to meet their unsatisfied needs: (1) A need (2) A goal (3) Action (4) Feedback. Employee motivation is the key to achieving results. Theories of motivation include Maslow’s Theory of Motivation and Mc Gregor’s Theory X and Theory Y.
Link: “Biotech Animalcare has to increased staff numbers from 10 to 25 in the last two years. Edward motivates staff by paying them well, having as many employees as possible organised into teams and involved in making decisions.”
Evaluation: In my opinion there appears to be a very positive work atmosphere in Biotech Animalcare LTD. The employees have accepted the changes to working conditions. Edward is very good at motivating the staff.
Leadership Leadership involves directing and assisting people in order to ensure work is done effectively so that objectives can be met. Leadership allows an individual to positively influence how others behave so that they contribute voluntarily to achieving group goals. This encourages people to contribute to the decision-making process. People’s feelings and emotions are considered important by the leader. Shared solutions to problems are sought, motivation and cooperation levels are very high, and there is excellent job satisfaction. Good leadership encourages an enterprise culture within business. Leadership Styles include Autocratic (Authoritarian), Laissez Faire and Democratic.
Link: “Edward has great contacts in business through him been President of the local Chamber of Commerce and spent a lot of time networking, asking other members what they are doing to cope with various issues such as shortage of suitable staff.”
Evaluation: In my opinion Edward is a democratic leader, adopting a democratic and facilitative approach to managing. This seems to be working well as staff number have increased are up 150%.

Sample 2 – ABQ suitable for Leaving Cert 2020


Harte Shoes Ltd
HarteShoes.JPGHarte Shoes Ltd Harte Shoes Ltd is a small family run manufacturing business, located in Monaghan, which has operated in the highly competitive footwear industry since the 1970s. At its peak the company employed highly skilled shoe makers and a very effective sales team. Martin Harte, the owner, began to realise that the centuries-old footwear industry was in decline, largely as a result of cheaper imports from manufacturers in Eastern Europe. He decided to review the company’s corporate strategy in order to make his company viable in the future.

His solution was based on the ever increasing popularity of Irish dance worldwide. The outstanding success of productions such as Riverdance, Lord of the Dance and the popularity of competitions such as the Irish Dance World Championships have seen a global increase in the numbers of girls and boys learning Irish dancing. Martin’s goal was to create a range of soft and hard dance shoes, using the finest and most durable leather, and so well engineered that they would provide protection and comfort for Irish dancers worldwide.

He sought the assistance of Enterprise Ireland’s ‘Get Export Ready’ scheme. Enterprise Ireland appointed Christine Landers, a Development Adviser, to Harte Shoes Ltd and she carried out a SWOT analysis. From this, it was clear that Harte Shoes Ltd had manufacturing expertise and that growing markets exist in the UK, America and Australia due to the global popularity of Irish dancing. However, she noted the lack of a computer aided design system (CAD) to assist with the production of shoes, especially in light of the fact that competitors from Eastern Europe had invested heavily in Information and Communications Technology (ICT). She also noted the absence of a quality website to facilitate online selling.

Martin discussed the SWOT analysis with existing employees and at that meeting a way forward was agreed. Martin invested a further €50,000 into the business to be used for modernising plant and equipment. Grant aid received from Enterprise Ireland was used for a new computer aided design system (CAD) and a website was established to showcase the new brand and to get orders from clients. Employees were given the required training and development through up-skilling courses organised by the company. Significant productivity improvements were achieved by introducing bonus shares for employees and offering a fair redundancy scheme. Martin was delighted with the innovative approach adopted by the design team in creating a range of quality hard and soft dance shoes. He welcomed their suggestions on the technical aspects of manufacturing hard dance shoes which included fibreglass heels and toes to increase the clicking sound, so important to Irish dance. His team developed a newly patented production technique enabling them to produce a dance shoe that is the lightest and loudest in the marketplace.

(2A) Do you think that Martin Harte displayed enterprising skills / characteristics? Explain your answer with reference to the text of the ABQ.
(20 Marks)

Sample Answer (2A)

Yes.

Customer/Future Focus: Entrepreneurs are very aware of customer needs and are willing to change their business model to meet those needs.

Link: “Martin’s goal was to create a range of soft and hard dance shoes, using the finest and most durable leather and so well engineered that they would provide protection and comfort for Irish Dancers worldwide.”
Reality Perception/ Realistic: An entrepreneur sees things/situations for what they are and not as he would like them to be.
Link: “Martin Harte, the owner, began to realise that the centuries-old footwear industry was in decline”
Networking/ Persuasive abilities/Human relations: Entrepreneurs recognise the importance of a wide range of contacts to provide guidance and support. Entrepreneurs need to be able to persuade others.
Link: “He sought the assistance of Enterprise Ireland’s ‘Get Export Ready’scheme.”
Risk Taker: Being an entrepreneur involves taking both personal and financial risk in pursuit of a business idea. Successful entrepreneurs are not afraid of taking risks. They are realistic risk takers.
Link: “Martin invested a further €50,000 into the business to be used for modernising plant and equipment.”
(2B) (i) Define the management activity of planning.
(ii) Explain the elements of a SWOT analysis and conduct the SWOT prepared by Christine Landers.
(30 marks)

Sample Answer (2B)

(i) Planning is the setting down of specific goals and objectives and the putting in place of strategies that allow you to achieve the stated goals and objectives of the business.
(ii) Strength: Internal attributes and resources that support a successful outcome for the business, something which it is good at or can be developed into a competitive advantage.
Examples: Strong brand, good market share, skilled workforce, manufacturing efficiency and strong financing.
Link: “…highly skilled shoe makers and a very effective sales team”
Weakness: Internal aspects of a business which are underdeveloped and could damage the success of the business or work against a successful outcome of the business.
Examples: Poor credit control, obsolete technologies, weak management, outdated facilities and inadequate R&D.
Link: “absence of a quality website to facilitate online selling”
Opportunity: External factors which a business could use to its advantage or factors outside the business which have the ability to benefit the business.
Examples: Falling exchange rate, consumer demand and strong economy.
Link: “growing markets exist in the UK, America and Australia due to the global popularity of Irish dancing”
Threat: External factors that could jeopardise the business or could have negative impact on a business.
Examples: EU regulations, shortage of raw materials and changing market tastes.
Link: “that competitors from Eastern Europe had invested heavily in Information and Communications Technology (ICT).”
(2C) Evaluate the effectiveness of the approach taken by Martin to help Harte Shoes LTD adapt to change.
(30 marks)

Sample Answer (2C)

Communication/ Consultation: Communication should be honest and open. Management should explain the need for the changes and the consequences of not taking any action to ensure the survival of the firm. The benefits of change should be explained to staff. This will reduce uncertainty and tensions among employees. Change is implemented by having a consultative process with employees.
Link: “Martin discussed the SWOT analysis with existing employees…”
Negotiation/Rewards: Management may discuss with employees and their representatives the changes in work practices required with a view to coming to some agreement in relation to pay and conditions of employment, without damaging industrial relations.
Link: “Significant productivity improvements were achieved by introducing bonus shares for employees and offering a fair redundancy scheme.”
Facilitator: Management could change from a controller to facilitator (helping employees perform the tasks rather than controlling them). Group working so that the team depends on each other and are responsible for a series of jobs. This may give the opportunity for employee empowerment/training/job rotation/job enlargement.
Link: “He welcomed their suggestions on the technical aspects of manufacturing hard dance shoes which included fibreglass heels and toes to increase the clicking sound, so important to Irish dance.”
Senior Management commitment to the change process: Lead by example. Management must be totally committed to creating a business that welcomes change and develops a culture of change. If this commitment is not present then the staff concerned will become aware of the half-hearted effort and the change will not progress.
Link: “He decided to review the company’s corporate strategy in order to make his company viable in the future.”
Evaluation: In my opinion Martin is very good at managing change. Over the past years he has seen a lot of changes especially in the areas of quality, customer service and in stock and financial management. Martin has very positive attitude to communicating with the staff. Martin feels the best approach is to communicate with staff to tackle the challenges. He has also provided the finance necessary to fund the changes.

Student Activity – Sample ABQ


Healthy Snacks LTD

Sheila Murphy, with twenty years’ experience in catering, had a number of senior positions in large businesses and always got on well with people. However, she became frustrated with the limitations of working for other people and decided to set up her own business. Sheila Murphy launched her range of crisps in 2012. These crisps are baked rather than fried, low in fat and gluten free. Thousands of health conscious consumers were initially introduced to Healthy Snack brand by negotiating with road race organisers to include crisps in their race goody bag. In the second year of operation the business reported a profit of 150,000 euro.

The business had developed very well since and she now employs forty people producing a wide range of healthy snacks. Sheila organise the firm having as many of the employees as possible organised into teams and involved in making the decisions. She liked people with initiative to work for her, especially those who would stick with jobs, spot challenges early and find solutions quickly. She allowed her staff to deal with customers directly, paid them well but expected targets to be met. Over the past number of years the food business had changed a lot, especially in the areas of quality, customer service and in stock and financial management.

However, with the recovery she feels that the business is now at a stage when a professional Chief Executive Officer (CEO) should be recruited, who would help the expansion internationally. Such a person would give Healthy Snacks LTD the necessary expertise and confidence in all areas of management, for example, profitability and liquidity.

HealthySnacksLtd.JPG

(A) (i) Explain the term entrepreneur
(ii) Outline the benefits for Sheila Murphy of becoming an entrepreneur.
(20 marks)
(B) Analyse the management activities used by Sheila in the running of her business. Refer to the above text in your answer
(30 marks)
(C) (i) From the figures given above calculate the net profit percentage and the current ratio for 2018 and 2019.
(ii) Analyse the significance of trends for Healthy Snacks LTD.
(30 marks)

Template for Solution

(A) – (i) Explain the term entrepreneur:

An entrepreneur is a person who does something new (spot a gap in the market) and is willing….

(A) – (ii) Outline the benefits for Sheila Murphy of becoming an entrepreneur.

1 Independence/Own boss:
Possible links to text could include:
2 Innovative/creative.
Possible links to text could include:
3 Profit/Financial return:
Possible links to text could include:
4 Risk taker:
Possible links to text could include:

(B) – Management activities…

1 Planning
Possible links to text could include:
2 Organising
Possible links to text could include:
3 Controlling
Possible links to text could include:

(C) – (i) Ratios and Analysis…

Net Profit percentage and the current ratio:

HealthySnacksLtd2

(C) – (ii) Analyse the significance of trends…

Trend in Profitability:

Analysis/Comment of Profitability

Trend in Liquidity:

Analysis/Comment of Liquidity