E Section C Theory

Question 1

What needs to be looked at when examining why revenue has decreased?

Answer 1

Market conditions

Question 2

Reason why people transfer service (quality)

Answer 2

Better quality from the alternative service

Question 3

When may market share increase (word of mouth)

Answer 3

As word of mouth spreads about improved results and service

Question 4

How should operating costs be categorised?

Answer 4

The split between fixed and variable costs

Question 5

What needs to be thought about in areas of customer satisfaction (expenditure)

Answer 5

Avoid cutting expenditure

Question 6

What are divisional managers eager to do (profits)

Answer 6

Maximise their individual profits without acknowledging the impact as a whole

Question 7

What does the balanced scorecard approach aim to do?

Answer 7

To look at financial performance and non-financial performance

Question 8

Example of internal processes in balanced scorecard?

Answer 8

Improving systems internally (e.g. Average number of corrections to booking due to an administrative error)

Question 9

Example of learning and growth in balanced scorecard?

Answer 9

Volunteering and funding of community organisations (e.g. Number of new items offered on the menu each month)

Question 10

Example of competitiveness measure in the building block model?

Answer 10

% of website hits converted into orders

Question 11

Example of financial performance measure in the building block model?

Answer 11

Gross profit margin

Question 12

Example of quality of service measure in the building block model?

Answer 12

% of jobs from repeat customers

Question 13

Example of flexibility measure in the building block model?

Answer 13

Time taken per job

Question 15

Example of resource utilisation measure in the building block model?

Answer 15

Sales per mechanic

Question 16

Example of innovation measure in the building block model?

Answer 16

% revenue generated from new service packs

Question 17

How does the standards block affect the dimensions block?

Answer 17

Standards block sets the target for the performance indicators chosen for each of the dimensions

Question 18

How does the rewards block affect the dimensions block?

Answer 18

Ensures that employees are motivated to achieve the standards

Question 19

Problems with setting objectives with Not for Profits (non-financial)

Answer 19

Objectives of NFPOs are often non-financial and reflect the interests which the various stakeholders have in an organisation

Question 20

Problems with setting objectives with Not for Profits (prioritisation)

Answer 20

The organisation’s management will face a dilemma when trying to decide which objectives are most important and therefore prioritised in the course of strategic planning and decision-making

Question 21

Problem with assessing qualitative objectives (measure)

Answer 21

How are they measured

Question 22

Problem with assessing qualitative objectives (subjective)

Answer 22

They are subjective. People are likely to have different expectations of what constitutes a high quality of education

Question 23

Advantage of using residual income (investments)

Answer 23

Encourage managers to make new investments

Question 24

Advantage of using residual income (imputed interest)

Answer 24

Imputed interest charge is deducted from profits when measuring the performance of the division, managers are made more aware of the cost of assets under their control

Question 25

Advantage of using residual income (costs of capital)

Answer 25

Alternative costs of capital can be applied to divisions and investments to account for different levels of risk. This can allow more informed decision-making.

Question 26

Disadvantage of using residual income (comparisons)

Answer 26

RI does not facilitate comparisons between divisions since the RI is driven by the size of divisions and their investments

Question 27

Disadvantage of using residual income (accounting)

Answer 27

RI is also based on accounting measures of profit and capital employed which may be subject to manipulation

Question 28

Why is spare capacity beneficial in production?

Answer 28

To deal with any unexpected disruptions

Question 29

Dimensions which measure performance in Fitzgerald and Moon

Answer 29

Financial performance Competitiveness which measure an organisation's standing against its competition Quality of service offered Flexibility of the organisation in providing the service Innovation which addresses the ability to introduce new processes Resource utilisation which measures productivity

Question 30

Result dimensions (Fitzgerald and Moon)

Answer 30

Financial performance Competitiveness

Question 31

Future performance dimensions (Fitzgerald and Moon)

Answer 31

Quality Flexibility Innovation Resource utilisation

Question 32

Second block (Fitzgerald and Moon)

Answer 32

Setting standards. To motivate managers, important they take ownership of standard

Question 33

Third block (Fitzgerald and Moon)

Answer 33

Rewards managers are offered for achieving the standards

Question 34

What must rewards be in Fitzgerald and Moon?

Answer 34

Have clarity (performance measurement scheme understood by managers) Motivating (rewards are attractive) Controllable (not subject to outside influences)

Question 35

What might cause individual members of staff to be late for work?

Answer 35

External factors such as delayed public transport

Question 36

When can managing environmental costs become a particular challenge?

Answer 36

A company with a low-cost pricing approach as profit margins are usually low in such businesses

Question 37

What happens when standards and rewards are set appropriately (Fitzgerald and Moon)

Answer 37

Staff will be engaged and motivated and it is then more likely to achieve goals (e.g. the dimensions)

Question 38

Advantages of divisionalisation (local)

Answer 38

Improves quality of decisions made because divisional managers know local conditions and are able to make more informed judgments

Question 39

Advantages of divisionalisation (authority)

Answer 39

Authority to act to improve performance should motivate divisional managers

Question 40

Advantages of divisionalisation (training)

Answer 40

Divisions provide valuable training ground for future members of top management by giving them experience of managerial skills

Question 41

Advantages of divisionalisation (resources)

Answer 41

Head offices might not have to direct operations closely enough itself. Some authority must be delegated to local operational managers

Question 42

Balanced scorecard advantage (organisations)

Answer 42

Not all organisations have profit or financial return as the main objective (e.g. non-financial objective)

Question 43

Balanced scorecard advantage (financial limitation)

Answer 43

Financial performance indicators are "lagging" indicators. Means events and decisions which caused these indicators occurred long ago

Question 44

Balanced scorecard advantage (manipulation)

Answer 44

FInancial measures used in isolation are relatively easy to to manipulate in the short term

Question 45

What is short-termism?

Answer 45

A bias towards the short-term rather than long-term performance

Question 46

Decisions that emphasise short-termism (quality)

Answer 46

Reducing quality control, to save operating costs

Question 47

Decisions that emphasise short-termism (training)

Answer 47

Cutting training costs or recruitment

Question 48

Steps that make managers take a long-term view (realistic)

Answer 48

Making short-term targets realistic

Question 49

Steps that make managers take a long-term view (managers)

Answer 49

Evaluating managers' performance in terms of contribution to long-term as well as short-term objectives

Question 50

Steps that make managers take a long-term view (quality)

Answer 50

Set quality based targets as well as financial targets