Business Management 1997 WASSCE-Past Questions and Answers-WAEC

1. Overstaffing: This is one of the main reasons why state enterprises have been privatized. Politicians and people in high office interfere in the appointment of employees. The result of this is overstaffing, high cost of operation and poor attitude towards work.
2. Lack of managerial and technical expertise: SOEs also face the problem of lack of managerial and technical skills. This is because appointments of persons based on political consideration leads to the appointment of unqualified and incompetent managers. Private enterprises are able to attract more qualified and competent managers.
3. Increase government revenue: By privatizing most of the state-owned enterprises, the government will improve its revenue position. This is because the sale of state enterprises is a means of enabling the government to raise revenue. Government also earns income in the form of taxes from them.
4. Reduce government expenditure: Privatization is a means by which government expenditure on state enterprises may be reduced. The government no longer finances these enterprises that have not been able to cover their cost of operations due to poor management and inefficiency.
5. Attract investors: Another reason for privatization is to attract investors both foreign and local to fund these enterprises. Most of the enterprises could not be funded solely by the government and private participation has been found to be a way of raising the needed funds for the continued operation of these enterprises. Thus lack of finance to keep these enterprises running is another reason for privatization.
6. Low productivity: Low productivity from state-owned enterprises as a result of poor management, poor attitude of .workers towards work and poor service conditions is another reason for privatization.
7. Mismanagement and embezzlement of scarce resources: Mismanagement and embezzlement of the scarce resources of these enterprises over the years is one of the major reasons for privatization. State-owned enterprises have become an avenue for bribery, corruption and embezzlement of funds.

The following are the main stages of decision-making:

• Identification and definition of the problem(s)
• Analysis of the problem
• Gathering of information
• Finding alternative solutions to the problem(s)
• Evaluation of alternatives
• Choosing and implementing the most appropriate solution
• Measurement of the final result.

The above points can be explained below:

• Identification and definition of the Problem: Identifying and defining the problem is already half of the solution. Once a problem is identified and defined, steps can then be taken to solve it. Accurate definition and identification of the nature, cause or causes of the problem is therefore very important.
• Analysing of the Problem: After identifying and defining the problem, the next stage is to critically analyse the problem. This stage makes it possible to determine the dimension of the problem and the resources needed to solve it.
• Gathering of Information: – The third stage is the collection of data and other
  important information to solve the problem. It is important to find as many facts and figures about the situation as possible.
• Find Alternative Solutions: There is rarely one solution to a problem. The information and data obtained at the information gathering stage should aid the manager to develop alternative solutions to the problem.
• Evaluation of Alternatives: This stage involves the evaluation of the different alternative solutions to the problem. These solutions must have their advantages and disadvantages clearly evaluated. When the business executive has done this evaluation, he then compares the alternatives on a cost benefit basis.
• Choosing and Implementing the Appropriate Solution: When alternatives have been critically evaluated, the next stage is to choose the best solution – the one with the greatest advantages and least disadvantages and implement it.
• Measurement of the Final Result: It is important for managers to measure the final result to see if desirable outcomes are obtained. If the outcomes are not desirable, there is the need for managers to recognise and review their poor decisions in order:

1. 1. Take corrective action
   2. To learn from the decision and improve their decision making generally.

NB: This question was also asked in 1996 Paper One Question 7(a). Click here for the suggested answer.

Money has solved the problems associated with barter trade in the following ways:

• Money solves the problem of double coincidence of wants. This is because of the quality of general acceptability and also as a medium of exchange. This means that everybody would accept money in exchange for goods and service. There will therefore be no need to look for somebody in possession of what you need and at the same time need what you have.
• Another quality of money is that it must be divisible. By this quality, money solves the problem of indivisibility of commodities. Money has several denominations which people can use to buy any quantity of commodity they need.
• Money is relatively light and easy to carry. That is, it is portable. This solves the problems of bulkiness of commodities.
• Money also serves as a store of value. With the presence of money, producers can sell their products for money, keep the money until the need arises for it to be used. It thus solves the problem of savings and storage.

For anything to be money, it must be able to perform the functions of money. A cheque is therefore money because it can perform all the functions of money. That is. it serves as a medium of exchange, measure of value, store of value, unit of account, and standard of deferred payment. Every cheque has a serial number, a date, an account number, the name of the drawee and an endorsement at the back by the drawer. A cheque is money but it is not a legal tender.

NB: The same question was asked in 1993 Paper One, Question 2(b). Click here for the answer.

1. Vertical Communication refers to the flow of information from supervisors to
   subordinates such as from chief executive to all heads of departments and from subordinates to their superiors such as from students to their teachers or headmaster. These movements of information from superiors to subordinates and vice versa are known as the downward and upward channels of communication.

Horizontal Communication on the other hand refers to the flow of information or messages among employees of the same level or status such as among head of departments or managers. It is the flow of information from a manager to a manager of the same status or from an employee to another employee at the same post.

ii.  Formal Communication is the official means of sending information relating to work, workers and organisation which has been set up by management and are therefore allowed and practised always. Formal communication takes the form of letters, memoranda, reports etc. formal communication I s therefore the official means of sending or transmitting information.

Informal communication on the other hand is the secret method of passing information, which has not been allowed in the business organisation. It has no official source and takes the form of gossip or grapevine. It normally takes place among superiors, peers and subordinates.

NB: The same question was asked in 1993 Paper One, Question 6(b). Find out the answer from here.

International trade which is the exchange of goods and services between and among countries is beset with many obstacles among which include:-

• Language barriers: – Different languages are spoken by different countries all over the world. It is very difficult for businessmen who speak different languages to communicate effectively and thus cannot do business with each other. It is also difficult for them to get an agent who can trade in both languages.
• The problem of operational currency: – Differences in currencies is another obstacle to international trade. It is not every currency which is accepted in international trade. Thus, if for instance Ghana wants to do business with U. K. (Britain) or America, she must first convert the cedis into pound sterling or dollars.
• Trade regulations: – Trade regulations also hinder international trade. Such regulations include artificial barriers such as tariffs, quotas, prohibitions, etc. hinder international business. These measures sometimes frustrate exporters and importers and thus discourage them from increasing their trading activities.
• The Financial problems: – Exporters and importers lack financial assistance. Hence, they cannot conduct effective market research to find the most suitable markets. Lack of adequate market information about foreign country could lead to failure in business.
• Cultural Factors: – The existence of different cultural practices creates a problem in international trade. Culture which is the way of life of people in a particular locality can affect the demand for a product. Their beliefs, likes and tastes determine the demand for a foreign product. It also makes advertising and distribution of foreign products difficult.
• Different political and legal systems: – The political atmosphere goes to a larger extent to determine the extensity of international trade. Where the political system is stable, many investors come in to invest. But where the system is unstable, less foreign investment is undertaken. Besides that, the legal system affects it in the sense that if the system is favourably exposed to the trade, it flourishes and vice versa.

THE YEPIMSO COMPANY LIMITED (NOV, 1997)

The management of Yepimso Company Limited, a manufacturing organization, had been concerned about the low level of productivity for some time. During the past few years, it had tried various methods in the hope of getting better results but without any success. The slow progress, from the union’s viewpoint was attributed to the setting of unrealistic targets solely by management. Partnership and joint decision-making was not the normal practice in Yepimso Ltd.

This state of affairs remained until Mr. Okuma Kwame became a supervisor following the retirement of the incumbent, Madam Yaa Dede. After Mr. Kwame had been in his new position for a few weeks, he began to work out a new plan for improving productivity.

He started by improving the work place itself – factory, shop and offices – since it lacked the standard amenities and remained unmotivating. Next, he thought of breaking the company’s objectives into departmental goals, which would be, established by the various departments themselves under his guidance. Just before the plan was implemented, Mr. Kwame held a series of meetings to explain it to the union. He received fruitful feedback with a pledge of co-operation. Reward was directly linked with productivity, an expectation that received much support from the union.

Mr. Kwame’s boss, Mr. Amewugah, was skeptical of the plan. “After all,” he murmured, “nothing that had been tried worked”. After much persuasion, Mr. Amewugah agreed for the innovation to be tested. The production and the marketing departments were re-organized to handle about three times more activities than before. Personal selling was the only technique used in the past. The Marketing Manager introduced two other promotional methods to push the increased volume of production. The two new methods principally made use of trade fairs, leaflets, handbills and communicating to a large number of the company’s customers at the same time. The quality control unit was strengthened with the employment of a few more experienced workers.

After six months of trial, Mr. Amewugah asked the Statistics and Economic Research Department to appraise the effect of the new plans. The outcome of the studies was as follows:

Product quality moved from 52% to 89%

Volume of production had increased from 80,000 units to 250,000 units per month

The Company’s market share had increased to 30%

Cost had reduced remarkably

Profit per unit of production was (t6,000

Mr. Amewugah became so impressed with the results that he decided with immediate effect, to promote Mr. Okuma Kwame as the Manager in charge of operations.

The problems include:

• The setting of unrealistic targets solely by management brought about low level of productivity in the Company.
• Management’s refusal to involve the workers (union) in decision making also affected the level of productivity.
• The morale of the workers was low and this also contributed to the slow progress of the company.

1. Sales promotion: This is a short-term incentive to encourage purchase or
   sales of a product or service. Companies use sales promotion tools/methods to create a stronger and quicker response. These methods include the use of:

• • Coupons
  • Samples and free gifts
  • Contests
  • Trade fairs
  • Demonstrations
  • Price off

ii.  Mass selling: This is a marketing strategy, which helps the marketer to communicate to a large number of customers and potential customers at the same time. The methods used include: Print media (newspapers, magazines), electronic media (radio, television) and display media (bill boards, posters),

1.   (c) State and explain three reasons that led to the growth of the market                 share.

Suggested Answer:

The reasons that led to the growth of the market share include: –

• The improvement of the work place and the re-organization of the marketing
  and production departments. Workers (union) took part in establishing departmental goals. Reward was linked with productivity and staff morale was high. This led to an increase in production and marketing of the firm’s products and thus an increase in market share.
• The recruitment of more experienced and quality control workers has led to an
  improvement in the quality of the company’s products. High quality products attracted more customers and thus contribute to the growth of market share.
• The introduction of more efficient and effective promotional methods also
  contributed to the growth of market share. Mr. Kwame used sales promotion and mass selling methods to complement the personal selling method, whichwas in use at the time. Goods were exposed to consumers, incentives were offered to induce consumers towards the company’s products.

• A good reward System: – This means that incentives must be fair, adequate,
  equitable, well distributed and commensurate to the output and achievement of the worker. It should relate to the demands of the employees’ job
• Training and development: – There must be opportunity for the advancement
  of the worker. Training and development should be geared towards equipping employees with the knowledge, skills and attitudes to enable them face the ever-changing business environment. In this regard, training programmes, seminars, conferences, courses both local and foreign must be offered to
  deserving employees
• Leadership Style: – Management must adopt a leadership style, which encourages workers. The manager must show fairness, firmness and inspire his subordinates to work with confidence on their assigned jobs. The channels must be opened to enable subordinates approach their superiors with their problems and grievances for amicable solution.
• Work environment: – The work place, equipment and working tools must be suitable for workers to feel comfortable to put in their best. The offices must be well ventilated, provided with adequate lighting system, provided with furniture which reduce fatigue, good temperature, good drinking water and provided with protective clothing.
• Provision of welfare services and ‘other fringe benefits such as free medical services, canteen facilities, housing, transportation etc.
• Recognition must be given to subordinates who perform their job well. This can be in the form of praise for jobs well done. This will make subordinates to be convinced and confident that their efforts will be rewarded.

• Marketing bridges the gap between production and consumption of goods and services in an economy.
• To make effective and efficient use of their resources.
• Marketing helps manufacturing organizations in the determination of how well their organizations are doing in terms of whether their products or services are in high demand or not.
• It helps manufacturing organizations in satisfying their consumers at profit.

The following are some of the sources of finance available to a sole proprietor.

• Personal Savings
• Trade Credit
• Hire Purchase
• Bank Overdraft
• Loans
• Bills of Exchange

• Personal Savings: – The importance of this source is that the funds obtained may not attract interest payment as compared to a bank loan.
• Trade Credit: – It is an important source especially for businessmen who do not have enough cash to pay for goods immediately and thus reduces immediate cash flow problems.
• Bank Overdraft: – This facility is opened to current account holders and only credit worthy sole proprietors are provided this facility. Thus, as long as the sole proprietor keeps faith with the bank, the source of finance is reliable and can be utilized at any time.
• Hire Purchase: – The importance of this source is that it enables organizations which cannot make full payments for goods/products to acquire their use until full payment is made.

A manager has five main steps to take a trainee through to enable him acquire the skills needed for the job.

• The first step is to get those who are willing and serious to do the work. He must therefore make the trainee available and ready to do the work.
• The second step is to break the work they are going to learn into smaller units for easy understanding. Here the important units or points should be identified and the stages and procedures for learning made clear to the trainee.
• Thirdly, the Manager has to do a physical demonstration of how the work is done to the trainees. He should give a clear demonstration of the steps, procedures and the stages involved’ in performing the work to the trainees.
• In the fourth place, the Manager must then give the trainees the chance to go through the performance stages. Here the trainee is given the chance to perform the work under the supervision of the manager.
• Lastly, the Manager must allow the trainee to do the work on his own with the Manager closely monitoring him and correcting him where necessary.

• The Labour Department promotes and improves labour standards. This is
  achieved through inspection of offices and work places. This function promotes co-operation between workers and employers and government groups.
• Through the establishment of conciliation, mediation and arbitration
  procedures, the Labour Department investigates and settles labour complaints. This function promotes peaceful and harmonious industrial relations in labour relations in Ghana.
• The Labour Department also provides advice on labour policies and all matters
  relating to labour. This function enables workers (unions) to know what the policy objectives of the government with regards to labour issues are.
• The Labour Department administers labour laws. This function helps workers
  to know their rights and obligations.
• Other functions of the Labour Department include:

1. 1. Promotion of effective tripartism through co-operation between employers and workers’ organizations
   2. Investigation and determination of workers’ compensation cases and claims, as a result of injuries arising out of and in the course of one’s employment.

Refer to 1995 Paper 1 Question 3(b) for suggested solutions to (a), (b) and (d).

• Decentralization:

It is simply defined as the distribution of authority to make decisions within an organization or the process whereby decision-making is localized down the company. It is a situation where power is dispersed among lower-level managers in the organization. Thus it is a situation whereby duty, power and authority are delegated to lower levels of the organization.

NB: Asked 1996 Paper Two, Question 9(b). Click here for the suggested answer.

NB: Asked 1996 Paper Two, Question 9(a). Click here for the suggested answer.

NB: Asked in 1996 Paper Two Question 2(b). Check here for the answer.

It may be defined as a written acknowledgement of a loan made to a company. It is a loan which is sold as an investment, at a stipulated interest and to be redeemed on a given date irrespective of whether the company makes a profit. It is thus a term used to refer to a loan to a company, that is, the document evidencing the loan.

• (i)     Truly, when a company wants to raise additional capital to finance its programme of expansion but reluctant to do that by issuing shares, the company may issue debentures.
• (ii)    When a company wants to raise capital on a temporary basis, it can do this by borrowing money from the lender and return issue debentures, redeemable at a fixed or determinable time or at the company’s option.

• He is entitled to a fixed rate of interest which must be paid irrespective of whether the company makes profit or not.
• He is entitled to the repayment of the principal sum when it is due.