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centertop00 BUSINESS MANAGEMENT UNITS 3 AND 4 Business Management Units 3 and 4 practice exam and suggested answerskirsten furness | rosebud secondary collegeThe following practice exam for VCE Business Management Units 3 and?4 consists of two sections. Section A has short-answer and extended-answer questions, including questions with multiple parts. One of the extended-answer questions is worth 10 marks. This section is worth a total of 50 marks. Section B consists of short-answer and extended-answer questions based on a case study. This section is worth a total of 25 marks. Suggested answers to this practice exam follow the question and answer book.All 11 questions are compulsory. The command/task words in each question, the corresponding number of marks allocated and the number of lines provided after each question give a guide to the appropriate length of responses. Additional space is provided at the end of the question and answer book. Please note that the questions and answers have no official status. Teachers are advised to preview and evaluate all practice exam material before distributing it to students. Note: The questions are based on the VCE Business Management Adjusted Study Design for 2020 only.Name: ______________________________Teacher: ______________________________BUSINESS MANAGEMENT UNITS 3 AND 4Practice written examination 2020Reading time: 15 minutesWriting time: 2 hoursQuestion and answer bookStructure of bookSectionNumber of questions Number of questions to be answeredNumber of marksAB56565025Total 75 Students are to write in blue or black pen.Students are permitted to bring into the examination room: pens, pencils, highlighters, erasers, sharpeners and rulers.Students are NOT permitted to bring into the examination room: blank sheets of paper and/or white-out liquid/tape.No calculator is allowed in this examination.Materials suppliedQuestion and answer book.Additional space is available at the end of the book if you need extra paper to complete an answer. Clearly label all answers with the appropriate question number.InstructionsWrite your name and your teacher’s name in the spaces provided above on this page.All written responses must be in English.Students are NOT permitted to bring mobile phones and/or any other unauthorised electronic devices into the examination room.SECTION AInstructions for Section AAnswer all questions in the spaces provided.Question 1 (10 marks)Read the following case study and answer the questions that follow.Australian Film and Television (AFT) is committed to supporting the development of online content, film and television in Australia, with the purpose of connecting audiences with Australian stories. AFT do this by offering funding for Australian projects, available through a rigorous and competitive application process. This process is overseen by Kate, the Head of Content, and she leads of team of five people to oversee the application and grant process. Kate’s team allocated a total of $75 million to a range of projects in 2018–19.In 2018–19, the first season of the Australian children’s cartoon ‘Red Cat’ was streamed 150?million times on one of Australia’s national broadcaster’s online platform and is set to be the highest-earning Australian children’s cartoon ever released when distributed globally. AFT invested $9.2 million into the production of children’s content in 2018–19.a.Define the term ‘government business enterprise’. 2 marksb.Outline one reason why the government might choose to establish a government business enterprise, such as AFT, to operate in Australia. 2 marksc.Kate, the Head of Content at AFT, is known for her consultative management style.Explain how Kate might apply the management skills of leading and delegating when leading her team. 6 marksQuestion 2 (7 marks)Distinguish between Lawrence and Nohria’s Four Drive Theory and Maslow’s Hierarchy of Needs. In your response, explain how each theory would apply the strategy of investment in training to motivate employees.Question 3 (6 marks)Hi-Tek Plants is a plant nursery that has recently incorporated automated production lines into its production processes, including growing seedlings and putting seedlings into individual pots ready for transportation. David, the manager, says that while the machinery and equipment has been a significant investment for Hi-Tek Plants, this strategy has improved productivity by 30% in the first year and reduced waste by 18%.Analyse how automated production lines can be used to improve efficiency and effectiveness at a business such as Hi-Tek Plants.Question 4 (10 marks)With reference to a contemporary case study, apply the principles of Lewin’s Force Field Analysis to demonstrate how the business managed a period of change. In your response, refer to:?the influence on the operations system.the effective management of employees.Question 5 (17 marks)Read the following case study and answer the questions that follow.Ace Cleaning is a domestic and commercial cleaning business, servicing a number of residential and business customers in a rural region of Victoria. Ace Cleaning employs 32 staff, including three team leaders.?Ace Cleaning is the market leader in the region.Following an analysis of the business, the owner of Ace Cleaning is working with a business mentor in an attempt to improve the performance of Ace Cleaning, protect market share and maintain competitive advantage. The owner has reported the following trends in these key performance indicators (KPIs):number of customer complaints are increasingrates of staff absenteeism and staff turnover are increasinglevel of waste is decreasing due to a change in processes.a.Identify two inputs of the operations system of Ace Cleaning. 2 marksb.Outline the characteristics of the operations management for Ace Cleaning. 3 marksc. Explain how an agreement could be used by Ace Cleaning to manage its employees effectively and achieve its business objectives. 4 marksd.Propose and justify two management strategies that the manager of Ace Cleaning could implement to respond to the key performance indicators (KPIs). 8 marksSECTION B: CASE STUDYInstructions for Section BUse the case study provided to answer the questions in this section. Answers must apply to the case study. Answer all questions in the spaces provided.Read the following case study and answer the questions that follow. Red Mule is a small women’s clothing store in an inner suburb of Melbourne that has been operating for seven years. It is owned by Sue and her husband, Richard, who both work in the business. Red Mule operates an online shopping website and uses social media to promote the business. Until April 2020, 70% of sales occurred within the store. Red Mule employs six people who work as retail assistants and pack online orders in-store. Sue is responsible for sales, marketing and operations, while Richard oversees human resources, finance and technology support.?Red Mule sells a range of clothing and made-to-order leather boots and shoes. Customers have eight different styles to choose from and each style can be made in 20 different colours and patterns. There are a range of sizes available, including extra-small or extra-large sizes, not typically stocked in other shoe stores. The boots are manufactured in Indonesia and orders are shipped to Australia every two weeks. Online feedback suggests customers perceive $299 for custom-made leather boots as an inexpensive price point for what they perceive to be an innovative product that cannot be found elsewhere.Due to unforeseen circumstances relating to the COVID-19 pandemic, Sue and Richard needed to close the store for 10 weeks. To respond, Sue increased the online marketing of Red Mule, including sponsored posts on social media and by offering a 15% discount on all footwear. In spite of the challenges posed by the temporary store closure, Sue was surprised to see that net profit increased by 5% in the quarter from April to June 2020 when compared to the figures for the same period in 2019. However, the number of customer complaints increased by 30% in the same period. The two main complaints were that incorrect products were being shipped and the boots were not meeting customer expectations.Upon investigation, Sue discovered that the boots Red Mule was purchasing from the manufacturer did not match the original design of the boots nor the product description. The manufacturer changed the inner lining of the boots from leather to a synthetic lining without consulting her, and this has decreased the overall quality of the products. Sue addressed this issue with the manufacturer, who promptly rectified this situation, but she is concerned that there might be quality issues in products she has already shipped to customers. Many of these are new customers to the business, and Sue is concerned at the impact this might have on her business reputation in future. She has ruled out sourcing the footwear from an Australian manufacturer as this option would increase the retail price of the boots to $580, which is not a price point that would appeal to her target market. Subsequently, Sue has decided she needs to change manufacturers in Indonesia due to a lack of trust with the current supplier.Question 1 (2 marks)Define the term ‘globalisation’.Question 2 (3 marks)Explain why Red Mule is using overseas manufacturing in its operations systems.Question 3 (4 marks)Describe how employee observation could be used at Red Mule to achieve its business objectives.Question 4 (4 marks)Sue and Richard are investigating strategies to improve quality and it has been suggested that they implement quality assurance to minimise defects in their products.?Discuss the use of quality assurance as a strategy to improve the effectiveness of operations at Red Mule.Question 5 (6 marks)Explain why it is important for Sue and Richard to demonstrate leadership when changing their overseas manufacturer of footwear and describe one corporate social responsibility that Red Mule needs to consider when changing its overseas manufacturer.Question 6 (6 marks)Evaluate the suitability of differentiation as an approach to strategic management at Red Mule.END OF QUESTION AND ANSWER BOOKExtra space for responsesClearly number all responses in this spaceSuggested answersNote: When making judgements about the quality of student answers to questions, teachers could be guided by some or all of the following factors (depending on the question): accuracy, relevance, completeness, breadth/depth of treatment, logic of connections, clarity, substantiation of claims, level of coherence. These factors are particularly useful to consider when marking questions that require a global marking approach. These types of questions are multifaceted as they involve the application of a marking range that considers different aspects of a question. The factors listed above will provide useful reference points for discrimination within a marking range.Question 1 (10 marks)a.Define the term ‘government business enterprise’. 2 marksA government business enterprise is owned and operated by the government—state and federal. A government business enterprise will participate in commercial activities with the purpose of making a profit, but also aim to deliver community services and carry out government policies.Marking guide:1 mark for identifying that government business enterprises are government?owned/operated1 mark for providing a characteristic of a government business enterpriseb.Outline one reason why the government might choose to establish a government business enterprise, such as AFT, to operate in Australia. 2 marksGovernment business enterprises operate with some independence in the way that they provide important services to the community and have the objective to return profits to the major shareholder, which is the government. The purpose of AFT is to support the development of Australian content for film, television and online streaming for cultural purposes, and a benefit of this is that the industry is not outsourced overseas.Marking guide:2 marks for providing details that support a relevant reason c.Kate, the Head of Content at AFT, is known for her consultative management style.Explain how Kate might apply the management skills of leading and delegating when leading her team. 6 marksWhen using the consultative management style, Kate will need to balance centralised decision-making and control, with having good relationships with people and ensuring others have input into decision-making, especially given how much money the team is allocating in grants each year and the competitive nature of this process. Because the consultative management style can be time-consuming and risks creating conflict when people feel they have been overlooked or a lengthy process is not possible, the management skills of leading and delegating are critical.When Kate applies leading skills, she will be seeking to motivate and influence people to work together to identify stand-out projects like Red Cat, that have significant potential for success, locally and globally. When faced with stressful situations or conflict, Kate will use her leadership skills to lead by example and retain authority, while manage the situation in a way that leads to a positive outcome for the employees and the business. Examples of positive outcomes include improved motivation, increased productivity or a change in corporate culture.Having the ultimate responsibility for decision-making can make delegating authority to others challenging for a consultative manager like Kate. An effective consultative manager will be considerate of the input offered by others, while still recognising and accepting their responsibility for making a final decision about how budgets are allocated. Therefore, exercising judgement about the appropriateness of tasks that are delegated to others, and using clear communication when giving instructions are both important when a consultative manager is applying the skill of delegating.Marking guide:2 marks for providing the key features of the consultative management style2 marks for making a valid connection between the consultative management style and the skills of leading 2 marks for making a valid connection between the consultative management style and the skills of delegatingQuestion 2 (7 marks)Distinguish between Lawrence and Nohria’s Four Drive Theory and Maslow’s Hierarchy of Needs. In your response, explain how each theory would apply the strategy of investment in training to motivate employees.Maslow’s Hierarchy of Needs and Lawrence and Nohria’s Four Drives Theory are motivation theories exploring the intrinsic and extrinsic factors that inspire people to respond to a situation. There are some clear distinctions between the theories. Maslow’s Hierarchy of Needs was not developed specifically for a business setting and is organised in order of importance, from the basic physiological needs to the highest need of self-actualisation. Whereas, the Four Drives Theory was developed by researchers at the Harvard Business School and it is a more contemporary theory of motivation for the business world. In this theory the needs are not arranged hierarchically, rather, they recognise four main drives that shape the way people think and behave. The theory considers the four drives as being equally significant and can be satisfied simultaneously. Another key distinction is that the Four Drives Theory includes the drive to defend, which is a latent drive, meaning that the drive will be employed to minimise a potential negative; whereas, the Hierarchy of Needs implies that a negative will cause a person’s motivation to decline, with them moving back down the hierarchy to lower order needs.?According to the Four Drives Theory, investment in training is most closely aligned with the drive to learn, which recognises that people are motivated by the opportunity to learn new skills and gain experience. The Four Drives Theory places a significant emphasis on how important learning and development is on human motivation by dedicating an entire drive to learning new knowledge and skills. This theory views training as an extremely valuable strategy for motivating employees and getting the best out of them.?In contrast, within the Hierarchy of Needs theory, the strategy of investing in training is not clearly aligned to just one need, and the need for training or development is not explicitly stated as a need to be satisfied. Rather, training can be used as a strategy to satisfy a lower order need like safety (for example, through providing training for dangerous equipment or first aid) or a higher order need like esteem (for example, training in dispute resolution as part of the responsibility associated with a management role). Because of the focus on positive motivators, training could be used as a strategy to satisfy needs at any level of the hierarchy and investing in different forms of training is a tangible way that businesses can invest in the development of people and move them into higher levels.?Marking guide (global):1–3 marks for making clear the key differences between the two theories, taking into account accuracy and depth/breadth of response1–2 marks for showing how Maslow’s Hierarchy of Needs theory would apply the strategy of investment in training to motivate employees 1–2 marks for showing how Lawrence and Nohria’s Four Drives Theory would apply the strategy of investment in training to motivate employeesQuestion 3 (6 marks)Analyse how automated production lines can be used to improve efficiency and effectiveness at a business such as Hi-Tek Plants.Automated production lines are usually self-operating and comprise machinery and equipment (often robotics) that are organised in a sequence. Components proceed through different steps, usually along a conveyor belt and while computers manage the process, the role of employees is to oversee the system.Effectiveness measures the degree to which a business accomplishes the achievement of its objectives. Typically, effectiveness is a measure of quality rather than speed, effort and cost, which are measures of efficiency. For a business like Hi-Tek Plants, where productivity and levels of waste are integral measures of business objectives, the introduction of automated production lines is a strategy to improve effectiveness in the business. Through improving the precision and accuracy of repetitive and manually intensive processes associated with outputs like pot plants, a business is able to use an automated production line to create output that is consistent, meets customer demand, decreases waste (Hi-Tek Plants achieved an 18% reduction), improves quality and achieves business objectives.Efficiency focuses on how a business is using resources to achieve business objectives. In the case of Hi-Tek Plants, the improvement in productivity can be an indicator that efficiency has also improved. Productivity measures the inputs (resources) needed to produce outputs (goods and services) and for Hi-Tek Plants, productivity has improved by 30% with the introduction and investment in an automated production line. This might indicate the automated production line is reducing the amount of inputs needed to manufacture the same (or more) outputs. Generally, automated production lines are a high-cost investment in machinery and equipment, which increases the capital inputs required for production, but reduces human labour inputs required. However, speeding up the production processes in a manner that increases the rate of outputs (thus improving productivity), will usually reduce waste and errors.Marking guide (global):1–3 marks for drawing and supporting a valid conclusion between the use of automated production lines and improved efficiency at Hi-Tek Plants1–3 marks for drawing and supporting a valid conclusion between the use of automated production lines and improved effectiveness at Hi-Tek PlantsQuestion 4 (10 marks)With reference to a contemporary case study, apply the principles of Lewin’s Force Field Analysis to demonstrate how the business managed a period of change. In your response, refer to:?the influence on the operations systemthe effective management of employees.The principles of Lewin’s Force Field Analysis consider the driving (or supportive) forces and restraining (or resistant) forces that will influence the outcome of a situation and determine an action plan. During the COVID-19 pandemic in 2020, supermarkets, such as Woolworths, faced unprecedented challenges in times of extreme uncertainty and change. During this time, it was important for Woolworths (and its stakeholders, including employees, customers, suppliers and the government), to manage the driving and restraining forces influencing change in an expedient, socially responsible and effective manner. To date, Woolworths has successfully managed the change by ensuring that it minimised the effect of the restraining (or against) forces and strengthened the driving (or for) forces as they planned its response to the unfolding global crisis.Lack of time was a major restraining force that Woolworths needed to consider. Woolworths had to address the rapid and significant increase in customer demand for essential items, such as toilet paper, pasta, rice, tinned items and long life milk, as well as the increased demand for online shopping, and click and collect services, as impending lockdowns of the community quickly became a reality for people across Australia. Because of the speed with which the world changed, Woolworths and its suppliers had very little time to plan for the changes it needed to implement, both within the operations system (for example, speeding up the restocking processes in stores), as well as with the way it managed employees (for example, ensuring that employees were safe in the workplace).Societal attitudes (beliefs and attitudes about right and wrong) towards shopping for groceries changed rapidly, with shelves being cleared of essential items and online shopping systems not able to cope due to the significant increase in demand. The impact on the operations system was immediate, with significant pressure on the supply chain, so that stock could be delivered and available on shelves for customers. Woolworths had to work with stakeholders, such as suppliers, the government and employees, in order to manage and proactively respond to this change in societal attitudes.Another driving force was the response of competitors such as Coles and Aldi. Facing the same challenges, the major supermarkets worked within a cross-industry collaboration to address and make common changes to processes, such as cleaning and social distancing. This type of industry collaboration between major competitors is unprecedented in Australia. Woolworths had to significantly change the way it managed its existing employees, and also had to recruit, employ and train hundreds of new people to meet increased customer demand. Given that managers and employees can act as driving and restraining forces for change, it was necessary for Woolworths to ensure employees were well supported and felt safe in the workplace during this time. This helped with their motivation and increased their capability of responding to this situation in an effective way. The performance and reliability of staff was critical for Woolworths to be able to meet customer demand, manage its supply chains and keep people safe in store.Legislation also acted as a driving and a restraining force when it came to managing employees—it was a supporting or driving change because it made many changes inevitable and necessary, but it was a restraining change because of the threat that the situation posed to health and safety. This limited the actions and strategies that could be taken to improve efficiency and effectiveness within stores and online.?Because supermarkets were deemed as providing an essential service during the declared State of Emergency by the Victorian Government, supermarket employees were considered frontline workers. It was necessary for Woolworths to ensure that strict measures were put in place to protect the health and safety of employees. This included the provision of hand sanitisers and personal protective equipment, the installation of perspex shields at check outs, and by placing limits on the number of people in a store at any one time. To enhance the influence of employees and managers as a driving force for change, and to improve motivation, corporate culture, and to recognise the efforts of team members during the panic buying period, Woolworths rewarded more than 100 000 of its full-time and part-time employees with gift cards and up to $750 worth of shares each.Ultimately, Woolworths experienced record sales growth during the COVID-19 crisis and were able to restore reliable supplies of essential products, protect the health and safety of customers and staff, and support the community throughout the COVID-19 crisis by ensuring that the driving forces for change exceeded the power of the restraining forces.Marking guide (global):1–2 marks for providing the key characteristics or features of the principles of Lewin’s Force Field Analysis1–4 marks for relating knowledge about Lewin’s principles (driving and restraining forces) to the operations system of a contemporary case study, taking into account accuracy of content, depth/breadth of treatment and relevance 1–4 marks for relating knowledge about Lewin’s principles (driving and restraining forces) to the effective management of employees, taking into account accuracy of content, depth/breadth of treatment and relevance to a contemporary case study Question 5 (17 marks)Read the following case study and answer the questions that follow.a.Identify two inputs of the operations system of Ace Cleaning. 2 marksTwo inputs in the operations system are cleaning products and equipment, for example, a vacuum cleaner.Marking guide:1 mark for naming a relevant input (x two = 2 marks)b.Outline the characteristics of the operations management for Ace Cleaning. 3 marksAs Ace Cleaning is a service business, one characteristic of its operations management is that it provides services that are intangible, meaning that they cannot be touched. Cleaning services cannot be stored for later use; rather a record of the service is stored. Cleaning services also tend to be tailored to meet the needs of individual customers.Marking guide:1 mark for briefly summarising a characteristic relevant to Ace Cleaning (a service business) (x three = 3 marks)c. Explain how an agreement could be used by Ace Cleaning to manage its employees effectively and achieve its business objectives. 4 marksAgreements, both individual and enterprise ones, are contracts made at the business or enterprise level. Agreements allow for employees and employers to negotiate wages and conditions that improve on the minimum standards offered by an award such as the Cleaning Services Award 2020.?Ace Cleaning can use an enterprise agreement to manage employees effectively through offering wages and conditions above the award, which in turn will improve the motivation and commitment of employees. Agreements might include provisions, such as training programs or internal dispute resolution processes, to improve the relationship between the employer and employees.Agreements usually offer more flexibility than an award, for both employees and employers, and can allow the employer to build in incentives to improve the individual performance of employees. Incentives can be targeted to achieve desired improvements such as a decline in customer complaints. Improving motivation and the performance of employees are effective strategies for a business to achieve business objectives, such as an increased market share.Marking guide:2 marks for making a logical link between a feature of an agreement and an improvement in the effectiveness of managing ACE employees. Note: Usually students are not required to provide a definition of a term unless it is specified in the question; however, a high-scoring response would need to demonstrate an understanding of the term, such as features of an agreement. 2 marks for making a logical link between a feature of an agreement and the achievement of business objectives d.Propose and justify two management strategies that the manager of Ace Cleaning could implement to respond to the key performance indicators (KPIs). 8 marksTwo strategies that Ace Cleaning could implement in response to the KPIs are improving quality in production and a change in management style or management skills.Improving quality in production is an important strategy to use when trying to decrease the number of customer complaints. For a cleaning service, a rise in customer complaints might be linked to a decline in the quality of the service being produced. Ace Cleaning could implement quality control, quality assurance or Total Quality Management (TQM) as strategies to improve the efficiency and effectiveness of operations related to quality. If Ace Cleaning chose TQM it would reap the benefits of a business-wide commitment to excellence and a shared responsibility for improvements in quality with all members of the business. This inclusive approach and shared responsibility might also help improve corporate culture and employee motivation, leading to a decrease in staff absenteeism and turnover. TQM might also reveal whether there is a link between a reduction in waste and an increase in customer complaints—perhaps minimising wastage is leading to quality issues in the service output being produced.A change in management style or management skills is a strategy that could help address a decline in some of Ace Cleaning’s KPIs. Changing management styles when staff are unhappy in their work (as suggested by an increase in staff absenteeism and staff turnover), could lead to staff feeling more valued or being more productive in their work, which in turn could improve these indicators. Improving staff morale might require a change from a more task-oriented style, such as autocratic or persuasive, to a more people-oriented style such as consultative or participative.The owner of Ace Cleaning could also consider changing the emphasis given to particular management skills or how they are applied. For example, for a participative-style manager, delegating, communicating and interpersonal skills are important. Using these skills could improve the motivation and morale of staff at Ace Cleaning. If an autocratic management style was practised by the owner of Ace Cleaning, then it is more important to focus on leading skills rather than delegating skills. Strong leading skills could help address the underlying issues that are causing an increase in customer complaints. Applying specific leading skills together with effective communicating skills could see improvements in the quality of cleaning services and employee performances. This in turn could reduce the number of customer complaints. Another acceptable response to this answer is staff training.Staff training is an appropriate strategy to implement to decrease customer complaints and improve staff morale, resulting in a decrease in absenteeism and turnover. These indicators can give insight into overall staff satisfaction, and in the case of Ace Cleaning, they suggest that staff satisfaction is declining. Staff training is a strategy that can improve the knowledge and skills of employees, and in turn, improve productivity, efficiency and reduce errors, thus further decreasing waste for Ace Cleaning. When businesses invest in training for their employees, the employees are more likely to be more satisfied and motivated in their work. Staff training is also a strategy that can be used to address quality issues that might contribute to the increase in customer complaints. By improving knowledge and skills, processes can be executed with a higher degree of quality, and in turn, improve customer satisfaction with the service offered by Ace Cleaning. Marking guide (global):1–2 marks for putting forward two appropriate management strategies1–3 marks for supporting how a proposed strategy will improve the KPIs, taking into account the logic of reasoning between the strategy and the effect, depth/breadth of treatment and completeness of coverage of the KPIs (x two = 6 marks)SECTION B: CASE STUDYQuestion 1 (2 marks)Define the term ‘globalisation’.Globalisation refers to the removal of trade barriers between nations, leading to increased movement of investment, technology, labour, finance and trade across nations. It is considered a driving force for change as businesses can operate on an international scale.Marking guide:1 mark for stating precisely the meaning of globalisation 1 mark for providing an essential quality or characteristic of the termQuestion 2 (3 marks)Explain why Red Mule is using overseas manufacturing in its operations systems.The manufacturing of the leather footwear sold by Red Mule happens offshore, meaning that the goods are being manufactured overseas, in Indonesia. This is a different location to Melbourne, Australia, where Red Mule is located. Red Mule is using overseas manufacturing in the operations systems for two main reasons: to reduce the costs of boots and shoes (in both inputs and processes) and to allow the owners to focus primarily on running their retail business— a clothing boutique. Manufacturing comparable leather footwear (outputs) in Australia would be extremely expensive and would result in a much higher retail price for customers. By manufacturing overseas, Red Mule is able to be more competitive.Marking guide:1 mark for providing characteristics of overseas manufacturing2 marks for making a valid connection between a feature of overseas manufacturing used in the operations systems and a competitive gain for Red MuleQuestion 3 (4 marks)Describe how employee observation could be used at Red Mule to achieve its business objectives.Employee observation is an appropriate performance management strategy for Red Mule to use as it measures how well its employees are contributing to the achievement of the business objectives of increasing market share and profit.Employee observation involves obtaining feedback about past and current employee performance from a range of perspectives, including managers, colleagues and customers. Because Red Mule operates an online store and is active on social media, this technology offers a way to connect with customers and receive timely feedback about the strengths and weaknesses of its employees, through ratings or customer feedback surveys. As Red Mule is selling custom-order footwear, the nature of this type of business model increases the level and nature of interactions between the customers and employees. Through both direct observation of employees in the store and through technology, Red Mule can measure the extent to which employees’ communication and interpersonal skills are contributing to increasing market share and profit. If feedback from employee observation indicates improvements are needed, Red Mule can take targeted actions to improve the relevant skills of its employees, and this in turn provides greater opportunities for business objectives to be achieved. Employee observation is a suitable performance management strategy for Red Mule to assess and improve the performance of its employees.Marking guide (global):1–4 marks for providing key features of employee observation and how they relate to achieving business objectives, taking into account the breadth/depth of treatment, completeness of coverage and connections between features and results Question 4 (4 marks)Sue and Richard are investigating strategies to improve quality and it has been suggested that they implement quality assurance to minimise defects in their products.?Discuss the use of quality assurance as a strategy to improve the effectiveness of operations at Red Mule.A strength of quality assurance is that it is a proactive strategy to assure customers that the products purchased are fit for purchase through the use of a quality system. Using quality assurance would be an advantage for Red Mule as it is a proactive way to address the quality issues that it is experiencing with the current supplier. Before changing suppliers, Red Mule needs to identify the relevant production processes, training and quality checks that a future supplier needs to implement as part of their quality systems, in order to be contracted to manufacture the footwear. Using quality assurance is something Red Mule can incorporate into its marketing program to reassure customers that quality issues have been addressed and this should in turn improve its competitive advantage.?However, the process of implementing quality assurance can be costly and time-consuming, particularly as detailed documents and checklists need to be prepared. Additionally, the owners might need to conduct audits of their suppliers to ensure that the quality assurance processes are being complied with, which can be challenging when the manufacturing is done overseas.Marking guide (global):1–4 marks for providing a range of opinions that support and caution against the use of the strategy in fulfilling its purpose, taking into account depth/breadth of treatment of opinions, relevance to the case study and accuracy Question 5 (6 marks)Explain why it is important for Sue and Richard to demonstrate leadership when changing their overseas manufacturer of footwear and describe one corporate social responsibility that Red Mule needs to consider when changing its overseas manufacturer.Change is inevitable and the effective leadership of change is critical to the continued success of the business. The process of leadership involves influencing or motivating people to achieve objectives, and during a period of change this involves recognising the need for change and then determining the best course of action through the change process. To be effective, leaders need to communicate their vision clearly, listen to stakeholders, demonstrate empathy, take responsible risks, seek out new ideas, overcome setbacks and maintain stability during times of change. In order to survive in a competitive retail market in Australia, Sue and Richard need to demonstrate effective leadership when changing manufacturers as further issues associated with their choice of supplier could have negative consequences, such as supply chain issues.Because the owners intend to continue to have their custom footwear manufactured in Indonesia, it is important that they ensure the new supplier engages in socially responsible practices. It will be necessary for the owners to conduct thorough research into the practices of prospective suppliers to ensure that they are ethical and lawful. With regards to the way employees are treated, corporate social responsibility considerations include making sure that the workers have good working conditions, are paid fairly and in accordance with the legal requirements, and to ensure that workers are not exploited.Marking guide (global):1–4 marks for making valid links between leadership and the success of changes in operations, taking into account the depth/breadth of treatment and relevance to the case study 1–2 marks for identifying and providing key features of a relevant corporate social responsibility considerationQuestion 6 (6 marks)Evaluate the suitability of differentiation as an approach to strategic management at Red Mule.Red Mule adopts the differentiation strategy to gain competitive advantage by selling unique and customised footwear, in store and online.?A strength of the differentiation strategy is that it is characterised by creating a unique point of difference over competitors, usually through creativity or innovation. In this case, Red Mule is a small business that is being innovative by using overseas manufacturing to meet customer demand for custom footwear at a reasonable price. It also has the added advantage that using this strategy means that it can offer a broad range of colours and styles without needing to hold inventory that could go out of fashion or become soiled. While feedback suggests that customers do not perceive the price to be as high as they expected for the type of product sold, another strength is that the creative nature of the product and the reasonable price point creates a strong competitive advantage in a highly competitive industry.A weakness of this differentiation strategy is that the unique features of Red Mule’s products, in terms of colours and styles, can be readily copied by other footwear manufacturers and retailers, both domestically and overseas. With shipping times of at least two weeks for the custom orders, there is a risk that competitors might copy the most popular colours and styles for mass production, thus avoiding the long wait times for customers and destroying Red Mule’s competitive advantage with these highly creative products. Another weakness is that the price point of $299 is still expensive for shoes and might not appeal to price-sensitive customers.?Overall, the differentiation approach is an appropriate management strategy for Red Mule to use given the nature of its supply chain, its niche market and the diverse range of products the business sells to satisfy customer demand.Marking guide (global):1 mark for establishing a context1–4 marks for judging the strengths and weaknesses of differentiation as a strategic management approach for Red Mule, taking into account the breadth/depth of treatment, relevance to the case study and accuracy of content1 mark for drawing a conclusion that is consistent with the judgementsCopyright notice: Compak is a membership service of the Victorian Commercial Teachers Association (VCTA). 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VCTA Disclaimer: This resource has been written by the author (Kirsten Furness) for use with students of VCE Business Management. This does not imply that it has been endorsed by the Victorian Curriculum and?Assessment Authority (VCAA). The current VCE Business Management Study Design (2017–2022) can be accessed directly via the VCAA website. VCE is a registered trademark of VCAA. While every care is taken, VCTA accepts no responsibility for the accuracy of information or advice contained in Compak. Teachers are advised to preview and evaluate all Compak classroom resources before using them or distributing them to students. ................
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