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Examiners’ commentaries 2018

Examiners’ commentaries 2018

MN2177 Core management concepts

Important note

This commentary reflects the examination and assessment arrangements


for this course in the academic year 2017–18. The format and structure of
the examination may change in future years, and any such changes will be
publicised on the virtual learning environment (VLE).

Information about the subject guide and the Essential


reading references
Unless otherwise stated, all cross-references will be to the latest version of
the subject guide (2016) or current version of the online course. You should
always attempt to use the most recent edition of any Essential reading
textbook, even if the commentary and/or online reading list and/or subject
guide refer to an earlier edition. If different editions of Essential reading are
listed, please check the VLE for reading supplements – if none are available,
please use the contents list and index of the new edition to find the relevant
section.

General remarks
Learning outcomes
At the end of the course, and having completed the Essential reading and
activities, you should be able to:
•• demonstrate understanding of core management concepts
•• apply these concepts to specific business situations
•• analyse and evaluate managerial tools such as balance sheets and
marketing plans
•• explain the relevance of social science to business practice.

Examination advice
The examination will be a three-hour unseen written examination covering all
aspects of the syllabus. In the examination you will be asked to:
•• reproduce some knowledge
•• give and justify your own opinions, using theory, knowledge and examples
•• apply knowledge to new situations and make new connections between
topics and concepts (synthesising different parts of the syllabus)
•• compare and contrast different aspects of the syllabus
•• critically analyse, assess, or appraise theories and concepts and their
application to situations.
In the examination you must read the questions carefully to make sure you
have understood them, choose the questions you wish to answer from the
list available and manage your time carefully. You should always check the
instructions on the examination paper before you begin and follow them
carefully.

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Examiners’ commentaries 2018

Candidates who do well in this examination show an ability in five areas:


1. Identifying and making use of the correct content in the subject guide
Your capacity to draw on relevant material in the subject guide is central to
being able to construct an answer worthy of a good mark. Here you need to
do two key activities.
First, make use of the essential material in the subject guide that could
illuminate the question. For example, if you are asked a question about
Mintzberg’s Structure in Fives, then this is the material to focus on. Not
Mintzberg’s management theory that is also covered in the syllabus, and not
other forms of organisational structure. You might choose to mention them,
but they shouldn’t be the focus of your attention. Second, make sure that
you discuss only the issues that are relevant to the question at hand. For
example, if you are asked to talk about why employers agree to negotiate with
unions, a detailed account of the history of unions is surplus to requirements.
You will not get a good mark if you simply repeat the material from the subject
guide. You must understand it and put it in the correct order and format for
the question.
2. Clearly and fully answering the question that is being asked
This is an issue not only of identifying the correct content, as above, but also
being clear on how the question is asking you to use it. For example, if you
are asked to ‘Compare and contrast the Hawthorne Studies with Scientific
Management’, we would be looking for an answer that splits its time/page
space equally between the two areas, looking for similarities and differences. If
you were asked to ‘Critically evaluate the Hawthorne Studies in terms of their
relevance for today’s workplace’, you would be spending at least 75 per cent of
your answer looking at these studies before perhaps bringing in Taylor, and/
or another approach to workplace management, to explore other ways of
operating.
Also critical is to make sure that you answer all parts of the question and
respond fully to each. If it’s a question with two parts, then do both. If it’s a
question that specifically says you need to use examples and/or theories to
justify your answer, then you should do so.
Note that none of the questions (not even those based on the finance,
accounting and investment management areas) ask you to perform
calculations. Neither do they specify that you need to draw diagrams nor write
out balance sheets or income statements. Therefore, you should bear in mind
that there are likely to be few marks available for doing so before you spend
your time on this. Diagrams and short calculations used to illustrate a point
can be helpful, but they will not attract a large share of marks on their own.
3. Drawing on a range of sources to support your answer and demonstrate
your knowledge
This is a wide-ranging module and as such we are not expecting you to spend
your revision time memorising long lists of theorists. You have enough to
do in remembering the 15 or so key ones (for example, Porter, Mintzberg,
Kahneman) alongside the large syllabus. What we do want to see is that you
have engaged with the detail of the subject guide and the Essential readings,
and as such have specific, useful evidence and information with which to
support your answer. We know that lecturers always say it, but it can be very
useful indeed to try to gather a range of relevant examples from news
websites over the course of your studies and jot them down in your
notes. If you are unsure as to whether something works as an example, why
not post it on one of the module discussion boards or ask another student
who is studying this subject or a similar one?

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Examiners’ commentaries 2018

The key resources that you will want to draw on when looking for ways to
support your answer are:
a. The subject guide
You will find a vast array of theories, evidence and sources with which to
support your answer in the subject guide. Draw on these heavily. This is
probably where around 80 per cent of evidence to support your answer
will come from.
b. The Essential readings
In many cases, particularly where the Essential reading is Willman,
there will be heavy overlap between the subject guide and the reading.
However, there are still plenty of additional examples, ideas and theories in
the Essential readings that you can make use of.
c. Further readings
We are not suggesting that you all have the time to find and complete all
the further readings. But even if you only make use of three or four over
the course of the module, if you are careful which you choose (for example,
perhaps choosing some that are focused on principal-agent theory, or
Scientific Management, or rationality or another topic that is examined
under more than one heading), you will be able to make judicious use of
these in your answers. Used well, these will show examiners that you have
really tried to understand and engage with the materials.
d. Examples
As you can tell from the question wordings, the examinations team for
MN2177 really like examples. They help you to show how these theories
apply to the real world. Sometimes the example will not quite fit and it is
fine to qualify it in this way (i.e. to briefly note how the example is limited
in the particular context). Other times, you might decide to use an example
that disproves a theory.
4. Spending an equal amount of time on all four questions
This is another classic recommendation but one which works. In this exam,
it simply means spending 45 minutes on each of the 4 questions. While it
is possible to get a borderline pass on this subject by only answering three
questions, you would need to answer them very well. It often takes a student
a lot of extra writing to get from 15 out of 25 to 17 out of 25, and even more
to get to 18 or 19 out of 25. However, if you get 15 out of 25 on four questions,
you are then getting 60 per cent overall. This is definitely a more sensible exam
strategy. Trust us. Examiners mark papers which adopt a range of different
timekeeping approaches, where candidates have clearly split their time over
the four questions, they almost always come away with a higher grade.
5. Giving your answer an effective structure
There are a range of actions you should take to organise your answers that
will help the examiners to see what you are trying to do and award you marks
accordingly:
a. Write an introduction
Introductions are most effective when they demonstrate how you intend
to answer the question. The examiner instantly knows what you are
planning to do and can then read your answer looking for this clear, logical
structure.
b. Break your answer into paragraphs (and sections)
Breaking your text up into paragraphs makes it much easier to read. The
points you are trying to make are illuminated more clearly in your answer.
This works even better if you can try to use the first sentence of your
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Examiners’ commentaries 2018

paragraph to signpost what this paragraph is going to do. For example,


if you are writing an essay talking about why employers negotiate with
unions, and you have just presented all the reasons why it can help
organisational performance, you may then want to start a section about
the industries where it is not so beneficial. You might begin this with a
signpost sentence, such as, ‘However, there are a range of industries in
which negotiating with unions can reduce firm performance but managers
have little choice’. You have made it clear to the reader what the paragraph
is going to talk about and you can now go on to elaborate.
c. Plan the main body of your essay
Time can feel tight in the exam, but there is usually a benefit to spending a
minute at the beginning of each question sketching out a very rough plan
for your question. It is particularly important for questions with multiple
parts because it will make sure that you do not get carried away with
writing and totally forget about the second half of what you are being
asked to do.
d. Use subheadings
It is also perfectly acceptable (and even encouraged!) in this module to use
subheadings to divide up your answer. Because we often set candidates
questions that have two or three components, organising your answer by
using these as headings can show that you have covered all the key points.
These subheadings might be the same as the main sections you identify
you need to cover in your plan. You will find it helps you to organise your
answer. It also helps examiners to extract the key points you’re trying to
make.
e. Conclusion
Even if it is only a couple of sentences, making sure that you provide a
conclusion to your answer, which offers a very brief answer to the question,
is essential.

Feedback on the exam this year


There has been a big syllabus change this year. We have removed the
chapter on the Evolution of Firms, and significantly rewritten chapters on
Organisational behaviour; Financial and management Accounting; Portfolio
management; Decision making; Management science. There have been
more modest changes to the Marketing chapters (Blocks 17, 18 and 19).
The whole syllabus has become online only, and as such, all chapters (old
and new) have been enhanced with online activities, images, quizzes and
examination preparation exercises. Accordingly, students are, for the first time,
experiencing this module in online format with a revised syllabus. On the
whole, we feel that this change has been incredibly positive. Initial analysis
suggests that fewer of you are leaving the exam unfinished (i.e. there are fewer
papers where candidates have answered three questions or less). We are also
impressed by how enthusiastically you have embraced the revised parts of the
syllabus, with the areas of Management Science and Financial Ratios leading
to some very strong answers in the examination. The one major exception to
this seems to have been Leadership theory, which has been expanded in the
handbook, but with which many of you still seemed quite unfamiliar resulting
in a lot of speculative answers.
However, there seem to be a few of you still using the old syllabus, and as such
referencing concepts and ideas which are no longer on the syllabus (such as
the evolution of organisations). You are reminded that the marking guides will
use the new syllabus as their starting point, so although you may get marks
for extending your argument into these other areas (if it works well as an

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Examiners’ commentaries 2018

argument you still need to cover the basics first. These basics need to come
from the syllabus and Essential readings as they stand for the academic year
in which you are taking the module (in the case of this examination, it would
have been 2017–18).
Despite improvements at the lower end of the marking scale, we are still not
seeing the level of marks in the 70 per cent and above grade bands that we
would like to.
In other words, many students are not properly and fully answering the
questions.
To provide some more guidance, we can break this down into three key areas
that you could work on to improve their performance overall:
1. We feel that students are not dedicating enough time to developing their
own thoughts and examples on the syllabus. It’s obviously a very large and
disparate syllabus. However, most of you have over seven months to study
this module and prepare for the exam which is plenty of time to complete
some additional readings, find examples and practise using them in
mock exam questions. When asked for examples, or to justify an opinion,
you are often not able to do so. These activities (justifying opinions and
demonstrating independent research) are activities which signal that
a student is potentially working at a 70 per cent and above level, so we
encourage you to do them.
2. Another area where grades could be improved is if you properly answer
the question. For example, the question on management science
generated plenty of answers on scientific management, where the
question had not been read properly. The questions on leadership
generated answers which spanned the whole field of leadership, rather
than being targeted at the areas the questions required. The question on
Drucker and Mintzberg strayed often into Mintzberg’s Structure in Fives,
instead of focusing on Mintzberg’s managerial theories. And so on.
3. A lot of easy marks were lost due to not answering the second part of a
question. For example, with the financial ratios question, it asked you to
identify three, and then provide some limitations of ratios in general. Lots
of students provided the three ratios, but then didn’t remember to answer
part two so that no limitations were ultimately stated.
To end on a more positive note, this year you were much better at
including examples where they were asked for. We have really laboured
this point in the past three years and are pleased to see that it is paying off

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Examiners’ commentaries 2018

Examination revision strategy

Many candidates are disappointed to find that their examination


performance is poorer than they expected. This may be due to a number of
reasons, but one particular failing is ‘question spotting’, that is, confining
your examination preparation to a few questions and/or topics which have
come up in past papers for the course. This can have serious consequences.
We recognise that candidates might not cover all topics in the syllabus in
the same depth, but you need to be aware that examiners are free to set
questions on any aspect of the syllabus. This means that you need to study
enough of the syllabus to enable you to answer the required number of
examination questions.
The syllabus can be found in the Course information sheet available on
the VLE. You should read the syllabus carefully and ensure that you cover
sufficient material in preparation for the examination. Examiners will vary
the topics and questions from year to year and may well set questions that
have not appeared in past papers. Examination papers may legitimately
include questions on any topic in the syllabus. So, although past papers can
be helpful during your revision, you cannot assume that topics or specific
questions that have come up in past examinations will occur again.
If you rely on a question-spotting strategy, it is likely you will find
yourself in difficulties when you sit the examination. We strongly advise
you not to adopt this strategy.

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Examiners’ commentaries 2018

Examiners’ commentaries 2018

MN2177 Core management concepts – Zone A

Important note

This commentary reflects the examination and assessment arrangements


for this course in the academic year 2017–18. The format and structure of
the examination may change in future years, and any such changes will be
publicised on the virtual learning environment (VLE).

Information about the subject guide and the Essential


reading references
Unless otherwise stated, all cross-references will be to the latest version of
the subject guide (2016) or current version of the online course. You should
always attempt to use the most recent edition of any Essential reading
textbook, even if the commentary and/or online reading list and/or subject
guide refer to an earlier edition. If different editions of Essential reading are
listed, please check the VLE for reading supplements – if none are available,
please use the contents list and index of the new edition to find the relevant
section.

Comments on specific questions


Section A
Answer two questions from this section.

Question 1
Choose three financial ratios and critically evaluate the insight they can
provide on firm performance. What are the limitations of financial ratios in
general?
Reading for this question
•• Block 10, virtual learning environment (VLE)
•• Atrill, P. and E. McLaney Financial accounting for decision makers. (Harlow:
Financial Times Prentice Hall, 2013) [ISBN 9780273785637] Chapter 8
Learning outcomes being examined
•• Describe key methods for analysing the efficiency of a company, giving
examples where appropriate
•• Explain the purpose of performance ratios, with a focus on their relevance
to managers
•• Evaluate different liquidity and solvency ratios, with a particular focus on
their suitability for the context in question.
Approaching the question
Explain/define financial ratios. For example they allow a company to
compare its current performance to its past performance or that of its
competitors (benchmarking).
Choose three financial ratios to consider. These are likely to be drawn
from different categories of financial ratios, which might for example be a
performance ratio (such as Gross Profit Margin, Operating Profit Margin or
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Examiners’ commentaries 2018

Return on Capital Employed); a short-term liquidity ratio (such as a version


of Current Ratio or Quick Ratio); a solvency ratio (Gearing ratio or Interest
Cover); an efficiency ratio (e.g. Inventory Holding Period or Trade Payables
Performance Period); and/or an investment ratio (Price/Earnings Ratio).
Highlight key ratios. Some possible ratios that could have been selected and
the types of issues/areas candidates could have focused on discussing with
regard to them include
•• Price/Earnings (P/E) Ratio: important as they indicate shareholder
confidence into the company and how it is run. A manager is interested in
these because they should run the company on behalf of the shareholders
so they would want to influence the numbers which make up this ratio
in a way that would boost confidence of the shareholders. It is often
interpreted as the number of pounds an investor is willing to invest for
each pound of profit. A high P/E ratio would suggest that the company
is expecting profit growth in the future; a low P/E ratio would suggest
that the company could be undervalued which means it could be a
good time to purchase shares. A manager would also be interested in
P/E ratios as they provide an insight into the shareholders’ expectations
of the company. Shareholders and potential investors see this ratio as a
benchmark of confidence and can suggest whether shares might be sold
or purchased. It is often therefore quoted alongside share price when
analysing a company.
•• Current ratio: this assesses a company’s ability to pay their current
liabilities from their current assets. This figure represents how many times
their assets would cover current liabilities. A company would usually want
this figure to be more than two, or even three, to ensure they always have
the ability to pay. A manager would be interested in this because it will
show them if more short-term assets (cash) are required to cover liabilities
as they fall due. If a manager saw that the company was struggling to pay
current liabilities a bank loan could be requested. Failure to pay current
liabilities could force the company into liquidation. It is an insight into
how the firm is currently performing with regard to whether it is operating
within its means or is overstretched and so may potentially face problems
in the future.
•• Gross Profit Margin: The gross profit margin shows what percentage
of revenue is turned into profit. The profit considered here is gross profit
which excludes overheads and just deducts cost of sales (direct costs).
As not all costs are considered the gross profit margin is usually higher
than other margins. A manager would expect gross profit margin year-
on-year as when revenues change, cost of sales usually changes in
proportion. Gross profit margin is important for a manager because they
can determine if the operations of the business are profitable (i.e. if they
are performing well) and take action accordingly such as make direct costs
more efficient and thus improve performance.
Explain that financial ratios are thus able to provide some insight into firm
performance, but they are not without their limitations. In particular:
•• They can only work retrospectively, not able to be used to guarantee future
performance or to make a prediction of what might happen.
•• They do not look at the non-financial aspects of the business. The Gross
Profit Margin might be excellent this year, for example, because lots of
revenue has been turned into profit. However, this might mean that not
enough has been reinvested into the firm and so the facilities are shabby,
morale is low and staff haven’t had pay rises. This is storing up problems for
the future which the figures alone will not reveal.
•• We often find comfort in numbers that they feel real and tangible, but
particularly in the case of accounting numbers, they are based on social

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Examiners’ commentaries 2018

constructs. Profit will be a different figure depending on which accounting


principles are used, and so there will be some difference between the gross
profit margin under different accounting systems. We need to be careful
that we are not seduced into seeing the numbers as an objective, totally
reflective take on what is going on inside the firm.
Conclude. For example, indicate that overall, financial ratios can provide
considerable insight into previous business performance, particularly when
used to benchmark against other companies, departments, or previous results.
However, they are not ‘facts’, they are just constructions, and they ignore
qualitative or other types of data, and so should be looked at in conjunction
with a wider evidence base.
A satisfactory answer would:
•• Define financial ratios
•• Choose three financial ratios and talk about them, making reasonable links
to firm performance
•• Come up with one or two brief explanations as to why they are limited.
An excellent answer would:
•• Define financial ratios, giving examples alongside the definition
•• Choose three financial ratios and give a detailed account of how they can
be used to understand firm performance
•• Use well-argued explanations as to why the use of financial ratios is limited,
mentioning the social construction of numbers
•• Conclude in a balanced way.
Common mistakes in responding to the question:
•• Choosing three ratios that are too similar to one another. Better answers
mentioned three ratios that were quite different, meaning there were a
wider range of issues to discuss.
•• Only discussing how ratios are used in general. Stronger answers made
an explicit link throughout to their usefulness in understanding firm
performance.
•• Missing out the second part of the question. This question also requires an
analysis of the weaknesses of financial ratios.
•• Very few, if any answers, referenced the idea of these measures as
social constructs. A good answer would have engaged with the idea of
financial figures being created in a somewhat subjective fashion – despite
legislation trying to prevent much of this – and as such, ratios are not
directly comparable from one organisation to the next.
•• Using the Balanced Scorecard as one of the three ratios. A good answer
needed to identify three ratios, and recognise that the balanced scorecard
may use ratios, but is not a ratio itself.

Question 2
How useful is Drucker’s theory of what managers do? You should use other
relevant theories and concepts to justify your answer.
Reading for this question
•• Block 5, VLE
•• Willman, P. Understanding management: social science foundations. (Oxford:
Oxford University Press, 2014) [ISBN 9780198716921] Theme 2
Learning outcomes being examined
•• Contrast perspectives on what managers do in terms of leading managerial
and economic theories.

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Examiners’ commentaries 2018

Approaching the question


Explain that Drucker was a management theorist who originated a theory of
what managers do, which takes the form of a list of actions they undertake
within their daily work.
Explain what Drucker’s theory contains (but not giving too much detail;
marks are primarily for the analysis of its utility and its comparison with other
models):
•• Sets objectives (routinely decide what needs to happen and sets goals to
get there)
•• Organises (make optimum use of the resources required to enable the
successful carrying out of plans)
•• Motivates and communicates (get people to do what needs to be done,
using communication and motivation tools and skills to help them)
•• Develops people, including themselves (giving people the ability to
perform through learning)
•• Measures (check progress against plans, taking corrective actions where
necessary).
Outline strengths of Drucker’s work:
•• His work was ground breaking at the time. It was perceived as very useful
because it told managers not just what they did do, but also prescribed
what they should do. So that, if they weren’t already doing these things,
they should start to.
•• Because of his work, we are able to perceive management as a distinct set
of tasks carried out under the label of ‘management’, and we can help to
develop the skills and practices necessary to achieve them.
•• You may come up with further strengths of your own and/or that you have
read about.
Outline flaws of his work:
•• It seems very pedestrian today, in that it’s just another content theory
which presents us with a ‘tick list’ of what a person should apparently
be doing. But it’s not clear where this list comes from. Is it based on
what managers already do? Or what they should be doing? Where is the
evidence, if it’s what they should be doing, to say that that is the case?
•• There is not much evidence to suggest that these five tasks would make for
ideal management performance at the exclusion of everything else.
•• Moreover, there isn’t the sort of granular detail that would allow us to
understand how each managerial role will be different to another and will
itself differ over time.
•• In sum, he could be accused of making management look scientific and
straightforward when it is actually quite complicated.
•• You may come up with further flaws of your own and/or that you have read
about.
Use, for example Mintzberg to justify criticisms of Drucker. Mintzberg’s
‘Management Fact and Folklore’ (1973) actually studied what managers did all
day, and found that their work had six characteristics (we wouldn’t expect you
to lay out all of these, but rather to mention two or three):
•• The manager’s job is a mixture of regular, programmed jobs and
unprogrammed tasks.
•• A manager is both a generalist and a specialist.
•• Managers rely on information from all sources but show a preference for
that which is orally transmitted.
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Examiners’ commentaries 2018

•• Managerial work is made up of activities that are characterised by brevity,


variety and fragmentation.
•• Management work is more an art than a science and is reliant on intuitive
processes and a feel for what is right.
•• Management work is becoming more complex.
Conclude, for example by indicating that this is not to detract from the value
of Drucker’s work at the time, and it also doesn’t remove our continued
interest in trying to find out a definitive list of what attitudes/behaviours/skills
might make up the profile of the ideal manager or leader, either in general or
in particular settings.
Note: other conclusions very possible and use of theories/theorists other than
Mintzberg are also very possible and, assuming relevance, would have been
rewarded.
A satisfactory answer would:
•• Identify Drucker as a management theorist with a theory that outlined key
characteristics of managerial work
•• Be able to identify most of Drucker’s five factors
•• Provide a critique of how useful the theory is (it doesn’t matter how far this
opinion leans to one side or the other as long as it is well justified)
•• Bring in Mintzberg (but we are also open to other relevant theorists and
would take each answer on a case-by-case basis) to show how Drucker’s
work is limited
•• Conclude on how useful overall you believe Drucker’s theory to be, making
sure that your summary is in line with the rest of your answer.
An excellent answer would:
•• Identify Drucker as a management theorist with a theory that outlined key
characteristics of managerial work, using dates
•• Be able to identify all of Drucker’s five factors
•• Provide a well-argued critique of how useful the theory is, recognising
it was important at the time and paved the way for other theories of
management and other attempts to separate managerial work from other
forms of work
•• Bring in Mintzberg and/or other theorists to argue for/against the utility of
Drucker
•• Conclude on how useful overall you believe Drucker’s theory to be, with
a summary that is in line with the rest of your answer and recognises the
changing status of Drucker’s work.
Common mistakes in responding to the question:
•• Not correctly remembering Drucker’s theory and/or Mintzberg’s theory.
Good answers were comfortable with Drucker’s theory, and Mintzberg’s if
they chose to use it.
•• Not bringing in other theories and concepts to support and justify the
answer. Better answers didn’t ignore this part of the question and brought
in the other ideas asked for.
•• Arguing one-sidedly for Drucker as very useful, or useless, without decent
evidence to support such a strong proposition. Better answers used
evidence to justify their perspective, whether they held a strong view or a
more moderate one.
•• Using the wrong theory of Mintzberg’s (i.e. Structure in Fives) to contrast
to Drucker. We didn’t specifically require Mintzberg, but we did require a
model that worked as a ground for comparison, and no candidate made
Structure in Fives work as a successful comparison.

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Examiners’ commentaries 2018

•• Spending too long discussing Drucker. Better answers spent a good


proportion of their time discussing the other theories asked for in the
question.

Question 3
Define what is meant by the term ‘management science’. How can
management science be used to improve the performance of the
contemporary firm?
Reading for this question
•• Block 6, VLE
•• Slack et al., Supplement to Chapter 11; Chapters 12 and 15.
Learning outcomes being examined
•• Describe how quantitative modelling approaches can aid management
decision making
•• Outline the nature of post-war developments in management science
•• Discuss some of the challenges facing managers in the evaluation of
models and data.
Approaching the question
Define management science. For example, as a scientific method of providing
executive departments with a quantitative basis for decisions regarding the
operations under their control (Morse and Kimball, 1950). As usual, however,
there is no need for you to have learnt a word-perfect definition.
Explain in a little more detail what management science means and/or where
it comes from. For example:
•• One significant outgrowth of scientific management was management
science, which is often now encompassed within the field of operations
management.
•• Management science makes use of data and models to produce
information that is intended to help managers make better decisions.
Explain how management science can be used in a variety of ways to improve
the performance of the contemporary firm. Some examples (though there are
plenty more and we would reward independently derived/novel ideas):
•• Improves the management of inventory: companies can use algorithms,
tailored to their business situation, to make sure that they order the right
stock at the right time in order to reflect their business culture, processes
and needs. A good inventory management system will mean that less
money is tied up in working capital. Can ensure that it is possible to meet
customer demand at the right time. Can guard against obsolesce of old
inventory as newer (and potentially better) items become available. Can
reduce the damage or loss of inventory items. Can help to manage admin,
insurance and storage costs.
•• B
etter queue management: Little’s law allows you to calculate time for
a process, and this can be used to ascertain the time that someone is
likely to spend queuing. Factors can then be manipulated to reduce the
queue length/timing. It has considerable applications to supply chains;
retail outlets; call centres; healthcare systems; law courts; passenger
transportation; and manufacturing facilities.. Queue discipline can be
undertaken by the firm in order to provide rules to determine the order
in which customers are served; how they are entertained into the queue;
and whether the process or building can accommodate a queue of that
length. If queues can be managed in a way that reduces customer anxiety
or annoyance, and if the time they are waiting could even be used to

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Examiners’ commentaries 2018

reinforce the brand or encourage additional sales (e.g. sweets by the


side of a checkout queue in the supermarket; Disney characters meeting
you in the queue for a ride), then the queue can be used to build sales or
customer satisfaction.
•• More ergonomic, efficient and/or comfortable workplace
management: wearables in the workplace can be used to see how long
processes are taking, how physically exhausting they are and whether they
could be sped up. It is an updated approach to time and motion studies.
There will be significant efficiency gains. For example, Tesco has been using
armbands to allot tasks in the warehouse since 2007, and there has been
a drop of 18% in the amount of staff needed to work there, following the
ability to communicate directly with employees and track their movements
to make sure they are being given optimal tasks and performing them
efficiently.
•• L
eaner production systems: Toyota style systems, which are based on
getting work teams to ‘conduct experiments’ on the best ways for their
team to perform their tasks and gradually improve their work practices can
have the following benefits for the contemporary firm which could in turn
have an impact on performance (adapted from Slack et al., 2006):
1. Reduction of overproduction
2. Reduced waiting time
3. More efficient logistics and transportation of goods around the
workspace
4. Reducing unnecessary inventory
5. Reducing poor quality or defective goods.
Argue that there are, however, key problems with the use of management
science, as algorithms struggle to reflect the true variability and nature of the
world. For example:
•• Unrealistic assumptions: in Economic Order Quantity (EOQ), used to
manage inventory, there usually needs to be an assumption of steady
demand, and this isn’t realistic. It is hard to know how customers will
receive a new product, and whether there might be fluctuations in
demand.
•• Hard to estimate reality: in EOQ, it is hard to estimate holding costs,
that may be inaccurate for each item. For example, how do you apportion
warehouse costs? It also struggles to consider wider factors, such as is
there actually room to store all the stock that the model suggests you
order with the intention of keeping costs down. It will not keep costs down
if you have to buy another warehouse.
•• Some problems can’t be solved: in queueing theory, it doesn’t matter
how good your queuing system is if you are having a particularly busy day
that you couldn’t have predicted and your building cannot accommodate
a queue of that length. In lean production, if one link in the synchronised
chain breaks, then all processes stop.
•• Employee stress and boredom: using wearables in the workplace may
improve efficiency, but it may come at the cost of high work stress and
turnover. There have been a number of examples in the press in the last
few years of the stress that workers in new-style warehouses that use such
wearables or similar devices (e.g. the Amazon warehouses) are suffering
from. Lean production can still lead to dislocation from work, as the task
becomes more monotonous and the team is not sufficiently rewarded for
efficiency gains.
Conclude, reflecting on the application of MS to improving the performance
of the contemporary firm.

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A satisfactory answer would:


•• Define management science
•• Come up with two or three ways in which management science could be
used to improve the performance of the contemporary firm. Explain them
relatively well, but perhaps with some brevity or gaps in explaining the
links to the concept of performance itself
•• Conclude on the value of management science for improving the
performance of the contemporary firm.
An excellent answer would:
•• Define management science clearly, using a reference or example to do so
•• Make a link to its historical development (e.g. discuss Taylor and how his
work could be seen as a precursor to management science)
•• Give three or more points on how management science can be used to
improve the performance of the contemporary firm, making use of theory
and examples to do so
•• Provide counter-evidence, showing some of the problems with
using management science to try to improve the performance of the
contemporary firm
•• Provide a balanced conclusion on the role of management science in
improving the performance of the contemporary firm.
Common mistakes in responding to the question:
•• Getting management science and scientific management confused. Better
answers may have used scientific management to explain the genesis of
management science, but they recognised that management science was
so much more than scientific management.
•• Going even further into scientific management and comparing it to
Hawthorne studies. Better answers spotted that Hawthorne studies were
not very relevant to this specific question and chose to omit it from this
particular answer.
•• Not using the contemporary setting and as such just giving historical
examples to (e.g. shovelling pig iron or time and motion studies). Better
attempts used really contemporary examples, such as radio-frequency
identification (RFID) technologies; wearable data collection devices,
algorithms used to make purchasing decisions in supermarkets etc.
•• Just talking about what management science is rather than making a
proper link to how it might improve the performance of the contemporary
firm. Better answers worked with this link for a large proportion of the
response to the question.

Question 4
What is ‘loss aversion’ according to Kahneman? Can an understanding of loss
aversion lead to better decision making in organisations?
Reading for this question
•• Block 16, VLE
•• Willman (2014) Theme 4
Learning outcomes being examined
•• Explain the prescriptive and descriptive approaches to decision-making in
organisations
•• Discuss the impact of biases and heuristics on managerial decision making.
Approaching the question
Define loss aversion. For example as ‘engaging in high-risk behaviour to avoid
the experience of loss relative to a reference point’.
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Examiners’ commentaries 2018

Define in more detail: The theory says that when we deal with gains (i.e. when
we have gains), we then tend to be risk averse (because we do not want
to lose them). However, when we deal with losses (i.e. when we have just
encountered losses), we tend to be risk seeking: we will take bigger risks to
eradicate a loss.
Explain that loss aversion is a form of bias. Biases are deviation from the norm
or rationality at times of judgement. Therefore, they are an irrational way to
behave.
Make use of examples to illustrate how loss aversion works. Such examples
can be hard to explain, so we anticipate that writing these out is likely to
consume quite a lot of the time in the examination. We will give credit for
examples being well-explained and linked back to the question.
•• In the case of Nick Leeson, he made considerable losses on the stock
market. However, rather than writing them off, he continued to ‘throw
good money after bad’ (i.e. to waste additional money trying to fix what
is expected to be a hopeless case) in an attempt to make up what he
had lost. He hid this behaviour until he could hide it no longer. He was
prosecuted for fraudulent, unauthorised speculative trading and sent to
prison. He demonstrated loss aversion because he didn’t want to write off
his losses, but acted in a risk seeking way to try to get them back.
•• At the other end of the spectrum, if workers have recently brought in a
large amount of revenue from a sale, and they have the choice to reinvest
this money in a new piece of work with a similar level of risk, they would be
less willing to do it because they would be more risk averse than necessary,
not wanting to lose what they had already gained.
Explain that, if we can be aware of loss aversion, at both ends of the spectrum,
we can try to guard against it in business practice and make our decision
making more ‘rational’. Although absolute rationality is shown by Kahneman
and Tversky to be hard, if not impossible, to achieve, it is much more possible
to try to achieve it if we are aware that the bias exists in the first place.
Give examples (again, such examples can be hard to explain so will likely
consume quite a lot of the time in the examination. Credit is given for good
explanations linked back to the question):
•• For example, organisations might want to pay closer attention to workers
who are investing large amounts of company resources (particularly
money). Rather than leaving them to operate unchecked, having regular
check-in points, as well as encouraging them to work in teams to share
their workload, might reduce the problem.
•• They may also want to pay close attention to teams who have just
experienced a considerable gain, particularly where their pay is based on
commission or they have a profit-sharing scheme or a performance-related
bonus. All of these variables may make them more risk averse as they stand
to lose out personally from a loss.
Critique loss aversion theory (e.g. it does not totally explain human behaviour).
It does a better job than assumptions of total rationality, but we are all
different and will be subject to our own psychologies and circumstances. Thus,
we cannot assume a ‘standard’ level of loss aversion across a workforce.
Conclude overall, on the impact of loss aversion of firm-based decision
making.
A satisfactory answer would:
•• Define loss aversion, recognising somewhere in the answer that there are
two different behaviours described: risk-avoiding after making a gain; risk-
seeking after making a loss
•• Make a reasonable attempt at providing example(s) of what loss aversion is

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Examiners’ commentaries 2018

•• Provide an explanation of how the theory of loss aversion could be used to


help organisations make better decisions (it’s fine to focus on just one end
of the spectrum at this level)
•• Conclude on the utility of loss aversion for decision making in
organisations.
An excellent answer would:
•• Define loss aversion, recognising that there are two different behaviours
described: risk avoiding after a gain; risk seeking after a loss
•• Reference Kahneman & Tversky, and mention behavioural economics as the
wider field from which the theory of loss aversion is drawn
•• Give examples of what loss aversion is at both ends of the spectrum
•• Provide an explanation of how the theory of loss aversion could be used to
help organisations make better decisions, at both ends of the spectrum
•• Conclude on the utility of loss aversion for decision making in
organisations, possibly saying how behavioural economics is one of the
biggest developments in management and economic theory for decades.
Common mistakes in responding to the question:
•• Not knowing the theory of loss aversion in detail. Better answers were
comfortable with loss aversion and could describe it clearly and in a
detailed way. They were able to build up their answers through good
discussion of how an understanding of it can be used to improve decision
making in firms.
•• Talking too much about prospect theory, biases or heuristics. Better
answers used prospect theory and/or biases and/or heuristics as helpful
additional concepts rather than making them the central basis of their
response.
•• Not using enough examples to illustrate the answer. Although the
question didn’t specifically ask for examples, one of the best ways to show
the benefits for organisational decision making was to explain using
examples. Better answers were confident in doing this, either with real life
examples or with made-up hypothetical examples. We were very happy to
see either/both, with no preference over which was used as both were able
to clarify the response to the question that the candidate gave.

Section B
Answer two questions from this section.

Question 5
Why do firms often alter their structures as they grow? How might the choice
of structure be related to firm performance?
Reading for this question
•• Block 15, VLE
•• Willman (2014) Chapter 5
Learning outcomes being examined
•• Critically assess key design choices firms may be required to make
•• Evaluate the suitability of particular design decisions in a chosen context
•• Discuss the role of structural contingency theory in relation to structure
and strategy.
Approaching the question
Define organisational structure. For example, an organisation’s structure
follows choices regarding issues such as task allocation, division of labour,
supervision and level of bureaucracy.

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Recognise that firms often outgrow their structures. Candidates could


mention the fact that most firms often start with a simple/entrepreneurial/
functional structure and then progress to a divisional structure, becoming less
centralised. They might also recognise that firms organise in waves, spending
time decentralising, then trying to ‘tidy up’ the hierarchy and structure again
with more centralisation and/or the removal of hierarchical layers.
Identify how the ‘structure follows strategy’ approach has an impact on
choices (Chandler, 1977). A firm may wish to try to establish its strategic aims
and then work from there. Restructure should happen when a change in
the market, or a novel technology, or some other shift occurs which requires
a strategic shift and which thus has an impact on what the most desirable
structure might be.
Identify key reasons why firms may need to restructure, and some of their
choices. It may be framed in terms of the different structures that are likely
at different sizes (either using standard terms like ‘functional’, ‘divisional’,
‘geographical’, etc.; or Mintzberg’s Five Structures; or U-Form/M-Form; or the
‘six questions’ identified in Willman:
•• Where should the organisation’s boundaries be?
•• How should work be divided and combined?
•• What are the lines of authority and communication?
•• How much bureaucracy do we need?
•• What should be the extent of centralisation?
•• How do we leverage what we know?
Give detail on the sorts of choices that need to be made. Below follows
an example for each of the six questions, making links between firm size,
firm structure and firm performance. You might tackle this question from a
different framework or organise it differently. That is acceptable and marks
would be awarded accordingly.
•• Where should the organisation’s boundaries be? As a firm grows, it may
wish to undertake vertical integration (buying a supplier or a customer)
or undertake horizontal integration (buying a competitor or someone
making a complimentary good). If it is a divisional firm, it may acquire a
business in a totally different area. All of these actions will necessitate a
change in structure to accommodate more employees or more business
lines.Conversely, if a company is struggling it may wish to cut a product
line or to sell one off. This will also affect the structure. In this sense, the
firm’s performance will be heavily influenced by where it chooses to put its
boundaries.
•• How should work be divided and combined? As a company grows, it
will be making more of each product and/or service, and possibly new
products and/or services too. As such, it will need to look at its division of
labour. For example, where the human resources (HR) department might
have just been one person in the early days of the firm, they may have
a big enough size to employ five people. Rather than then all doing the
same task, they will have different roles. One might be an admin assistant;
another might specialise in recruitment and appraisal; another in learning
and development; another in pay. And there might then be an additional
person to manage them. Thus, they become a department of their own
and this division of labour makes things more efficient but also needs to
be reflected in the structure, which now needs to accommodate a new
department somewhere. Performance will depend on it.
•• What are the lines of authority and communication? In many firms,
as they grow, the lines of authority and communication are formalised.
A larger firm may have large spans of control that have slowly emerged,
but managers may be struggling with their workload. A restructure might
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Examiners’ commentaries 2018

allow more managers to be brought in to reduce span of control so that


each manager has more time to spend with individual workers and on key
projects, which should enhance performance.
•• How much bureaucracy do we need? As a firm grows, it usually
establishes more rules and routines. This can lead to a feeling of greater
bureaucracy. Even quite creative or maverick firms, such as Facebook,
will have to become more bureaucratic so that everything isn’t treated
as a new problem or exception. It should be less time consuming to have
rules and routines, but sometimes a firm can be too bureaucratic and
the amount of paperwork can be frustrating. This could have a negative
impact on performance. A big firm may try to remove areas of the structure
that are encouraging this bureaucracy or downgrade the importance of
the paperwork to free up more time for creativity. It may mean making
people redundant which will have an impact on the structure. Some
very bureaucratic processes, such as pay systems, can sometimes be
outsourced, reducing costs and internal paperwork further, and having
another sort of impact on the structure.
•• What should be the extent of centralisation? Organisations go through
repeated cycles of centralisation and decentralisation. Issues which could
be seen to prompt a drive towards centralisation are (Willman, 2014):
Competence, if managers believe their subordinates to be incompetent,
they will want to remove accountability and autonomy by centralising
and taking back more power; Cost, functions such as HR and finance can
be gathered at head office level more easily in a centralised business;
Communication, lines of communication are tighter and more immediate
in a business that is centralised, particularly if that centralisation brings
people into the same office space. Each of these different issues will have
an impact on how the firm chooses to structure/restructure itself. Further,
the size of the firm will impact these issues.
•• How do we leverage what we know? Firms are spending more time
thinking about this question and seeing if they can make structures which
allow this to happen. Often, leveraging knowledge is about getting people
in different departments to work together and to share information, and
a very formal hierarchy can restrict this. The organisational chart often
won’t reflect the informal networks or structures, but organisations can
also try to create these alongside the formal structure, for example creating
working groups, quality circles or practice groups.
Explain and justify that the structure needs to fit what the firm is trying to
achieve for it to perform to the best of its ability. There needs to be a clear
link between factors such as the culture, size and industry of the firm with its
structure for it to work. A sense of this will be embedded throughout.
Conclude, for example indicating that there is a strong link between
structure and performance, with correct structure being critical for good
performance.
A satisfactory answer would:
•• Define organisational structure
•• Explain that there is a link between firm strategy and structure, and so
when a firm is choosing a structure it should try to fit what it is trying to
achieve strategically; if it is growing, or has grown recently, it is important
that the structure fits the size of the firm in order for the strategy to be
successful (you might struggle in a satisfactory answer to fully explain this,
but credit will be given for trying to do so)
•• Provide around three examples of how the choice of structure might
be related to firm performance, possibly making use of some of the six
questions in the handbook to organise the answer
•• Conclude on the need for structure to relate to firm size in order for firms

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Examiners’ commentaries 2018

to have a chance of performing well.


An excellent answer would:
•• Define organisational structure
•• Explain that there is a link between firm strategy and structure, and so
when a firm is choosing a structure it should try to fit what it is trying to
achieve strategically; if it is growing, or has grown recently, it is important
that the structure fits the size of the firm in order for the strategy to be
successful
•• Talk about how as a firm grows, it tends to move from an entrepreneurial
structure to a functional structure to a divisional structure etc.
•• Provide around three examples of how the choice of structure might be
related to firm performance, making use of a framework, for example the
six questions in the handbook, or another set of criteria to organise the
answer
•• Conclude on the need for structure to relate to firm size in order for firms
to have a chance of performing well, including a critical view on how
possible it actually is to have a flawless link between strategy, structure and
performance.
Common mistakes in responding to the question:
•• Taking too static a view of structure. The question clearly wanted the
candidates to talk about changing structures when a firm grows. Better
answers were very comfortable doing this.
•• Ignoring the second part of the question. This question requires
consideration of how structure links to firm performance.
•• Not being selective. For this question candidates could have used many
pages of content, and some did! This left no space for analysis. Some even
added in less relevant models, too, such as Porter’s Five Forces. Better
answers were brave: they chose a handful of points to make that allowed
them to answer the question, sometimes only discussing one or two
specific structures in order to illustrate their answer. This worked really well
as they then had plenty of time to answer both parts of the question.

Question 6
Critically compare the function of management accounting with that of
financial accounting. Why is it important to have both functions in a typical
firm?
Reading for this question
•• Blocks 7, 8 and 9, VLE
•• Willman (2014) Themes 1; Willman (2014) Theme 6; Willman (2014)
Chapter 8
•• Kaplan, R. and A. Atkinson. Advanced management accounting. (Harlow:
Pearson Education, 1998) third edition [ISBN 9780130802200] Chapter 3;
Chapter 4; Chapter 8
•• Weetman, P. Financial accounting: an introduction. (Harlow: Pearson, 2013)
sixth edition [ISBN 9780273789253] Chapter 7
(Note: this is a cross-topic question, hence the high volume of reading
above).
Learning outcomes being examined
•• Critically evaluate key financial methods for performance measurement
that are used by organisations, giving examples where appropriate
•• Explain the benefits to managers of using both financial and non-financial
performance measures

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Examiners’ commentaries 2018

•• Describe the purpose of and differences between the income statement, cash
flow statement and balance sheet
•• Explain how the income statement, cash flow statement and balance sheet
can be used to inform managerial decision making.
Approaching the question
Define accounting and/or financial/management accounting. For example:
•• Accounting. The measurement, processing and communication of financial
information about a firm.
•• Financial accounting. Measuring, processing and communicating financial
information, primarily for the use of external stakeholders, following the
relevant country’s accounting laws.
•• Management accounting. Measuring, processing and communicating
financial and non-financial information, primarily for the use of internal
stakeholders.
Compare and contrast management and financial accounting. This is laid out in
the handbook in the form of a table, but we would expect candidates to write it
out longhand (NB: the following is just one way of organising it; there are plenty
of others. There are a range of issues that are subsumed in the analyses of each
point that could also be treated as separate points).
Primary use for the data:
•• Management accounting: internal (to make internal decisions)
•• Financial accounting: external (to inform external stakeholders, e.g.
shareholders and the government/tax department)
•• Analysis: Both serve an important purpose for the firm to remain afloat.
Without financial information, the company would fall foul of the law and
would struggle to attract investors. Without management accounting, the
company would struggle to analyse and improve performance and may find
it hard to remain competitive.
Purpose:
•• Management accounting: Assist management in planning and controlling
the business to make effective decisions
•• Financial accounting: Assist management and shareholders in analysing the
position and performance of the organisation
•• Analysis: Both functions are therefore critical, but in a very small firm, there
might not be the resources to compile regular management accounts. This
could act as a ceiling to data analysis, improved performance, and therefore
growth.
Legal requirement:
•• Management accounting: No legal requirement
•• Financial accounting: Compliance with accounting standard and Companies
Act in the UK (other local standards in other countries)
•• Analysis: Financial accounting is a legal necessity distinguishing why financial
accounting would be needed even if there was no management accountant.
Format produced
•• Management accounting: Management discretion
•• Financial accounting: In accordance with accounting standards
•• Analysis: The success of the management accounting function will often
depend on the quality of the data that is given and the management’s buy-in
to the process. In financial accounting, some figures will be at the discretion
of the financial accountant, but their suitability will be checked by an auditor.
Nonetheless they could still be seen to be subjective. As such, the format
in which each is produced may seem ‘official’ but this can be the seductive
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Examiners’ commentaries 2018

nature of numbers and the way that they often look objective and factual
even when they are not. It is important to take both sets of numbers with a
degree of cynicism.
Scope:
•• Management accounting: Flexible; includes historical, current and future
information which can focus on specific parts of the business
•• Financial accounting: Dictated by accounting standards focusing on
profits, assets, liabilities and cash flow
•• Analysis: The focus of management accounting can change depending on
the conventions and whims of the firm, as well as its focus of interest at a
point in time. Significant changes in the way that financial accounts are
compiled will need to be flagged year-on-year in the statements. Scope
changes are most likely to come about as a result of the law, for example a
growing need to present Corporate Social Responsibility facts and figures
in the financial statement.
Information:
•• Management accounting: Financial and non-financial key performance
indicators (KPIs), number of customers per hour for example
•• Financial accounting: Focused on financial position and financial
performance
•• Analysis: both have a critical business role Management accounting can
guard against an overreliance on the finances and recognise the need to
analyse a range of other facts and figures, too.
Explain and justify the importance of having both functions because they
serve very different purposes.
Recognise, however, that if there were only management accountants, there
would be no legal fulfilment of responsibility as a firm so engaging financial
accountants is the most critical. Moreover, investors would also be reticent to
engage with the firm as they would have no sense of what was going on.
Recognise that if there were only financial accountants, there would be no
detailed analysis of internal performance with the intention of improving, and
therefore it would be hard to remain competitive.
Conclude either on the need for both, or on the slightly more pronounced
(legal) need for financial accounting.
A satisfactory answer would:
•• Define management/financial accounting
•• Critically compare three different aspects of the functions of management
accounting and financial accounting
•• Outline an argument why it is important to have both, or more important
to have financial accounting
•• Conclude.
An excellent answer would:
•• Define management/financial accounting
•• Critically compare at least three different aspects of the functions of
management accounting and financial accounting, with no errors and
clearly recognising the tangible differences between the practice of each
•• Provide a solid argument as to why it is important for a reasonably sized
firm to have both but that it might not be in the scope of a small firm
•• Recognise that, at root, financial accounting will always be more important
to the firm because it is a legal necessity and without it, the firm would fall
foul of the law.

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Common mistakes in responding to the question:


A lack of clarity on the differences between management accounting and
financial accounting, possibly confusing investment management with one or
both. Better answers realised the major differences between the former (see
‘approaching the question’ above) and ignored investment management.
•• Spending too long on one or the other (suggesting a lack of familiarity
with the excluded topic). Good answers spent equal time dealing with
both.
•• Arguing that management accounting is more important than financial
accounting (the legal imperative makes this an untenable argument).
Better answers usually settled on the notion that both were important, or
that financial accounting was marginally more important because it was
prescribed by law.

Question 7
Why is the decision on how much to spend on advertising a difficult one?
What tools or techniques are available to aid their decision making? Use
examples to explain your answer.
Reading for this question
•• Block 19, VLE
•• Kotler, P. and G. Armstrong. Principles of marketing. (Harlow: Pearson
Education Ltd, 2016) sixteenth global edition [978-1292092898] Chapter 8;
Chapter 16
Learning outcomes being examined
•• Outline key advertising decisions that managers are likely to have to make.
Approaching the question
Define advertising (in the context of marketing). For example, as ‘Salesmanship
mass-produced’ (Hite, 1988, p. 203) or stating that it encompasses the
following functions:
•• To inform customers about products or offers.
•• To persuade customers to buy.
•• To remind customers of a product or brand.
•• To act as a barrier to entry for potential new entrants by raising entry costs.
Explain that there are a wide range of difficult decisions that managers will
have to make, including how much to spend. You should note that this is
difficult because advertising is about differentiation to increase demand, and
as such it competes with the conventional way to increase demand, which is
to cut prices. Accordingly, the decision on how much to spend on advertising
is potentially a difficult one since it is an attempt to increase demand at
constant or even increasing prices.
Outline some tools to help with the decision. For example:
•• Calculation dealing with the price elasticity of demand. Dorfman and
Steiner (1954) developed the basic prescriptive formula, that is Advertising
expertise/Sales revenue = Advertising elasticity/price elasticity of demand.
Note the scope of the formula. This theorem shows that the sensitivity
of prices depends on advertising and the sensitivity of advertising on
price. The best position for the firm is where price sensitivity is low and
advertising sensitivity high; substantial price rises can be sustained
by moderate advertising expenditures. Identify that there are three
implications of this equation that affect the decision-making process. That
is to say:
The more productive advertising is in raising sales, the higher will

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Examiners’ commentaries 2018

be its proportion of sales revenue. Thus, if advertising milk helps


to raise sales, advertising will become responsible for more of the
sales revenue generation for the firm. This is where we end up with
a company that is very reliant on advertising to generate sales, for
example vodka sales are heavily affected by advertising as there is little
to differentiate between the higher end products apart from brand
and advertising is a primary way to communicate this to consumers.
The greater the price elasticity, the less effective advertising will be
and the smaller the percentage of sales revenue. High price elasticity
implies many substitute products. Industries where this is the case
might include commodity goods, such as flour or sugar or shops
selling basic sandwiches.
Advertising should be highly effective for new products where there
are few comparable offerings, so the advertising-to-sales ratio will be
high at product launch. As the market becomes saturated, advertising
elasticity will fall and one would thus expect the advertising-to-sales
ratio to fall across the lifecycle of a product or brand. For example,
Netflix used advertising very successfully to establish a strong
market for itself in an industry that was still very much in its infancy
(online subscription television producing its own original shows).
Its success arises because it informs consumers of a new product
and simultaneously convinces them that it is something they would
want/need.You can highlight that the equation does have limitations
because it can be hard to generate ‘reliable’ numbers (e.g. advertising
elasticity figures).
•• Market research (e.g. analysing the impact that advertising seems to have
on demand)
•• Ratio analysis (e.g. look more general at return on capital employed (ROCE)
in relation to advertising)
Conclude. You might state that the decision on how much to spend on
advertising is a difficult one because there are many factors to consider,
but this simple price elasticity and demand equation, though having some
limitations, does help.
A satisfactory answer would:
•• Define advertising
•• Give clear reasons why it’s hard to work out how much to spend
•• Identify some tools that can be used to make advertising decisions
•• Conclude on the difficulty, probably deciding that it is quite difficult.
An excellent answer would:
•• Define advertising and give an example
•• Give clear reasons why it’s hard to work out how much to spend, using a
real-life example to explai.
•• Lay out the equation to aid decision making (Dorman and Steiner)
accurately and explain it well and give good examples throughout
•• Recognise the key implications of the equation for deciding how much to
spend on advertising.
•• Recognise at least one limitation of the calculation
•• Conclude clearly on the difficulty.
Common mistakes in responding to the question:
Not being able to recall the equation (see ‘approaching the question’ above).
This was a very common error, and only the better candidates could really
engage with the equations in any meaningful way. You should remember

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Examiners’ commentaries 2018

that it is the syllabus for this module with regard to marketing that you need
to revise for MN2177, and it is not sufficient to cover just the syllabus for the
Marketing module (if you are studying that alongside or have already studied
it) as the content, coverage and approach are different.
•• Not remembering enough about advertising specifically to be able to
answer the question convincingly, and hence talking around marketing
more generally. Excellent answers are always extremely precise in this
regard, and pinpoint exactly the right content, only straying from it to
bring in useful additional related concepts in brief.
•• Not being able to clearly explain why it is difficult to work out how much
to spend. Good answers were really clear on where the problems emerged
from with regard to spending, for example it being hard to work out
returns.

Question 8
Critically evaluate trait and continency theories of leadership, in particular
exploring whether they can be used to improve leadership effectiveness.
Reading for this question
•• Block 4, VLE
•• Northouse, Chapter 1: Introduction
Learning outcomes being examined
•• Evaluate key leadership theories, including leader-member exchange
(LMX) and transformational leadership
•• Discuss the psychological contract and the impact it has on our
understanding of work relationships.
Approaching the question
Define leadership. For example as ‘motivating people to achieve a common
goal’ (as leadership is hard to define examiners will be lenient with
attempts)
Explain that there is a historical trajectory of leadership theory, starting with
early trait theories and working up to more current theories around, for
example, followership or transformational leadership.
Provide an explanation of what trait theory is:
•• The academic literature emerges in the 1920s. At this early stage (and for
some time after) the unit of analysis is the individual. The research tries to
identify what traits make someone a good leader. These traits are usually
presented as innate (something that people are born with). Numerous
lists were produced over the years, often with common features but no
universal agreement.
Provide an explanation of whether it can help to improve leadership
effectiveness:
•• Trait theory is fundamentally depressing (as in the opposite of stimulating)
for the business literature (and the consultants and trainers who work in
the area) because it implies that you cannot have an impact on someone’s
leadership by purposefully training them and that efforts to develop
leaders are limited to the appropriate selection of staff.
•• The only way it can be used to improve leadership effectiveness is
discouraging those who do not have the ‘traits’ (if indeed a definitive list is
ever found and agreed upon) from undertaking leadership positions and
actively seeking out those who do have these traits to become leaders.
Explain how contingency theory tries to improve on this and provide a
description of it. Your answer might continue:

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Examiners’ commentaries 2018

•• It is perhaps unsurprising then, that the literature turned away from


the trait approach. The development of the field of leadership research
reflects an interest in including an ever-increasing array of organisational
variables in a quest to identify what good leadership is, and how it may be
developed or enhanced within particular contexts.
•• Contingency theories in their various forms suggest sources of variation
in leadership effectiveness based in the power of the leader, the nature of
the task to be completed and level of uncertainty in the work situation.
Contingency theories are incredibly diverse in the aspects of context they
choose to focus on. One of the more influential studies is actually called
Contingency Theory and was originated by Fiedler (1964). It is a leader-
match theory, meaning that it tries to match leaders to situations which
might suit them. It takes the name Contingency because it proffers that a
leader’s effectiveness depends on their style fitting the context. Leaders are
divided into those who are relationship-focused versus those who are task-
focused. In order to measure this, Fiedler created the Least Preferred Co-
worker (LPC) scale on which to measure leadership style. Those who score
high are relationship-motivated, those who score low are task-motivated.
There are then three situational variables which Fiedler believes will impact
the type of leadership style required in a particular situation:
i. Leader-member relations: the degree to which followers trust, are
attracted to and feel for their leader.
ii. Task structure: the degree to which tasks are specified, from vague
and unclear to highly structured.
iii. Position power: the amount of authority a leader has to punish or
reward their followers.
•• Once a situation is measured the favoured leadership style could be
identified and the right type of leader found. Although it seems relatively
simplistic, it has been supported by much empirical research. It has thus
been shown to be helpful in improving leadership effectiveness.
•• The theory also removes the expectation that leaders will be successful in
all situations, and the matching process, thus inadvertently recommended,
can be used to increase the chances that the right leader will find the right
place to be and thus be successful.
Recognise some of the problems that contingency theory still has:
•• Fiedler is criticised because they do not explain what a leader should do
if they find themselves in one of their unfavourable situations. It might be
assumed that panicking or refusing to participate would not be acceptable
alternatives.
•• Additionally, contingency theories of leadership are criticised en masse
because they still place the emphasis on the leader as an individual; that is
to say, not factoring in the audience.
Explain the benefits of using these theories and others in conjunction:
•• Leadership theories might be best used in conjunction with one another.
Rather than seeing one as a panacea, instead those who wish to be better
leaders, or train people to be better leaders, can use the findings of the
various models to shed light on what may or may not work in a particular
situation. Although this isn’t the spirit in which any of the models is written,
it might be a more practical and realistic approach to the complexity of the
world, which even the most complicated models struggle to reflect.
Conclude. For example stating that leadership theories can help to improve
leadership effectiveness, particularly in conjunction, but it is not an ‘exact
science’ and we still do not have a definitive answer (if one even exists) as to

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Examiners’ commentaries 2018

what makes a good leader.


A satisfactory answer would:
•• Define leadership
•• Give a decent outline of trait leadership, recognising that it cannot be used
to improve leadership effectiveness
•• Give a decent outline of contingency theories, recognising that they can
perform one or more useful roles in improving leadership effectiveness
•• Give some form of useful conclusion about the relative merits and
limitations of each leadership theory and/or stating that they are best used
in conjunction with one another /other theories.
An excellent answer would:
•• Define leadership
•• Give a decent outline of trait leadership, recognising that it cannot be used
to improve leadership effectiveness, though it can however be used to
select leaders
•• Give a decent outline of contingency theories, recognising that they can
perform one or more useful roles in improving leadership effectiveness;
using Fiedler or another contingency model as an example of the field as a
whole but making it clear that this is just one example
•• Give a clear and well-argued conclusion about the relative merits and
limitations of each leadership theory and/or stating that they are best used
in conjunction with one another and/or other theories.
Common mistakes in responding to the question:
•• Confusion over what trait and/or contingency theories are. This question
requires a very precise definition of both and engagement with the
theories, rather than a general survey of the whole field of leadership.
•• An insistence on laying out the whole field, not just comparing the two
types of models mentioned (e.g. we do not need to see anything detailed
about transformational leadership or behavioural models of leadership).
Once again, this question requires precise engagement with the theories
mentioned in the question itself.
•• Not making a clear enough link between the theories and leader
effectiveness. Better answers were able to make this link.
•• Treating both theory types as though they will have the same
relationship to leadership effectiveness; they have actually been chosen
for this question because this is not the case. Trait theory assumes that
effectiveness is a constant, whereas contingency theory assumes that it
depends. Better answers picked up on this.

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Examiners’ commentaries 2018

Examiners’ commentaries 2018

MN2177 Core management concepts – Zone B

Important note

This commentary reflects the examination and assessment arrangements


for this course in the academic year 2017–18. The format and structure of
the examination may change in future years, and any such changes will be
publicised on the virtual learning environment (VLE).

Information about the subject guide and the Essential


reading references
Unless otherwise stated, all cross-references will be to the latest version of
the subject guide (2016) or current version of the online course. You should
always attempt to use the most recent edition of any Essential reading
textbook, even if the commentary and/or online reading list and/or subject
guide refer to an earlier edition. If different editions of Essential reading are
listed, please check the VLE for reading supplements – if none are available,
please use the contents list and index of the new edition to find the relevant
section.

Comments on specific questions


Section A
Answer two questions from this section.

Question 1
Define what is meant by the term ‘management science’. How can
management science be used to improve the performance of the
contemporary firm?
Reading for this question
•• Block 6, VLE
•• Slack et al., Supplement to Chapter 11; Chapters 12 and 15.
Learning outcomes being examined
•• Describe how quantitative modelling approaches can aid management
decision making
•• Outline the nature of post-war developments in management science
•• Discuss some of the challenges facing managers in the evaluation of
models and data.
Approaching the question
Define management science. For example, as a scientific method of providing
executive departments with a quantitative basis for decisions regarding the
operations under their control (Morse and Kimball, 1950). As usual, however,
there is no need for you to have learnt a word-perfect definition.
Explain in a little more detail what management science means and/or where
it comes from. For example:

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Examiners’ commentaries 2018

•• One significant outgrowth of scientific management was management


science, which is often now encompassed within the field of operations
management.
•• Management science makes use of data and models to produce
information that is intended to help managers make better decisions.
Explain how management science can be used in a variety of ways to improve
the performance of the contemporary firm. Some examples (though there are
plenty more and we would reward independently derived/novel ideas):
•• Improves the management of inventory: companies can use algorithms,
tailored to their business situation, to make sure that they order the right
stock at the right time in order to reflect their business culture, processes
and needs. A good inventory management system will mean that less
money is tied up in working capital. Can ensure that it is possible to meet
customer demand at the right time. Can guard against obsolesce of old
inventory as newer (and potentially better) items become available. Can
reduce the damage or loss of inventory items. Can help to manage admin,
insurance and storage costs.
•• Better queue management: Little’s law allows you to calculate time for
a process, and this can be used to ascertain the time that someone is
likely to spend queuing. Factors can then be manipulated to reduce the
queue length/timing. It has considerable applications to supply chains;
retail outlets; call centres; healthcare systems; law courts; passenger
transportation; and manufacturing facilities. Queue discipline can be
undertaken by the firm in order to provide rules to determine the order
in which customers are served; how they are entertained into the queue;
and whether the process or building can accommodate a queue of that
length. If queues can be managed in a way that reduces customer anxiety
or annoyance, and if the time they are waiting could even be used to
reinforce the brand or encourage additional sales (e.g. sweets by the
side of a checkout queue in the supermarket; Disney characters meeting
you in the queue for a ride), then the queue can be used to build sales or
customer satisfaction.
•• More ergonomic, efficient and/or comfortable workplace
management: wearables in the workplace can be used to see how long
processes are taking, how physically exhausting they are and whether they
could be sped up. It is an updated approach to time and motion studies.
There will be significant efficiency gains. For example, Tesco has been using
armbands to allot tasks in the warehouse since 2007, and there has been
a drop of 18% in the amount of staff needed to work there, following the
ability to communicate directly with employees and track their movements
to make sure they are being given optimal tasks and performing them
efficiently.
•• Leaner production systems: Toyota style systems, which are based on
getting work teams to ‘conduct experiments’ on the best ways for their
team to perform their tasks and gradually improve their work practices can
have the following benefits for the contemporary firm which could in turn
have an impact on performance (adapted from Slack et al., 2006):
1. Reduction of overproduction
2. Reduced waiting time
3. More efficient logistics and transportation of goods around the
workspace
4. Reducing unnecessary inventory
5. Reducing poor quality or defective goods.
Argue that there are, however, key problems with the use of management
science, as algorithms struggle to reflect the true variability and nature of the

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Examiners’ commentaries 2018

world. For example:


•• Unrealistic assumptions: in Economic Order Quantity (EOQ), used to
manage inventory, there usually needs to be an assumption of steady
demand, and this isn’t realistic. It is hard to know how customers will
receive a new product, and whether there might be fluctuations in
demand.
•• Hard to estimate reality: in EOQ, it is hard to estimate holding costs,
that may be inaccurate for each item. For example, how do you apportion
warehouse costs? It also struggles to consider wider factors, such as is
there actually room to store all the stock that the model suggests you
order with the intention of keeping costs down. It will not keep costs down
if you have to buy another warehouse.
•• Some problems can’t be solved: in queueing theory, it doesn’t matter
how good your queuing system is if you are having a particularly busy day
that you couldn’t have predicted and your building cannot accommodate
a queue of that length. In lean production, if one link in the synchronised
chain breaks, then all processes stop.
•• Employee stress and boredom: using wearables in the workplace may
improve efficiency, but it may come at the cost of high work stress and
turnover. There have been a number of examples in the press in the last
few years of the stress that workers in new-style warehouses that use such
wearables or similar devices (e.g. the Amazon warehouses) are suffering
from. Lean production can still lead to dislocation from work, as the task
becomes more monotonous and the team is not sufficiently rewarded for
efficiency gains.
Conclude, reflecting on the application of MS to improving the performance
of the contemporary firm.
A satisfactory answer would:
•• Define management science
•• Come up with two or three ways in which management science could be
used to improve the performance of the contemporary firm. Explain them
relatively well, but perhaps with some brevity or gaps in explaining the
links to the concept of performance itself
•• Conclude on the value of management science for improving the
performance of the contemporary firm.
An excellent answer would:
•• Define management science clearly, using a reference or example to do so
•• Make a link to its historical development (e.g. discuss Taylor and how his
work could be seen as a precursor to management science)
•• Give three or more points on how management science can be used to
improve the performance of the contemporary firm, making use of theory
and examples to do so
•• Provide counter-evidence, showing some of the problems with
using management science to try to improve the performance of the
contemporary firm
•• Provide a balanced conclusion on the role of management science in
improving the performance of the contemporary firm.
Common mistakes in responding to the question:
•• Getting management science and scientific management confused. Better
answers may have used scientific management to explain the genesis of
management science, but they recognised that management science was
so much more than scientific management.
•• Going even further into scientific management and comparing it to
Hawthorne studies. Better answers spotted that Hawthorne studies were

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Examiners’ commentaries 2018

not very relevant to this specific question and chose to omit it from this
particular answer.
•• Not using the contemporary setting and as such just giving historical
examples to (e.g. shovelling pig iron or time and motion studies). Better
attempts used really contemporary examples, such as radio-frequency
identification (RFID) technologies; wearable data collection devices,
algorithms used to make purchasing decisions in supermarkets etc.
•• Just talking about what management science is rather than making a
proper link to how it might improve the performance of the contemporary
firm. Better answers worked with this link for a large proportion of the
response to the question.

Question 2
Choose three financial ratios and critically evaluate the insight they can
provide on firm performance. What are the limitations of financial ratios in
general?
Reading for this question
•• Block 10, virtual learning environment (VLE)
•• Atrill, P. and E. McLaney Financial accounting for decision makers. (Harlow:
Financial Times Prentice Hall, 2013) [ISBN 9780273785637] Chapter 8
Learning outcomes being examined
•• Describe key methods for analysing the efficiency of a company, giving
examples where appropriate
•• Explain the purpose of performance ratios, with a focus on their relevance
to managers
•• Evaluate different liquidity and solvency ratios, with a particular focus on
their suitability for the context in question.
Approaching the question
Explain/define financial ratios. For example they allow a company to
compare its current performance to its past performance or that of its
competitors (benchmarking).
Choose three financial ratios to consider. These are likely to be drawn
from different categories of financial ratios, which might for example be a
performance ratio (such as Gross Profit Margin, Operating Profit Margin or
Return on Capital Employed); a short-term liquidity ratio (such as a version
of Current Ratio or Quick Ratio); a solvency ratio (Gearing ratio or Interest
Cover); an efficiency ratio (e.g. Inventory Holding Period or Trade Payables
Performance Period); and/or an investment ratio (Price/Earnings Ratio).
Highlight key ratios. Some possible ratios that could have been selected and
the types of issues/areas candidates could have focused on discussing with
regard to them include
•• Price/Earnings (P/E) Ratio: important as they indicate shareholder
confidence into the company and how it is run. A manager is interested in
these because they should run the company on behalf of the shareholders
so they would want to influence the numbers which make up this ratio
in a way that would boost confidence of the shareholders. It is often
interpreted as the number of pounds an investor is willing to invest for
each pound of profit. A high P/E ratio would suggest that the company
is expecting profit growth in the future; a low P/E ratio would suggest
that the company could be undervalued which means it could be a
good time to purchase shares. A manager would also be interested in
P/E ratios as they provide an insight into the shareholders’ expectations
of the company. Shareholders and potential investors see this ratio as a
benchmark of confidence and can suggest whether shares might be sold
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Examiners’ commentaries 2018

or purchased. It is often therefore quoted alongside share price when


analysing a company.
•• Current ratio: this assesses a company’s ability to pay their current
liabilities from their current assets. This figure represents how many times
their assets would cover current liabilities. A company would usually want
this figure to be more than two, or even three, to ensure they always have
the ability to pay. A manager would be interested in this because it will
show them if more short-term assets (cash) are required to cover liabilities
as they fall due. If a manager saw that the company was struggling to pay
current liabilities a bank loan could be requested. Failure to pay current
liabilities could force the company into liquidation. It is an insight into
how the firm is currently performing with regard to whether it is operating
within its means or is overstretched and so may potentially face problems
in the future.
•• Gross Profit Margin: the gross profit margin shows what percentage of
revenue is turned into profit. The profit considered here is gross profit
which excludes overheads and just deducts cost of sales (direct costs).
As not all costs are considered the gross profit margin is usually higher
than other margins. A manager would expect gross profit margin year-
on-year as when revenues change, cost of sales usually changes in
proportion. Gross profit margin is important for a manager because they
can determine if the operations of the business are profitable (i.e. if they
are performing well) and take action accordingly such as make direct costs
more efficient and thus improve performance.
Explain that financial ratios are thus able to provide some insight into firm
performance, but they are not without their limitations. In particular:
•• They can only work retrospectively, not able to be used to guarantee future
performance or to make a prediction of what might happen.
•• They do not look at the non-financial aspects of the business. The Gross
Profit Margin might be excellent this year, for example, because lots of
revenue has been turned into profit. However, this might mean that not
enough has been reinvested into the firm and so the facilities are shabby,
morale is low and staff haven’t had pay rises. This is storing up problems for
the future which the figures alone will not reveal.
•• We often find comfort in numbers that they feel real and tangible, but
particularly in the case of accounting numbers, they are based on social
constructs. Profit will be a different figure depending on which accounting
principles are used, and so there will be some difference between the gross
profit margin under different accounting systems. We need to be careful
that we are not seduced into seeing the numbers as an objective, totally
reflective take on what is going on inside the firm.
Conclude. For example, indicate that overall, financial ratios can provide
considerable insight into previous business performance, particularly when
used to benchmark against other companies, departments, or previous results.
However, they are not ‘facts’, they are just constructions, and they ignore
qualitative or other types of data, and so should be looked at in conjunction
with a wider evidence base.
A satisfactory answer would:
•• Define financial ratios
•• Choose three financial ratios and talk about them, making reasonable links
to firm performance
•• Come up with one or two brief explanations as to why they are limited.
An excellent answer would:
•• Define financial ratios, giving examples alongside the definition
•• Choose three financial ratios and give a detailed account of how they can

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Examiners’ commentaries 2018

be used to understand firm performance


•• Use well-argued explanations as to why the use of financial ratios is limited,
mentioning the social construction of numbers
•• Conclude in a balanced way.
Common mistakes in responding to the question:
•• Choosing three ratios that are too similar to one another. Better answers
mentioned three ratios that were quite different, meaning there were a
wider range of issues to discuss.
•• Only discussing how ratios are used in general. Stronger answers made
an explicit link throughout to their usefulness in understanding firm
performance.
•• Missing out the second part of the question. This question also requires an
analysis of the weaknesses of financial ratios.
•• Very few, if any answers, referenced the idea of these measures as
social constructs. A good answer would have engaged with the idea of
financial figures being created in a somewhat subjective fashion – despite
legislation trying to prevent much of this – and as such, ratios are not
directly comparable from one organisation to the next.
•• Using the Balanced Scorecard as one of the three ratios. A good answer
needed to identify three ratios, and recognise that the balanced scorecard
may use ratios, but is not a ratio itself.

Question 3
Under what circumstances do managers need to pay attention to product
branding when they are developing and selling their products? Is it possible
to measure the value of a brand?
Reading for this question
•• Block 19, VLE
•• Kotler and Armstrong, Chapters 8 and 16
Learning outcomes being examined
•• Describe the nature and role of branding in the sales and development of
products and services
•• Describe key aspects of the relationship between marketing and economic
theory
Approaching the question:
As with all the questions in this paper, there is no ‘one right answer’. What
follows is a reasonably comprehensive list of points we might expect to see,
in roughly the order we might expect to see them. We also do not expect that
even an excellent answer would have the time to cover all of the points.
Define brand, encompassing some or all of the following points:
•• customer experience represented by a collection of images and ideas
•• often, it refers to a symbol such as a name, logo, slogan, and design
scheme.
•• A brand often includes an explicit logo, fonts, colour schemes, symbols,
sound which may be developed to represent implicit values, ideas, and
even personality.
Explain some circumstances when managers need to pay attention to product
branding when they are developing and selling their products. There are
lots to choose from and we aware that many candidates study marketing
alongside this subject, so we will be receptive to ideas other than those
below/in the handbook:

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Examiners’ commentaries 2018

•• In a perfectly competitive market (where there is price taking; product


homogeneity; perfect information; and perfect mobility of resources)
there is no need to attend to product branding. However, in any other
circumstance, there is. And, seeing as a perfectly competitive market is a
theoretical construct and does not really exist, there is always scope for
branding.
•• Brands are thus market differentiators (but are not always differentiated in
position).
•• The meanings that consumers ascribe to brands and the ‘identities’ that
they may believe they help them to have (Holt and Cameron, 1998)
routinely lead to sales for many companies and their brands.
•• We might argue the that branding has a role in all industries, from
commodity goods (to try to make one brand of identical, granulated sugar
more ‘desirable’ than another) to highly differentiated lifestyle purchases
(such as a pair of trainers or a holiday).
Explain how brand value might be measured:
•• Brand awareness can be measured and merged with brand awareness
as a measure of brand strength, which tries to quantify the value of the
brand to its customer. If the value of the brand can be measured, and then
manipulated, it may ultimately be possible to increase demand and sales
or price for the product. This will be a key aim for most organisations, and
so branding should be a key focus of attention for most organisations, too.
•• Brand equity can also be measured. measures the value of the brand to
the firm. It can be measured by looking at the costs of creating the brand
(marketing, advertising) or by looking at market differences in revenue
between branded and unbranded products (for example, branded and
generic drugs). However, increasingly brand equity is seen as the net
present value of the cash flows to the brand. On this method, as Table 1
shows, some brand equity estimates are very large. The table shows the 5
most valuable brands in 2016 using a method in which future cash flows
are highly weighted. These brand values are a high proportion of the total
market capitalisation of these companies. Conversely, companies which
have recently been subject to reputational damage, with adverse publicity,
may see their brand equity reduced (e.g. BP, VW).
Possible conclusion: Brands are thus revenue streams and profit opportunities.
Companies develop brands mainly so they can charge more, increase new
purchases, increase brand loyalty (and thus raise the chances of repeat
purchases) and differentiate a set of products.
A satisfactory answer would:
•• Define brand/branding.
•• Recognise a set of circumstances under which managers need to pay
attention to product branding (but possibly not recognise the role that we
could give economic theory in this and how we could use the absence of
the perfectly competitive market to argue that there is a role for branding
in all products/services/industries).
•• Discuss one way (or more) of measuring the value of a brand.
•• Give a measured conclusion on the value of branding.
An excellent answer would:
•• Define brand/branding.
•• Recognise the role that we could give economic theory in this and how we
could use the absence of the perfectly competitive market to argue that
there is a role for branding in all products/services/industries.
•• Recognise a set of circumstances under which managers need to pay

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Examiners’ commentaries 2018

attention to product branding.


•• Discuss two or more ways of measuring the value of a brand, recognising
limitations of these brand valuation techniques.
•• Give a measured conclusion on the value of branding.
Common mistakes in responding to the question:
•• A general discussion of marketing or advertising as opposed to branding.
The question required a clear focus on branding, with marketing and
advertising perhaps providing some wider context. There is plenty in
the syllabus to be able to answer this question with a focus on branding
specifically.
•• Failure to consider the second part of the question, or to consider it
incredibly briefly. Good answers dedicated a significant proportion of their
time to this component. Most answers ignored it completely, which led it
to be one of the lower marked questions on the exam.
•• Structuring their answer around the marketing mix, which worked for only
a handful of students. On the whole this was a problematic direction to go
in, as it meant too much time was spent trying to shoehorn the answer into
this format, rather than discussing the issues that might have been more
key. Better answers simply discussed in reasonable detail the key topics
that the question asked for.

Question 4
Critically compare the function of management accounting with that of
financial accounting. Why is it important to have both functions in a typical
firm?
Reading for this question
•• Blocks 7, 8 and 9, VLE
•• Willman (2014) Themes 1; Willman (2014) Theme 6; Willman (2014)
Chapter 8
•• Kaplan, R. and A. Atkinson. Advanced management accounting. (Harlow:
Pearson Education, 1998) third edition [ISBN 9780130802200] Chapter 3;
Chapter 4; Chapter 8
•• Weetman, P. Financial accounting: an introduction. (Harlow: Pearson, 2013)
sixth edition [ISBN 9780273789253] Chapter 7
(Note: this is a cross-topic question, hence the high volume of reading
above).
Learning outcomes being examined
•• Critically evaluate key financial methods for performance measurement
that are used by organisations, giving examples where appropriate
•• Explain the benefits to managers of using both financial and non-financial
performance measures
•• Describe the purpose of and differences between the income statement,
cash flow statement and balance sheet
•• Explain how the income statement, cash flow statement and balance sheet
can be used to inform managerial decision making.
Approaching the question
Define accounting and/or financial/management accounting. For example:
•• Accounting. The measurement, processing and communication of financial
information about a firm.
•• Financial accounting. Measuring, processing and communicating financial

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Examiners’ commentaries 2018

information, primarily for the use of external stakeholders, following the


relevant country’s accounting laws.
•• Management accounting. Measuring, processing and communicating
financial and non-financial information, primarily for the use of internal
stakeholders.
Compare and contrast management and financial accounting. This is laid out
in the handbook in the form of a table, but we would expect candidates to
write it out longhand (NB: the following is just one way of organising it; there
are plenty of others. There are a range of issues that are subsumed in the
analyses of each point that could also be treated as separate points).
Primary use for the data:
•• Management accounting: internal (to make internal decisions)
•• Financial accounting: external (to inform external stakeholders, e.g.
shareholders and the government/tax department)
•• Analysis: Both serve an important purpose for the firm to remain afloat.
Without financial information, the company would fall foul of the law and
would struggle to attract investors. Without management accounting, the
company would struggle to analyse and improve performance and may
find it hard to remain competitive.
Purpose:
•• Management accounting: Assist management in planning and controlling
the business to make effective decisions
•• Financial accounting: Assist management and shareholders in analysing
the position and performance of the organisation
•• Analysis: Both functions are therefore critical, but in a very small firm, there
might not be the resources to compile regular management accounts.
This could act as a ceiling to data analysis, improved performance, and
therefore growth.
Legal requirement:
•• Management accounting: No legal requirement
•• Financial accounting: Compliance with accounting standard and
Companies Act in the UK (other local standards in other countries)
•• Analysis: Financial accounting is a legal necessity distinguishing why
financial accounting would be needed even if there was no management
accountant.
Format produced
•• Management accounting: Management discretion
•• Financial accounting: In accordance with accounting standards
•• Analysis: The success of the management accounting function will often
depend on the quality of the data that is given and the management’s
buy-in to the process. In financial accounting, some figures will be at the
discretion of the financial accountant, but their suitability will be checked
by an auditor. Nonetheless they could still be seen to be subjective. As
such, the format in which each is produced may seem ‘official’ but this
can be the seductive nature of numbers and the way that they often look
objective and factual even when they are not. It is important to take both
sets of numbers with a degree of cynicism.
Scope:
•• Management accounting: Flexible; includes historical, current and future
information which can focus on specific parts of the business
•• Financial accounting: Dictated by accounting standards focusing on
profits, assets, liabilities and cash flow

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Examiners’ commentaries 2018

•• Analysis: The focus of management accounting can change depending on


the conventions and whims of the firm, as well as its focus of interest at a
point in time. Significant changes in the way that financial accounts are
compiled will need to be flagged year-on-year in the statements. Scope
changes are most likely to come about as a result of the law, for example a
growing need to present Corporate Social Responsibility facts and figures
in the financial statement.
Information:
•• Management accounting: Financial and non-financial key performance
indicators (KPIs), number of customers per hour for example
•• Financial accounting: Focused on financial position and financial
performance
•• Analysis: both have a critical business role Management accounting can
guard against an overreliance on the finances and recognise the need to
analyse a range of other facts and figures, too.
Explain and justify the importance of having both functions because they
serve very different purposes. Recognise, however, that if there were only
management accountants, there would be no legal fulfilment of responsibility
as a firm so engaging financial accountants is the most critical. Moreover,
investors would also be reticent to engage with the firm as they would have
no sense of what was going on.
Recognise that if there were only financial accountants, there would be no
detailed analysis of internal performance with the intention of improving, and
therefore it would be hard to remain competitive.
Conclude either on the need for both, or on the slightly more pronounced
(legal) need for financial accounting.
A satisfactory answer would:
•• Define management/financial accounting
•• Critically compare three different aspects of the functions of management
accounting and financial accounting
•• Outline an argument why it is important to have both, or more important
to have financial accounting
•• Conclude.
An excellent answer would:
•• Define management/financial accounting
•• Critically compare at least three different aspects of the functions of
management accounting and financial accounting, with no errors and
clearly recognising the tangible differences between the practice of each
•• Provide a solid argument as to why it is important for a reasonably sized
firm to have both but that it might not be in the scope of a small firm
•• Recognise that, at root, financial accounting will always be more important
to the firm because it is a legal necessity and without it, the firm would fall
foul of the law.
Common mistakes in responding to the question:
A lack of clarity on the differences between management accounting and
financial accounting, possibly confusing investment management with one or
both. Better answers realised the major differences between the former (see
‘approaching the question’ above) and ignored investment management.
•• Spending too long on one or the other (suggesting a lack of familiarity
with the excluded topic). Good answers spent equal time dealing with
both.

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Examiners’ commentaries 2018

•• Arguing that management accounting is more important than financial


accounting (the legal imperative makes this an untenable argument).
Better answers usually settled on the notion that both were important, or
that financial accounting was marginally more important because it was
prescribed by law.

SECTION B
Answer two questions from this section.

Question 5
Explain three of the six the characteristics of managerial work, according to
Mintzberg. How does his perspective on what managers do contrast to that
of Drucker?
Reading for this question
•• Block 5, VLE
•• Willman, Theme 2
Learning outcomes being examined
Contrast perspectives on what managers do in terms of leading managerial
and economic theories
Approaching the question
As with all the questions in this paper, there is no ‘one right answer’. What
follows is a reasonably comprehensive list of points we might expect to see,
in roughly the order we might expect to see them. We also do not expect that
even an excellent answer would have the time to cover all of the points.
Define management or outline who Mintzberg (and possibly also Drucker) is/
are:
•• Management: a highly contested term, concerned with controlling things
or people, planning, resourcing and controlling things or people, and so
on.
•• Mintzberg: leading management theorist with considerable breadth, who
originated a relatively innovative theory of what managers do
•• Drucker: one of the first management theorists to attempt to characterise
the work of a manager.
Explain how previous theories of management had tried to come up with a
list of actions that a manager performs, e.g., Drucker. However, these lists were
not definitive. Instead, Mintzberg observed managers at work to try to see if
the lists of things such as controlling and resourcing accurately reflected the
day to day work of a manager. He found that they did not, and originated a list
of six ‘myth busting’ statements about the work of a manager:
•• The manager’s job is a mixture of regular, programmed jobs and
unprogrammed tasks: Mintzberg says that the manager does not just
undertake the sorts of organised, planned tasks that Drucker talks about,
but is also concerned with plenty of exceptions to the rule, having to deal
with those as and when they come up, often in ad hoc ways.
•• A manager is both a generalist and a specialist: A manager will need to
have specialist knowledge in their specific field, industry or discipline, but
also general knowledge in order to be able to deal with complex problems.
It may be hard to categorise the necessary skills and knowledge into a
simple list of what a manager does.
•• Managers rely on information from all sources but show a preference for
that which is orally transmitted: Rather than being the sorts of meticulous
planners, measurers and controllers that Drucker talks about, managers
are more likely to make use of oral information. It may be that this has

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Examiners’ commentaries 2018

changed in the information age, and this finding may need revisiting in
light of social media, emails, and so forth. However, Mintzberg’s real point
here is that managers do not make as much use of the sorts of organised,
neatly measured data sources as Drucker suggested.
•• Managerial work is made up of activities that are characterised by brevity,
variety and fragmentation: Mintzberg noticed that managers frequently
have to swap from one task to another, to another. They rarely have the
sort of time to be able to sit and measure, plan, or set objectives. They act
rapidly.
•• Management work is more an art than a science and is reliant on intuitive
processes and a feel for what is right: Again, rather than planning, objective
setting and measuring being at the heart of what managers do, they are
often working interpretively, using their instinct and senses to arrive at
what they feel is the right decision, rather than necessarily using data to
calculate what might be the right decision.
•• Management work is becoming more complex: There was no sense in
Drucker’s work that the field of management was changing at all. However,
Mintzberg, writing in 1990, may have observed the growing amount of
information that managers need to deal with and understood that this
would have a fundamental impact on the way that management might be
practised in the future. Drucker didn’t recognise that management might
change in the future.
Explain that Mintzberg’s perspective differed from that of Drucker, because
he didn’t try to argue that managers spent their time doing key things, but
rather characterising the nature of being a manager. He showed that it wasn’t
really about the activities that you did, as all management roles had different
priorities, but rather about the nature of the work: it was fast, involved lots of
communication, was artful, and complex.
However, it has problems. Drucker’s list is instinctively useful – 5 easy ‘actions’
that a manager does or should do. Mintzberg’s is much harder to treat
as a prescription for what a manager should do. It’s more a sympathetic
recognition that this work is difficult stuff. As such, it has not had the same
level of impact on the field of management as the work of Drucker.
However, the work of both of them is missing a discussion of agency and trust,
which are key issues highlighted by economic theory and could be seen as at
the pediment of the challenge of being a manager. Both researcher seemed
to be at least agnostic on whether managers can be trusted to act in the best
interests of the firm and, possibly, by exclusion, suggested that managers
spend their time focused on the objectives of the organisation. Both seem to
assume that managers are always working in the firm’s best interests, but we
know from even a common-sense perspective that this isn’t true.
A satisfactory answer would:
•• Explain largely correctly three characteristics of managerial work according
to Mintzberg.
•• Compare the work of Mintzberg with that of Drucker, showing recognition
of how their theories tangibly differ (not just comparing one thing on
Mintzberg’s ‘list’ with one on Drucker’s list).
•• Conclude on the value of Mintzberg’s work in comparison to that of
Drucker’s.
An excellent answer would:
•• Explain correctly three characteristics of managerial work according to
Mintzberg.
•• Compare the work of Mintzberg with that of Drucker, showing recognition
of how their theories tangibly differ (not just comparing things on each

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Examiners’ commentaries 2018

theorist’s list).
•• Recognise that both their works have limitations, e.g., in terms of not
considering self-motivation/power/agency.
•• Conclude by giving some comparison of the work of both theorists,
possibly ranking their contribution or saying how both were valuable in
their own way.
Common mistakes in responding to the question:
•• Incorrectly identifying and/or misremembering Mintzberg’s/Drucker’s
theories. In particular, going off on tangents, for example Mintzberg’s
organisational types. Better answers knew what needed to be discussed,
and what was included in the theories, and used them appropriately.
•• Failing to compare the theories. This question required comparison,
as stated, whether this was about their limitations, contributions, the
substance of their theory, or any other element identified by the student.

Question 6
Why do firms often alter their structures as they grow? How might the choice
of structure be related to firm performance?
Reading for this question
•• Block 15, VLE
•• Willman (2014) Chapter 5
Learning outcomes being examined
•• Critically assess key design choices firms may be required to make
•• Evaluate the suitability of particular design decisions in a chosen context
•• Discuss the role of structural contingency theory in relation to structure
and strategy.
Approaching the question
Define organisational structure. For example, an organisation’s structure
follows choices regarding issues such as task allocation, division of labour,
supervision and level of bureaucracy.
Recognise that firms often outgrow their structures. Candidates could
mention the fact that most firms often start with a simple/entrepreneurial/
functional structure and then progress to a divisional structure, becoming less
centralised. They might also recognise that firms organise in waves, spending
time decentralising, then trying to ‘tidy up’ the hierarchy and structure again
with more centralisation and/or the removal of hierarchical layers.
Identify how the ‘structure follows strategy’ approach has an impact on
choices (Chandler, 1977). A firm may wish to try to establish its strategic aims
and then work from there. Restructure should happen when a change in
the market, or a novel technology, or some other shift occurs which requires
a strategic shift and which thus has an impact on what the most desirable
structure might be.
Identify key reasons why firms may need to restructure, and some of their
choices. It may be framed in terms of the different structures that are likely
at different sizes (either using standard terms like ‘functional’, ‘divisional’,
‘geographical’, etc.; or Mintzberg’s Five Structures; or U-Form/M-Form; or the
‘six questions’ identified in Willman:
1. Where should the organisation’s boundaries be?
2. How should work be divided and combined?
3. What are the lines of authority and communication?
4. How much bureaucracy do we need?
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Examiners’ commentaries 2018

5. What should be the extent of centralisation?


6. How do we leverage what we know?
Give detail on the sorts of choices that need to be made. Below follows
an example for each of the six questions, making links between firm size,
firm structure and firm performance. You might tackle this question from a
different framework or organise it differently. That is acceptable and marks
would be awarded accordingly.
•• Where should the organisation’s boundaries be? As a firm grows, it may
wish to undertake vertical integration (buying a supplier or a customer)
or undertake horizontal integration (buying a competitor or someone
making a complimentary good). If it is a divisional firm, it may acquire a
business in a totally different area. All of these actions will necessitate a
change in structure to accommodate more employees or more business
lines.Conversely, if a company is struggling it may wish to cut a product
line or to sell one off. This will also affect the structure. In this sense, the
firm’s performance will be heavily influenced by where it chooses to put its
boundaries.
•• How should work be divided and combined? As a company grows, it
will be making more of each product and/or service, and possibly new
products and/or services too. As such, it will need to look at its division of
labour. For example, where the human resources (HR) department might
have just been one person in the early days of the firm, they may have
a big enough size to employ five people. Rather than then all doing the
same task, they will have different roles. One might be an admin assistant;
another might specialise in recruitment and appraisal; another in learning
and development; another in pay. And there might then be an additional
person to manage them. Thus, they become a department of their own
and this division of labour makes things more efficient but also needs to
be reflected in the structure, which now needs to accommodate a new
department somewhere. Performance will depend on it.
•• What are the lines of authority and communication? In many firms,
as they grow, the lines of authority and communication are formalised.
A larger firm may have large spans of control that have slowly emerged,
but managers may be struggling with their workload. A restructure might
allow more managers to be brought in to reduce span of control so that
each manager has more time to spend with individual workers and on key
projects, which should enhance performance.
•• How much bureaucracy do we need? As a firm grows, it usually
establishes more rules and routines. This can lead to a feeling of greater
bureaucracy. Even quite creative or maverick firms, such as Facebook,
will have to become more bureaucratic so that everything isn’t treated
as a new problem or exception. It should be less time consuming to have
rules and routines, but sometimes a firm can be too bureaucratic and
the amount of paperwork can be frustrating. This could have a negative
impact on performance. A big firm may try to remove areas of the structure
that are encouraging this bureaucracy or downgrade the importance of
the paperwork to free up more time for creativity. It may mean making
people redundant which will have an impact on the structure. Some
very bureaucratic processes, such as pay systems, can sometimes be
outsourced, reducing costs and internal paperwork further, and having
another sort of impact on the structure.
•• What should be the extent of centralisation? Organisations go through
repeated cycles of centralisation and decentralisation. Issues which could
be seen to prompt a drive towards centralisation are (Willman, 2014):
Competence, if managers believe their subordinates to be incompetent,
they will want to remove accountability and autonomy by centralising
and taking back more power; Cost, functions such as HR and finance can
be gathered at head office level more easily in a centralised business;
Communication, lines of communication are tighter and more immediate
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Examiners’ commentaries 2018

in a business that is centralised, particularly if that centralisation brings people


into the same office space. Each of these different issues will have an impact
on how the firm chooses to structure/restructure itself. Further, the size of the
firm will impact these issues.
•• How do we leverage what we know? Firms are spending more time thinking
about this question and seeing if they can make structures which allow this
to happen. Often, leveraging knowledge is about getting people in different
departments to work together and to share information, and a very formal
hierarchy can restrict this. The organisational chart often won’t reflect the
informal networks or structures, but organisations can also try to create these
alongside the formal structure, for example creating working groups, quality
circles or practice groups.
Explain and justify that the structure needs to fit what the firm is trying to achieve
for it to perform to the best of its ability. There needs to be a clear link between
factors such as the culture, size and industry of the firm with its structure for it to
work. A sense of this will be embedded throughout.
Conclude, for example indicating that there is a strong link between structure and
performance, with correct structure being critical for good performance.
A satisfactory answer would:
•• Define organisational structure
•• Explain that there is a link between firm strategy and structure, and so when
a firm is choosing a structure it should try to fit what it is trying to achieve
strategically; if it is growing, or has grown recently, it is important that the
structure fits the size of the firm in order for the strategy to be successful (you
might struggle in a satisfactory answer to fully explain this, but credit will be
given for trying to do so)
•• Provide around three examples of how the choice of structure might be
related to firm performance, possibly making use of some of the six questions
in the handbook to organise the answer
•• Conclude on the need for structure to relate to firm size in order for firms to
have a chance of performing well.
An excellent answer would:
•• Define organisational structure
•• Explain that there is a link between firm strategy and structure, and so when
a firm is choosing a structure it should try to fit what it is trying to achieve
strategically; if it is growing, or has grown recently, it is important that the
structure fits the size of the firm in order for the strategy to be successful
•• Talk about how as a firm grows, it tends to move from an entrepreneurial
structure to a functional structure to a divisional structure etc.
•• Provide around three examples of how the choice of structure might be
related to firm performance, making use of a framework, for example the six
questions in the handbook, or another set of criteria to organise the answer
•• Conclude on the need for structure to relate to firm size in order for firms to
have a chance of performing well, including a critical view on how possible it
actually is to have a flawless link between strategy, structure and performance.
Common mistakes in responding to the question:
•• Taking too static a view of structure. The question clearly wanted the
candidates to talk about changing structures when a firm grows. Better
answers were very comfortable doing this.
•• Ignoring the second part of the question. This question requires consideration
of how structure links to firm performance.
•• Not being selective. For this question candidates could have used many pages
of content, and some did! This left no space for analysis. Some even added in

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Examiners’ commentaries 2018

less relevant models, too, such as Porter’s Five Forces. Better answers were
brave: they chose a handful of points to make that allowed them to answer
the question, sometimes only discussing one or two specific structures in
order to illustrate their answer. This worked really well as they then had
plenty of time to answer both parts of the question.

Question 7
How does behavioural economics influence our understanding of
managerial decision making? How does it differ from earlier accounts of
managerial decision making? You should use materials from theory and
practice to illustrate your answer.
Reading for this question
•• Block 16, VLE
•• Bazerman, Chapter 2
•• Willman, Theme 4
Learning outcomes being examined
•• Explain prescriptive and descriptive approaches to decision-making within
organisations
•• Explain the rational approach to decision making with reference to
examples
•• Discuss the impact of biases and heuristics on managerial decision making
Approaching the question
As with all the questions in this paper, there is no ‘one right answer’. What
follows is a reasonably comprehensive list of points we might expect to see,
in roughly the order we might expect to see them. We also do not expect that
even an excellent answer would have the time to cover all of the points.
Define Behavioural Economics (BE) and/or managerial decision making:
•• Behavioural economics: a significant area of research which uses
approaches drawn from cognitive and behavioural psychology, coupled
with finance and economics to explore how and explain why people make
seemingly irrational decisions.
•• Managerial decision making: considering how managers make decisions
that relate to their work or that of others.
Explain that BE influences our understanding of decision making because it
removes the idea that people act rationally, rather showing how people may
often think they are trying to act rationally but are actually acting in a range of
other ways.
Explain that it then tries to explore what some of these ways are, building
up, through experiment, a catalogue of biases and heuristics that our brain
defaults to when undertaking decision making, whether we are aware of it
or not (and often we are not). Some key biases it has revealed/explicated are
(NB: there are lots more that students could talk about and we are happy
to consider anything as they will have covered lots in the handbook/in the
essential reading):
•• The action bias (preferring action to inaction)
•• The retrievability bias (tending to have our thinking shaped by information
we can easily recall rather than that which we cannot)
•• Loss aversion (Acting in a fashion that is risk averse when we may lose
something we have gained; and in a fashion, that is risk seeking when we
try to regain something we have lost)

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Examiners’ commentaries 2018

Explain that these findings all help to influence our understanding of


managerial decision making, because they allow us to understand why
managers often make the decisions they do, despite seeming somewhat
irrational, and they help us to become more aware or ‘mindful’ of our thinking
and thus to be able to try to correct it (although of course this isn’t always
possible).
Give examples, e.g., if we have a bias towards action then when we are
desperate to act rather than wait, despite the fact that this might lead to a bad
management decision as we may not have all the information or resources
we need to make a decision, we may be able to try to override this instinct in
ourselves or in others. (NB: action bias is just one example and again students
could use anything from the handbook or their own reading/research: we will
give credit for anything that we deem relevant).
Explain how BE differs heavily from earlier accounts of managerial decision
making, which initially assumed ‘homo economicus’ as a standard model, and
that managers would always make the optimal decision and be in a condition
of perfect information – both of which are only theoretical and not possible in
the real world.
Explain that BE could be linked to Simon’s work on bounded rationality, which
describes how people routinely make sub-optimal decisions as it’s not realistic
to consider everything when making a decision.
Conclude, e.g., BE has made a very significant contribution to our
understanding of decision making and has the potential to have a big impact
on workplace and management practice. However, at its heart is the idea that
we cannot overpower our irrational side, caused by busy brains and shortcut
thinking. But we can try to be mindful of it in ourselves and others some of the
time.
A satisfactory answer would:
•• Define behavioural economics
•• Discuss at least two ways in which it influences our understanding of
managerial decision making
•• Compare it to earlier accounts of decision making: either economic theory
or the work of Simon (or both).
•• Conclude on the value of behavioural economics in developing our
understanding of managerial decision making.
An excellent answer would:
•• Define behavioural economics and attribute it to Kahneman
•• Discuss at least three ways in which it influences our understanding of
managerial decision making.
•• Compare it to earlier accounts of decision making: both economic theory
and the work of Simon on bounded rationality/satisficing.
•• Conclude on the significant value of behavioural economics, recognising in
some way the big impact it has had, and continues to have, on the way we
understand decision making.
Common mistakes in responding to the question:
•• A lack of clarity on what behavioural economics is, and thus misdirecting
this part of the answer towards bounded rationality. Better answers may
have discussed bounded rationality briefly, but spent the majority of
the time talking about theories/theorists clearly in the BE field, such as
Prospect Theory, Loss Aversion, Kahneman & Tversky, etc.
•• A failure to link the topic of BE specifically to managerial decision making

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Examiners’ commentaries 2018

(as opposed to decision making in general). This question required a focus


on how it might help managers to make decisions.
•• Insufficient theory/practice examples. This question clearly required both
and better answers were able to provide them.
•• Not enough discussion of how it differs from previous accounts of decision
making. The question clearly states that it wants to see where BE sits
in relation to other theories (such as traditional, ‘rational’, descriptive
economic theories, for example).

Question 8
‘Once a good leader, always a good leader.’ Discuss this statement, using at
least two competing theories to provide balance to your answer.
Reading for this question
•• Block 4, VLE
•• Northouse, Chapter 1: Introduction
Learning outcomes being examined
•• Evaluate key leadership theories, including LMX and Transformational
Leadership
•• Discuss the psychological contract and the impact it has on our
understanding of work relationships.
Approaching the question
As with all the questions in this paper, there is no ‘one right answer’. What
follows is a reasonably comprehensive list of points we might expect to see,
in roughly the order we might expect to see them. We also do not expect that
even an excellent answer would have the time to cover all of the points.
Define leadership: e.g., ‘motivating people to achieve a common goal’ (NB: it’s
hard to define, so we will be lenient with how people try to define it)
Break down the statement in the question: it is saying that if you are a
good leader at some point, this will sustain, despite possible changes in
circumstance.
Identify theories that agree with this, for example trait theory.
•• The research tries to figure out what traits make someone into a good
leader.
•• These traits are usually presented as innate (something that people are
born with). Numerous lists were produced over the years, often with
common features but no universal agreement on a particular list.
•• Trait theory suggests therefore that good leadership is universal: if you are
successful in one setting you will be successful in another.
Identify and explore other leadership theories that take a slightly or
significantly different approach, for example:
•• Behavioural leadership theories make a claim that good leadership can be
developed but that there is one good style everyone should strive for.
•• Contemporary theories such as transformational leadership theory make
similar claims that one leadership style should be strived for because it is
‘the best’.
•• Contingency theories disagree that one leadership style works everywhere.
They thought that matching leadership style to context was critical. E.g.,
Fiedler’s work found that there were three situational variables which
would impact on the type of leadership style required in a particular
situation. It removes the expectation that leaders will be successful in all
situations.

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Examiners’ commentaries 2018

Conclude, , different leadership theories have different perspectives on


whether a leader is ‘good’ irrespective of setting. However, where setting is
taken into account, there is decent empirical support for the suitability of
doing so, and common sense also suggests that this is an element that it
would be foolish to ignore.
A satisfactory answer would:
•• Define leadership
•• Use two theories to provide an argument and counter-argument
respectively.
•• Give some balance to the answer.
•• Conclude on whether they agree/disagree with the statement and why.
An excellent answer would:
•• Define leadership
•• Use three or more theories to provide an argument and counter-argument
respectively, continually returning to the quote to show what each theory
is adding to the debate
•• Provide good balance, using the area of contingency theory to build a
reasonable case for the need to adapt leadership to circumstance.
•• Conclude, with balance, on the statement.
Common mistakes in responding to the question:
•• Insufficient reference to leadership theory of leadership, instead
centralising their own thoughts. This is one area where it felt as though
some students had not done the necessary work. Good answers linked
all paragraphs to the theories that are there, marshalling their arguments
around these theories.
•• Misattributing perspectives on the statement to the wrong theories. Better
responses correctly interpreted all of the theories they covered.

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