Take this Exam: A-Level Business: People and Operations | Zestly

Question 1

A chain of forty stores trades in regions whose customers, seasons and competitors differ sharply. Head office currently sets every range, every price and every promotion. The board proposes letting each store manager choose part of the range and adjust some prices locally. What does the firm gain, and what does it give up?

Accepted Answer

It gains responsiveness — decisions taken by people who can see the local market, and taken faster — and gives up consistency and buying power, since a range that varies by store is harder to buy in bulk, harder to advertise nationally and harder to hold to one standard.

Answer

It gains responsiveness and gives up nothing, since the managers still answer to head office at the end of the year.

Answer

It gains consistency across the chain, because each manager will apply head office policy more carefully to their own store.

Answer

It gains buying power, because forty managers negotiating separately will each obtain a better price than head office obtains alone.

Question 2

A car manufacturer shifts from inspecting finished vehicles for faults to implementing quality control at every stage of the production process. What is the primary advantage of this change?

Accepted Answer

The firm reduces waste and costs by identifying and correcting faults before they become part of the finished product.

Answer

The firm can increase the price of its cars because customers are willing to pay for the extra inspection time.

Answer

The firm will no longer need to train its production staff, as the quality system will automatically handle all errors.

Answer

The firm can now employ more inspectors to ensure that every single part is checked manually.

Question 3

A tech firm experienced falling unit costs as it grew over the last decade. Recently, however, its unit costs have begun to rise despite continued growth. What is the most likely internal cause of this?

Accepted Answer

Diseconomies of scale, such as communication difficulties and poor coordination between departments.

Answer

Economies of scale, which have become too effective and are now reducing the firm's profitability.

Answer

External factors, such as a general downturn in the global economy affecting all tech firms.

Answer

A sudden increase in the market price of raw materials, which has made production more expensive.

Question 4

A firm is choosing between a labour-intensive process and a capital-intensive process. Demand for its product is highly volatile and unpredictable. Which approach should it choose, and why?

Answer

Labour-intensive, because it ensures that the firm will always have a high level of output, regardless of market conditions.

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Capital-intensive, because it allows the firm to produce large volumes at a very low fixed cost.

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Labour-intensive, because it allows the firm to adjust its workforce size in response to fluctuating demand, keeping costs variable.

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Capital-intensive, because it is always cheaper to use machines than to pay human wages, regardless of demand.

Question 5

A firm assembling kitchen appliances holds almost no stock: components arrive on the morning they are used. For three years this cut its costs noticeably. Last month its only supplier of one component was disrupted and the assembly line stood idle for eleven days. What is the right reading of this?

Answer

That just-in-time is a mistake, since any system that can halt a line for eleven days costs more than it can ever save.

Answer

That just-in-time bought three years of lower holding costs and less capital tied up in a warehouse, and the eleven lost days are part of the price of that: the system trades a buffer for savings, and a component with a single supplier is where the trade bites hardest.

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That just-in-time is simply the better system and the disruption was bad luck with no bearing on the choice.

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That the firm was not running just-in-time properly, since a correctly operated system keeps enough stock to cover a supplier failure.