ICAP Question Bank P Business management and behavioural studies The Institute of Chartered Accountants of Pakistan First edition published by Emile Woolf Limited Bracknell Enterprise & Innovation Hub Ocean House, 12th Floor, The Ring Bracknell, Berkshire, RG12 1AX United Kingdom Email: info@ewiglobal.com www.emilewoolf.com © Emile Woolf International, October 2013 All rights reserved No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, scanning or otherwise, without the prior permission in writing of Emile Woolf Publishing Limited, or as expressly permitted by law, or under the terms agreed with the appropriate reprographics rights organisation You must not circulate this book in any other binding or cover and you must impose the same condition on any acquirer Notice Emile Woolf International has made every effort to ensure that at the time of writing the contents of this study text are accurate, but neither Emile Woolf International nor its directors or employees shall be under any liability whatsoever for any inaccurate or misleading information this work could contain © Emile Woolf International ii The Institute of Chartered Accountants of Pakistan Certificate in Accounting and Finance Business management and behavioural studies C Contents Page Question and Answers Index v Questions Section A Multiple choice questions Section B Objective test and long-form questions Section C Multiple choice answers 25 Section D Objective test and long-form answers 29 Answers © Emile Woolf International iii The Institute of Chartered Accountants of Pakistan Business management and behavioural studies © Emile Woolf International iv The Institute of Chartered Accountants of Pakistan Certificate in Accounting and Finance Business management and behavioural studies I Index to Objective test and long-form questions and answers Question page Answer page Fayol Mintzberg 29 Friendly vs hostile 30 Currency risk 30 Interest rate rise 10 30 Monopoly 10 31 Ageing population 10 31 Five forces 10 31 Matrix 10 32 Organisational structure 10 32 10 Evolution 10 32 11 Decentralisation 10 33 12 Fashion Planet 11 33 13 Management levels 11 34 14 Centralisation and decentralisation 12 34 15 Stakeholders 12 35 16 Dynamic organisations 12 35 17 The nature of change 13 37 © Emile Woolf International v The Institute of Chartered Accountants of Pakistan Business management and behavioural studies Question page Answer page 18 Lewin 13 37 19 Gemini 13 38 20 Culture-basics 13 38 21 Entrenched traits 13 39 22 Fashion Planet 13 39 23 Power, culture, job satisfaction 14 40 24 Schein and culture 14 40 25 Handy and culture 15 41 26 Four cultures 15 41 27 Hofstede and culture 15 41 28 Terminology 16 42 29 Stress 16 42 30 Attitude 16 43 31 Stress – symptoms and cause 16 43 32 Perception 16 44 33 Perception 16 44 34 Cross-culture bases for attitudes 16 45 35 Behbood Hospital Services 16 46 36 Fancy Apparel Company 17 46 37 MBO 17 47 38 Non-monetary motivation 17 47 39 Self-actualisation 17 47 40 Expectancy theory 18 48 41 Pay as a motivator 18 48 42 Leadership 18 48 43 CHFC 18 49 44 Decision-making styles 18 49 45 Transactional and transformational leader 18 49 © Emile Woolf International vi The Institute of Chartered Accountants of Pakistan Index to questions and answers Question page Answer page 46 Charismatic leaders 18 50 47 Delegation 19 50 48 Autocratic leadership 19 50 49 X and Y 19 51 50 Transformational leaders 19 51 51 Participative vs authoritarian 19 52 52 Continuum 19 52 53 Action-centred leadership 19 53 54 Hersey and Blanchard 19 53 55 Participation and motivation 20 54 56 Blake and Mouton vs McGregor 20 54 57 Groups 20 55 58 Apollo industries 20 55 59 Cohesive groups 21 56 60 High performance team 21 56 61 Groups and leaders 21 57 62 Group conflict 21 57 63 Group decision 21 58 64 Composition of a team 21 58 65 Increasing a group size 21 59 66 Negotiation 21 59 67 Conflict 22 60 68 Deadlock 22 60 69 Conflict – positive outcomes 22 60 70 Peak mountain resorts 22 61 71 Stages of negotiation 22 61 72 Distributive and integrative bargaining 22 62 73 Functional and constructive conflict 22 62 © Emile Woolf International vii The Institute of Chartered Accountants of Pakistan Business management and behavioural studies Question page Answer page 74 Mediation and arbitration 23 63 75 Storage 23 63 76 Client-server computing 23 64 77 Information systems 23 65 78 Batch process 23 65 79 Decision support systems 23 66 © Emile Woolf International viii The Institute of Chartered Accountants of Pakistan SECTION Certificate in Accounting and Finance Business management and behavioural studies A Multiple choice questions CHAPTER 1 Which of the following statements best describes management as a practice? A Identify the needs of people and try to satisfy them B The art of getting work done through others C The system of correcting organisational deficiencies D An orderly way of carrying out jobs and duties Which component of a manager's job includes directing the work of others and resolving conflicts among members? A Controlling B Organising C Leading D Planning Frederick Taylor was a US engineer who is considered the founder of which of the following? A Classical school of management thinking B Specialisation C Scientific management D Bureaucracy © Emile Woolf International The Institute of Chartered Accountants of Pakistan Business management and behavioural studies CHAPTER In a ‘SWOT’ analysis, which of the following are considered as an aspect external to the organisation? A Strengths and Threats B Threats and Weaknesses C Strengths and Weaknesses D Opportunities and Threats Within Porter’s Five Forces framework, the term ‘threat of entrants’ means: A The possibility of an existing competitor capturing the entire market B The possibility of an existing competitor withdrawing from the market C The possibility of a new competitor entering the market D The possibility of a potential competitor entering a different market Which of the following will cause the exchange rate value of the Pakistani Rupee to fall? A A rise in demand for Pakistani exports by non-residents B A rise in Pakistani interest rates C A desire by multinational companies to expand their manufacturing base in Pakistan D An expansion of the Pakistani community’s desire to travel to other countries CHAPTER The building blocks in an organisation described by Mintzberg include the ‘operating core’ This represents: A the basic work of the organisation e.g., the shop floor B the higher management of the organisation C the accountants, computer specialists and engineers D those who provide ancillary services e.g., secretarial, clerical and catering Which of the following types of organisation structure might lead to potentially slower decision-making due to referring to two authorities? A Divisional B Functional C Matrix D Entrepreneurial © Emile Woolf International The Institute of Chartered Accountants of Pakistan Business management and behavioural studies family and develop strong personal relationships, show concern for the problems of the followers and are readily accessible 51 (iv) Consultation and participation – Transformational leaders motivate their followers to openly express their viewpoints and opinions and also encourage their participation in matters concerning them (v) Empowerment and supportive – Transformational leaders repose trust and confidence in their followers and delegate authority and powers to enable them to carry out their responsibilities (vi) Team work – Transformational leaders encourage team work and are strong believers that best results can be achieved through joint efforts (vii) Continuous change and innovation – Transformational leaders are creative individuals and are always open to new ideas and introduce changes for improved performance without causing abrupt disruptions in the organisation Participative vs authoritarian Participative style of leadership uses both task-centred and people-centred approaches to leading subordinates The decision-making process is decentralised and subordinates are expected to contribute their knowledge and skills in solving problems which increases their motivation and interest in their work Authoritarian style of leadership uses only work-centred behaviour from subordinates to ensure the accomplishment of tasks All the decision-making powers are highly centralised and ideas emanating from subordinates, if any, are discouraged The subordinates are expected to carry out the orders given to them by the leader Participative style of leadership is most effective in situations in which the leaders: 52  have confidence and trust in the subordinates to perform their assigned tasks  are willing and interested in sharing their skills with the subordinates  are interested in the personal development of the subordinates  want to devote their own efforts to attend to other tasks which they consider to be of more importance  Authoritarian style of leadership is effective in the following situations:  the leaders want immediate implementation of their decisions  the leaders not have faith in their subordinates competence and/or reliability  the jobs are of a highly repetitive nature  the leaders believe that employee participation would not make any positive contribution to the overall results Continuum Tannenbaum and Schmidt identified seven different levels of delegation that might be practised by managers:  Tells (extreme authoritarian management)  Tells and sells  Tells and talks  Consults © Emile Woolf International 52 The Institute of Chartered Accountants of Pakistan Answer bank: Objective test and long-form answers  Involves  Delegates  Abdicates They argued that as a team becomes more established and gains experience, the manager will trust them much more Consequently, the manager’s style will move along the continuum and the manager will delegate an increasing amount of authority The relevance of this approach to practical management is that the appropriate level of delegation within a team or an organisation may depend on the time that the team has been together, and on the skills and experience it has acquired 53 Action-centred leadership Adair argued that a manager must show concern for:  the job  managing his or her team or group and  managing each individual within the team or group The requirement to show concern for the job, for the group or for individuals varies with the work situation Sometimes a job-centred focus is more important, and sometimes the need to provide leadership for the group as a whole or for individuals is more important Adair argued that a manager should be able to show concern for all three aspects of management, and should be able to alter the emphasis of his or her leadership to meet the requirements of the particular work situation 54 Hersey and Blanchard (a) Hersey and Blanchard argued that managers may be involved in directive activity (giving directions and instructions) and supportive activity (supporting subordinates and helping them through guidance, encouragement and suggestion) The four leadership styles they identified are based on differing degrees of supportive and directive activity of the manager Style (b) (c) Directive activity Supportive activity Delegating style Low Low Telling/directive style High Low Selling style High High Supportive/participative style Low High Hersey and Blanchard argued that managers should adapt their management style to the requirements of the situation, and vary the amount of their supportive activity and directive activity For example, they suggested that the ‘selling’ style, where the manager gives a large amount of direction and support, is appropriate when the manager’s employees have some competence in their work, but are:  relatively inexperienced (therefore need direction) and  lacking in confidence (therefore need support and praise from the leader to build their self-esteem) Fiedler argued that managers by nature are either authoritarian or democratic, and the most appropriate leadership style varies with the work situation In this © Emile Woolf International 53 The Institute of Chartered Accountants of Pakistan Business management and behavioural studies respect his views are similar to those of Hersey and Blanchard However, unlike Hersey and Blanchard, Fiedler did not believe that individual managers could adapt their style to suit the needs of the work situation Fiedler argued that managers with the appropriate style should be appointed according to the needs of the situation For example, when a work situation calls for authoritarian leadership, an individual who is naturally authoritarian should be appointed: a democratic type of leader would be ineffective in the same situation 55 Participation and motivation A participative leadership style is one where the leader (manager) involves all the members of his or her ‘team’ in decision-making There are differing degrees of participation, from consulting with team members to allowing team members to make the decisions themselves A key element of participation is that the team members are able to contribute ideas and suggestions in a way that makes them feel that they are contributing to the decision-making process, and that their ideas and opinions are respected A participative style of leadership is therefore most likely to be effective in motivating employees in situations where the employees are able to contribute to decision-making and enjoy involvement in the decision-making process This is most likely to happen where:  the employees have skills or experience that they can bring to the decisionmaking process, and  decisions have to be made regularly which are ‘non-standard’, so that thought and judgement have to be used in arriving at the final decision This type of situation often arises in development project work and entrepreneurial activities, and in small teams of experienced or well-educated employees A participative style of leadership is unlikely to work in situations where the work is standardised and repetitive, and employees need relatively few skills and little training to their work This type of situation arises in highly-automated production operations (you might argue that it also arises in some aspects of accountancy work!) 56 Blake and Mouton vs McGregor McGregor suggested that there were two management styles, Theory X and Theory Y Theory X managers were authoritarian leaders, and McGregor suggested that these individuals focused on the requirements of the job and had little concern for the concerns of their subordinates Theory Y managers are much more concerned about the needs of their employees, and seek to involve them in decision-making Blake and Mouton argued that managers need not be either job-focused or peoplefocused They can show high or low concern for the needs of the job and high or low concern for people For example, they can show:  high concern for both the job and for people  low concern for both the job and for people  a high concern for the job and lower concern for people  a high concern for people and a lower concern for the job In practice, many managers show a medium level of concern for both aspects © Emile Woolf International 54 The Institute of Chartered Accountants of Pakistan Answer bank: Objective test and long-form answers 57 Groups A group consists of two or more persons who interact with one another and share common goals, values or interests Formal groups may be formed deliberately by management in organizations to achieve a defined purpose Informal groups are formed by the people in organizations who have some affinity for each other The qualitative indicators of group behaviour are: Effective workgroup: Higher commitment to achievement of goals Greater cohesiveness and understanding Better communications Clear understanding of each individual’s role in the group Group is geared to generate new ideas Ineffective workgroup: Members make criticism of other’s work Greater domination by individuals More likely to have an assertive leader to get work done Decisions are accepted passively Low level of commitment 58 Apollo Industries (a) (b) Factors which give rise to inter-group conflict: (i) Task interdependence (ii) Resource scarcity (iii) Jurisdictional ambiguity (iv) Differences in perception of goals (v) Uncertainty of roles (vi) Reward structures Positive outcomes of conflict:  endeavour to search for new ideas and approaches  identification and resolution of problems  stimulation of interest and creativity  opportunities for groups to perform at optimum levels Negative outcomes of conflict:  creation of an environment of distrust and suspicion  concentration of efforts within narrow group interests  undermining of team effort  weakening of communication between groups © Emile Woolf International 55 The Institute of Chartered Accountants of Pakistan Business management and behavioural studies (c) 59 Steps to be taken by management of AIL to reduce the negative impact in the above situation: (i) Task coordination – the Heads of Marketing and R&D departments may meet periodically to discuss how each department can contribute more effectively towards the achievement of organizational goals (ii) Information sharing – the members of both the departments may meet to share and analyse factual data (iii) Problem solving – Face-to-face meeting of the conflicting departments for the purpose of identifying the problem and resolving it through open discussions (iv) Changing the human variable – using techniques of behavioural change such as human relations training to alter attitudes and behaviours that cause conflict Cohesive groups A group is a collection of two or more individuals who interact with one another, have a stable pattern of relationships among them and share common goals and perceive themselves as a group The main attributes of a cohesive group are: (i) Number of members in the group is small (ii) Members of the group interact among themselves frequently and engage in effective interpersonal communication (iii) Members have a high degree of group loyalty (iv) Members are united against any perceived external threat to the group (v) Members consider that their interests would be satisfied best by the group (vi) Group affiliation is reinforced by effective leadership which provides continuous impetus to the members to achieve a feeling of belonging to the group (vii) Members are proud to be identified with the group if it is considered to be competent and has a track record of successful achievements 60 High performance team (a) A high performance team is one in which the members are highly focused on their goals, deeply committed to the personal growth and success of the individual members and have strong determination to significantly outperform other teams (b) The business leader can create and develop a high performance team by taking the following steps: (i) select the team members with the necessary mix of skills to complete the job effectively (ii) communicate to the team members the specifications of the desired end product/result, expectations of high standards of performance with challenging goals (iii) ensure that all necessary resources are provided to the team to achieve the goals © Emile Woolf International 56 The Institute of Chartered Accountants of Pakistan Answer bank: Objective test and long-form answers 61 inspire a sense of technical competence in the members and build-up their confidence and create motivation for joint efforts (v) offer encouragement through positive feedback (vi) reward outstanding performance (vii) resolve conflicts in a timely manner (viii) Task identification: Each team member should know how the individual members work is important in leading to overall task completion Groups and leaders (a) 62 (iv) The key characteristics of charismatic leaders are: (i) Charismatic leaders have a vision of an idealised goal of a change for a better future and are able to articulate their vision in a manner that is understandable to their followers (ii) Charismatic Leaders are willing to take high personal risks and engage in self-sacrifice to achieve their vision (iii) Charismatic Leaders engage in behaviours that are perceived as exceptional and are different from the prevailing norms (iv) Charismatic Leaders are sensitive to the needs, feelings and abilities of their followers and motivate them to achieve the visions of the leaders (b) Group dynamics is the study of interactions and forces operating within the groups It is influenced by the internal structure and composition of the groups, the manner in which the groups are formed and function and the ways in which the group members interrelate to each other and towards other groups (c) The factors which create more effective group cohesiveness are: (i) agreement and acceptance of group goals by the members (ii) effectiveness of the role of group leadership (iii) frequency of group interactions amongst the members (iv) relatively small size of the group (v) extent of group competition and rivalry with other groups Group conflict The factors which are responsible for creating group conflicts in business organisations are: (i) Interpersonal differences/group politics – The inherent differences in personality, temperament and outlook of individuals are often the main sources of interpersonal and group conflicts Discerning managers recognise these differences and make efforts to create a conducive environment in which people with interpersonal differences are able to work together as cohesive groups (ii) Differences in values and beliefs – Values and beliefs of individuals are shaped by their upbringing and life experiences and therefore differ considerably Values such as honesty, affiliations, beliefs and competitiveness are often deep rooted in individuals and may at times result © Emile Woolf International 57 The Institute of Chartered Accountants of Pakistan Business management and behavioural studies in discrimination, consciously or subconsciously, in their group interactions which can cause conflicts 63 (iii) Differences in allocation of resources – Groups have different interests in the allocation of resources such as salaries and perquisites, deployment of staff and equipment and allotment of space Each group has its own goals and perceptions of favouritism in allocation of resources which gives rise to inter-group conflicts Incompatibility of goals and objectives and allocation of resources thus give rise to inter- group conflicts (iv) Task interdependence – In business organisations, various groups have to share outputs and inputs from different departments/divisions for completion of their allocated tasks Inability to adhere to time schedules, quality of workmanship and allocation of responsibilities can result in group conflicts (v) Ambiguous roles – Uncertainty among the different departments about their specific roles and authorities and responsibilities in the organisation can give rise to inter-group conflicts The ambiguities are often the result of weaknesses in organisation structures (vi) Communication problems – Absence of an environment of open communications and withholding of important information from others can affect the performance and undermine the trust between groups and can give rise to group conflicts Group decisions The advantages of taking important business decisions in group settings are: (i) Cumulative pool of knowledge: A group of persons can bring a substantial (cumulative) pool of information, skills, expertise and experience to bear on the decision-making process (ii) Better comprehension of the decision-making process: The group participants with diverse backgrounds who are personally involved in the give-and-take of the decision-making process and discussions of the implications of the alternative courses of actions tend to understand better the rationale behind the final decision (iii) Increased acceptance and ownership of the decision: The participants who play an active role in group decision-making process and problem solving readily accept the ownership of the decision (iv) Opportunity for training of participants with less experience: Participants with less experience have the opportunity to learn, understand and appreciate the group dynamics by actually being involved in the decision making process 64 Composition of a team Belbin did not suggest that there is an ideal number of people to make an effective team, although if a group becomes too large it will lose the characteristics of a team (social interaction and team work) He suggested that in the most effective teams, the team members share a number of character types (he originally identified eight and then added a ninth, the specialist) One individual might possess several character types, so that a team of less than nine people can still be effective © Emile Woolf International 58 The Institute of Chartered Accountants of Pakistan Answer bank: Objective test and long-form answers He argued that without some of the character types present within the team, the team would not perform as effectively as it might For example, without a finisher/completer, some important details might be overlooked Without a shaper, there might be inadequate progress with the team’s work Without the monitor-evaluator, the team might reach ill-judged decisions – and so on 65 Increasing a group size The main effect of increasing a group from an established team of three to a new size of nine is that the old team is effectively brought to an end and a new team is put in its place Since there is a new team with new team dynamics, it will have to go through the stages of formation and development identified by Tuckman – forming, norming and storming, before it can start performing Since three of the new team members have been doing the work for some time, the team might succeed in getting through these stages fairly quickly – although much will depend on how the team members get on with each other The larger team might eventually become more effective than the previous team of three This is because they are more likely as a group to share the ‘essential’ characteristics of team members for an effective team – as identified by Belbin However, the nine team members need to adopt their appropriate roles, and this will only happen if the team comes together as a positively-minded group 66 Negotiation (a) Negotiations is a process in which two or more parties who consider that they need to be jointly involved in an outcome, but who initially have different objectives, seek by use of argument and persuasion to resolve their differences in order to achieve a mutually acceptable solution (b) At times parties to a conflict are unable to resolve their differences through direct negotiations In such situations, they may induct a third party to help them to find a solution (c) There are four basic third party roles: mediator, arbitrator, conciliator and consultant (i) Mediator: A mediator is a neutral third party who facilitates a negotiated solution through reasoning and persuasion and by offering suggestions for pursuing different alternatives Mediators are generally used in labour management negotiations and in civil court disputes Mediation is most effective in situations of moderate level of conflict Mediators must be perceived to be neutral and not coercive (ii) An Arbitrator is a third party with the authority to dictate an agreement Arbitration can be voluntary, i.e requested by the parties, or compulsory i.e forced on the parties by law or contract Arbitration is more likely to lead to a settlement (iii) A Conciliator is a trusted third party who provides an informal communication link between the opposing parties The roles of conciliator and mediator may overlap at times In practice, a conciliator also engages in fact finding exercise, interprets messages and persuades the disputing parties to reach agreements (iv) A Consultant is a skilled and impartial third party who attempts to facilitate problem-solving through communication and analysis as he has specialized © Emile Woolf International 59 The Institute of Chartered Accountants of Pakistan Business management and behavioural studies knowledge of the intricacies of the conflict Instead of putting forward specific solutions, the consultant helps the parties to develop mutual understanding and work with each other This approach therefore, has a long-term focus to build new and positive perceptions and attitudes between the conflicting parties 67 Conflict The following reasons give rise to conflicts: (i) incompatibility of goals, (ii) differences over interpretation of facts, (iii) disagreements based on expectations of the parties Conflicts may be beneficial for an organization in the following situations: 68 (i) help to bring about radical changes to alter existing power structures and entrenched attitudes which lead to complacency in the organisation (ii) encourage innovation and testing of new ideas and eliminate groupthink attitude (iii) bring emotions in the open and therefore result in release of internal hostile feelings (iv) result in constructive levels of tension within the organization and motivate individuals to work to their optimum levels of capabilities Deadlock In the case of a threat of last minute breakdown or collapse of the negotiation process, the following measures may be adopted: (i) (ii) (iii) (iv) 69 Offer a comprehensive and convincing explanation of the reasons why the concessions sought by the other party cannot be accepted Express willingness to review the matter or concessions or benefits sought by the other party, in the future Attempt to close the deal by offering some benefits in the future by giving additional concessions or benefits in an ancillary contract while finalizing the main contract State discreetly the consequences of failure to reach an agreement and emphasize the advantages and benefits of concluding the deal without any further loss of time Conflict – positive outcomes The positive outcomes of conflict are: (i) employees are forced to search for new approaches and ideas (ii) long-standing problems are brought to the surface and resolved (iii) clarification and acceptance of sound viewpoints of individuals (iv) stimulation of interest and creativity (v) opportunities are provided to employees to test their capabilities © Emile Woolf International 60 The Institute of Chartered Accountants of Pakistan Answer bank: Objective test and long-form answers 70 Peak mountain resorts The intergroup rivalry and conflict in WMRL and unsatisfactory service provided to the customers could be attributable to the following factors: 71 (a) Lack of leadership – Leadership which is not able to articulate the goals and objectives of WRML and provide a clear-cut sense of direction to the staff would create confusion within the organisation and result in rivalry and conflict and adversely affect the quality of service to the customers (b) Lack of coordination – Lack of proper control and coordination resulting in lapses at any one location can create conflict and affect the performance of the other facilities and have adverse impact on the overall performance of WMRL (c) Unrealistic targets – The targets may be unrealistic and over ambitious and not attainable due to the overall economic constraints and political situation This may adversely affect the motivation and morale of the staff and create internal conflicts which would adversely affect the quality of services rendered to the customers (d) Role ambiguity – WMRL may be faced with problems of conflicting roles, lack of clear job descriptions, or overlapping of responsibilities This would create conflict among the staff at different locations and affect the quality of service rendered to the customers (e) Incompatibility among the staff – The staff at the various locations may not be able to work in a team environment due to their internal differences arising from strong group affiliations and loyalties which would create rivalry and conflict and thereby adversely affect the overall performance of WRML (f) Biased attitude of management – It is possible that the staff at any one location of WRML or a particular category of staff is being treated in a biased manner affecting terms of rewards, perquisites, job designations and working conditions Such a situation or even its perception among the staff could result in internal conflict and poor service to the customers (g) Lack of recognition – The management may not be giving due recognition or rewarding those employees who may have made significant contribution towards achievement of the company’s goals in the past They may, therefore, not be fully motivated which could create internal conflicts and affect the overall quality of services provided to the customers Stages of negotiation Negotiations are a process in which there are at least two parties and each party needs the involvement of the other to reach a desired outcome The parties begin negotiations with different set of objectives and each party considers that the other party will be willing to modify its initial position and compromise for successful outcome of the negotiation process The various stages of the negotiation process are: (i) Preparation and planning: This includes understanding the nature of the conflict and perceptions of the parties to the conflict The outcome of the negotiation process from the most favourable to the minimum acceptable is determined The weaknesses and strengths of the other party are identified and a strategy is developed for conducting the negotiations (ii) Definition of ground rules: This includes agreement on procedures for conducting the negotiations, including names of the participants, venue and © Emile Woolf International 61 The Institute of Chartered Accountants of Pakistan Business management and behavioural studies time limits, if any, for conduct and conclusion of the negotiations 72 (iii) Clarification and justification: After both the parties have presented their initial viewpoints, each party offers its explanations, clarifications, and justifications This exchange of information brings into focus the importance of the issues to the parties and rationale for fairness of their respective positions (iv) Bargaining and problem solving: The parties make concessions and yield from their initial positions in order to reach consensus and move towards a mutually acceptable agreement (v) Closure and agreement: The consensus reached between the parties is stated in a formal agreement and include a procedure for its implementation and monitoring Distributive and integrative bargaining The basic differences between distributive bargaining approach and Integrative bargaining approach in the process of negotiations from the standpoint of their bargaining characteristics are: 73 (i) Goals: In the distributive bargaining approach, each party strives to obtain the maximum advantage for its own self-interest, whereas in an integrative bargaining approach both the parties attempt to expand the scope and size of the benefits to be able to maximise them to their mutual advantage (ii) Motivation: In the distributive bargaining approach, the motivation for each party is to adopt a win-lose position in which the gain of one party is at the expense of the other, but in the integrative bargaining approach the motivation is that both the parties should emerge as winners in a win-win situation (iii) Focus: In the distributive bargaining approach the focus is to assume a particular position and stick to it to obtain the opponent’s agreement to a specific target or as close to it as possible, whereas in an integrative bargaining approach the focus is on understanding the respective positions of each of the parties and try to reach a mutually acceptable outcome (iv) Interests: In a distributive bargaining approach, the interests of each of the parties are opposite, whereas in an integrative bargaining approach there is a convergence of interests of both the parties to arrive at a mutually acceptable position (v) Sharing of information: In a distributive bargaining approach, each party withholds information to out manoeuvre the other party, but in an integrative bargaining approach both the parties share information to satisfy the interests of each of the parties (vi) Duration of relationship: In the distributive bargaining approach, the duration of relationship between the parties is of a short-term nature, whereas in the integrative bargaining approach the engagement or relationship between the parties is of a long-term character Functional and constructive conflict (a) Functional/constructive conflict is a conflict which supports the goals of the group and helps to improve its performance In functional/constructive conflicts, it is important to separate personalities of the parties from the issues which cause or create conflicts The individuals involved in functional conflict © Emile Woolf International 62 The Institute of Chartered Accountants of Pakistan Answer bank: Objective test and long-form answers not take disagreements personally but in a spirit of harmony to examine and understand all the aspects which have a bearing on the issue to achieve optimal results for achieving the goals of the group (b) 74 Functional/constructive conflict can contribute to improve the performance in an organization by: (i) Evaluating the current position objectively and promoting reassessment of group activities and goals as an on-going process (ii) Stimulating creativity and innovation among the participants who express their opinions and views in an open and constructive manner (iii) Creating initiatives for changes in an orderly manner without causing disruptions or affecting the smooth coordination of activities of the organization (iv) Releasing of pent-up tensions of the participants because the individuals feel that their opinions have received consideration (v) Providing opportunities to dissidents to self-evaluate their own analytical abilities and the expertise they bring on important issues (vi) Introducing a culture in which groupthink or ‘rubber-stamping’ of decisions taken by the comparatively more articulate or dominating personalities is discouraged Mediation and arbitration (a) Negotiation is a process in which two or more parties who consider that they need to be jointly involved in an outcome, but who initially have different objectives, seek by use of arguments and persuasion to resolve their differences in order to achieve a solution which is acceptable to all the parties involved in the negotiations (b) Mediator - A mediator is a neutral third party who facilitates the parties to the negotiations to reach an acceptable solution through reasoning and persuasion and by offering suggestions for pursuing different alternatives Arbitrator - An arbitrator is a third party with the authority to dictate an agreement which should be acceptable to the parties to the negotiations Arbitration can be voluntary, i.e requested by the parties themselves, or compulsory, i.e forced on the parties by law or contract 75 Storage Primary storage (internal memory)  Internal temporary store directly accessible by the CPU that allows it to process data  Volatile by nature as it is erased when power is turned off  Much smaller than secondary or tertiary storage but much quicker to access (as it has no mechanical parts)  Examples include RAM and ROM (see 1.2 above) plus the CPU’s cache memory (temporary store of instructions repeatedly required to run programs – typically up to 2MB (megabytes) in size) © Emile Woolf International 63 The Institute of Chartered Accountants of Pakistan Business management and behavioural studies Secondary storage (external memory)  Secondary storage differs from primary storage in that it is not directly accessible by the CPU  Secondary storage is used for data not currently being processed but which may need to be accessed at a later stage, for example the operating system, documents, music files and emails  Non-volatile as data remains intact even when powered off  Located further from the CPU than primary storage (and not directly accessible by the CPU) Therefore takes longer to access However, is much larger than primary storage  A computer’s largest secondary storage location is typically its hard disk drive (also called hard drive), the capacity of which would typically fall between 40GB (gigabytes) to TB (terabytes) Other examples include:  Flash memory (USB flash drives or keys)  Floppy disks  CD  DVD  Blu-ray drive  Magnetic tape  Cloud drive Tertiary storage  Tertiary storage is not as commonly recognisable as primary or secondary storage by most computer consumers as they may never encounter it  Tertiary storage typically involves a robotic mechanism that mounts (inserts) and dismounts removable mass storage media into a storage device  Often used for archiving rarely accessed information as it is much slower than secondary storage  Primarily useful for extremely large data stores accessed without human operators Off-line storage  Off-line storage describes any type of data storage that is not under the control of a processing unit The medium is typically recorded on a secondary or tertiary storage device which is physically removed or disconnected Off-line storage therefore needs human intervention to re-connect for subsequent access  With off-line storage being physically separate from the computer it can be used to increase general information security For example keeping a copy of all your important files off-line in a separate building 76 Client-server computing Client-server computing describes one level of interaction found between computers in systems architecture A server is a machine that is dedicated to providing a particular function or service requested by a client within a network system © Emile Woolf International 64 The Institute of Chartered Accountants of Pakistan Answer bank: Objective test and long-form answers Servers can range in power from ‘top-end’ super servers, capable of driving thousands of network users, to ‘low-end’ servers which are typically a powerful personal computer (PC) Different types of servers might include file servers, network servers, print servers, e-mail servers and fax servers File servers are used to manage the data files that are accessible to users of the network All the shared data files for the system are held on a file server, or are accessible through a file server Network servers are used to route messages from terminals and other equipment in the network to other parts of the network In other words, network servers manage and control the routing of messages within computer networks 77 Information systems Strategic information relates to long-term decision making e.g over a 3-5 year time horizon Strategic information is useful to senior management and directors for establishing the overall strategy of the business It therefore incorporates both internal information as well as external information about competitors, the market and the general business environment Tactical information assists managers in making short-term tactical decisions such as  establishing a fee to quote on a particular order  whether to offer discounts on a particular product to help lower excess inventory  whether to switch suppliers Operational information relates to the day to day activities of an organisation Examples might include:  Daily sales reports  Daily production reports  Latest inventory levels  Details of customer complaints 78 Batch processing Batch processing is the collection of a group of similar transactions over a period of time, and their processing at a single time as a batch This type of processing has been associated with mainframe centralised type systems The method has been reduced in importance with the development of more advanced types of processing It still remains an important form of processing as many systems used now, are based on batch processed systems  Advantages  Relatively easy to develop  Less processing power is required as deals with similar updates  Checks in place as part of the systems run  Less hardware required, therefore cheaper  Disadvantages  Often delays between when a transaction is made and when the master file is updated and the output generated © Emile Woolf International 65 The Institute of Chartered Accountants of Pakistan Business management and behavioural studies  Management information is often incomplete due to out of date data  Often master files kept off line therefore access may not always be available 79 Decision support system A decision support system (DSS) is a set of related computer programs and data required to assist with the analysis and decision-making within an organization DSS were initially developed to overcome the rigid nature of management information systems The characteristics of decision support systems include:  DSS assists managers at the tactical level when they are required to make intelligent guesses  A DSS uses formula and equations to enable mathematical modelling  DSS are real-time systems enabling managers to solve problems through queries and modelling  User inputs queries and variables for the model through a user interface  Contains a natural language interpreter for querying the system  The user interface is integrated with data management and modelling software from the key components  Spreadsheet packages can become the tool for the development of a decision support system © Emile Woolf International 66 The Institute of Chartered Accountants of Pakistan ... Accounting and Finance Business management and behavioural studies C Contents Page Question and Answers Index v Questions Section A Multiple choice questions Section B Objective test and long-form questions... of Pakistan Certificate in Accounting and Finance Business management and behavioural studies I Index to Objective test and long-form questions and answers Question page Answer page Fayol Mintzberg... Certificate in Accounting and Finance Business management and behavioural studies A Multiple choice questions CHAPTER 1 Which of the following statements best describes management as a practice?