Exam-style Questions: Business Organisation

1.

a) What is meant by "tall" and "flat" organisational structures?

b) Why have many organisations moved away from tall to flat organisational structures?

(Marks available: 10)

Answer

Answer outline and marking scheme for question: 1

Give yourself marks for mentioning any of the points below:

a) Tall structures refer to hierarchical organisations with many layers of management/levels of responsibility.

Flat structures have very few levels of responsibility.

(5 marks)

b) Tall organisation structures have become less popular due to moves towards leaner organisations, teamwork ethos, increased customer focus and the ability to respond quickly to external changes and customer demands.

(5 marks)

(Marks available: 10)

2.

a) What services do banks offer to small businesses?

b) How might the purpose of a loan influence the period over which it is borrowed?

(Marks available: 10)

Answer

Answer outline and marking scheme for question: 2

.

Give yourself marks for mentioning any of the points below:

a) Banks offer a range of services to small business, lend money and offer advice.

The extent of the help will depend on a number of factors such as the financial standing of the company, i.e. the length of time it has been trading, sales turnover.

If it is a new company, the small business may find difficulty in raising finance through banks, they may have to pay higher rates of interest, and the banks may be less flexible if the business deviates from its business plan.

(5 marks)

b) Considerations should include, what the finance is to be used for, for example, current or fixed assets. Will the purchase be obsolete before the loan is paid back.

(5 marks)

(Marks available: 10)

3. a) What is the difference between organic growth and growth through acquisition?

b) Is growth necessarily good for a firm?

(Marks available: 20)

Answer

Answer outline and marking scheme for question: 3

Give yourself marks for mentioning any of the points below:

a) Organic growth is growth through increased sales, resulting in capital investment, perhaps in new plant.

Growth through acquisition (Hanson is a good example) occurs through takeovers of other businesses, so that there is no growth in the industry as a whole, simply a concentration among fewer and larger, financial groups.

(max 10 marks)

b) The second question can be answered in several ways. A candidate might note that a firm may change its character as it grows: A family firm may find that growth entails bringing in outsiders and relinquishing some family control.

Overtrading might be discussed: a firm can overextend its borrowing and find itself starved of working capital (more firms go bust in the upturn following a recession than during the recession itself).

(max 10 marks)

(Marks available: 20)