IB Business Management HL 2.1 Introduction to Human Resource Management Question Bank

Creative Toys (CT)


Creative Toys (CT) manufactures toys and markets them business-to-customers (B2C) online only. The business operates in a leased industrial site and relies on word-of-mouth promotion only. To make customers believe that CTs toys are better than its competitors, CT sets prices slightly higher than the competition. Production and sales are mostly between 1 October and 24 December. Most of the employees work on temporary contracts during this busy period. For the remainder of the year, CT operates well below capacity utilization.
Table 1 contains selected data for CT, for 2014:

In 2014, the management of CT considered a change of the marketing mix to include above the line promotion, lower prices, and an additional sales method called "toy parties". Toy parties would be hosted by newly recruited CT sales representatives and attended by parents and their children. At the parties parents could see the toys and children could play with them. Sales would be made at the parties by the new sales representatives, who would be paid on a commission-only basis.

Toy parties could be held throughout the year and make CTs total sales less seasonal. Based on market research, management has estimated that the parents' demand for toys is price elastic and is planning to set lower prices for all toys sold online and at toy parties. The management has prepared forecasted financial data for CT, for 2015, based upon the proposed change to the marketing mix, shown in Table 2 below.

The Finance Manager will carry out a variance analysis in order to determine whether the proposed change to the marketing mix has been successful.

Explain two possible human resource implications for CT's management given the proposed change to introduce "toy parties" as an additional sales method.

Item 1: Extract from Beral Courier, a local newspaper

Item 1: Extract from Beral Courier, a local newspaper Rumours of increased violence outside the UWP-protected area were recently confirmed by the office of the local governor. Attacks against vehicles on roads near local towns such as Bosca, Boussena, Gana and Saura have been confirmed by local police. One driver, who was returning from Saura, was seriously injured. In another instance, there was severe damage to a road, causing vehicles to take a different route, which doubled the travel time. The UWP Mission has announced its intention to increase UWP patrols in the area. The impact of the increased violence has had an immediate impact on local Beral shops, which reported shortages of produce.

Item 4: Critical path analysis for cell production approach Network diagram for one cell A-H (each cell (hospital wing) takes the same time to construct). Key: // = Critical path EST $=$ Earliest starting time LFT $=$ Latest finishing time

Item 5: Extract of a memo from Colonel Michael Donovan to General Diane Pierce regarding workforce planning By changing from a traditional construction approach to a cell production approach, the total time taken to complete the hospital can be shortened to 31 weeks. This is one week longer than the original estimate but still six weeks earlier than the traditional approach. In a cell production approach, most of the troops would be divided into cell "teams". Each team would be responsible for the construction of one wing (cell) of the hospital (Alpha, Beta, Charlie, and Delta). Although some tasks would have to be done for the entire hospital (such as painting and cleaning), most tasks will be completed by different cell teams, each building their own wing of the hospital. There are both advantages and disadvantages to this approach.

Identify two factors that may affect the UWP's workforce planning in Beral.

A component of the cost to customers is delivery costs, which are based primarily upon weight and distance to delivery location. Given the cost of delivery, RDM can generally offer competitive pricing in a 700-kilometre radius of Lobjanec. This 700-kilometre range means RDM can be price competitive in crucially important Germany but less so in such potentially lucrative markets as Scandinavia, the Netherlands, Belgium, France and northern Italy. To continue to grow and access these potentially lucrative markets, the chief financial officer has proposed that RDM build an additional production facility elsewhere in Europe, which would extend RDM’s market area. Given that the entire order/manufacture/delivery process could still be performed in Lobjanec, this new facility would require limited staff and most of the work will be done by robots. Before considering the expansion proposal, Jan knows that RDM’s marketing strategy must be addressed. RDM has no marketing strategy but rather a series of practices that have evolved since the Radeki de Dovnic family regained control of RDM in 1990. RDM has an outdated name, a weak brand identity, no relevant vision or mission statement and no written operations management strategy or human resources plan. The company makes good products at competitive prices and is responsive to customers’ needs. As a result, the company enjoys healthy profits for now. RDM’s relationship with stakeholders was profoundly changed by the move to automation. In the 1970s, RDM employed roughly 500 workers, making it the largest single employer in Lobjanec. In 2019, the business employs 117 people, only a small number of whom are involved in manufacturing. Further, most of those involved in manufacturing are not skilled manual labourers but highly trained engineers and computer experts who manage the automated process. Their attitudes, aspirations and motivations differ significantly from the workers who survived the Second World War and had worked under the Communist regime. With this reduction in, and transformation of, RDM’s labour force, the company no longer has the level of local influence that it formerly had.

If RDM builds a new production facility in Europe, an immediate consequence will be an increase in capacity. At current levels of output this would lead to a reduction in capacity utilization. The current output of RDM's factory is 20000 units a year, with a productive capacity of 21000 units a year before the new facility is built. If the new production facility is built, the greater capacity for the whole business will, at current levels of output, result in the capacity utilization falling to 50 % until production at the new facility starts.

Xi, the marketing manager, suggests that this increased capacity provides the opportunity for market development to be achieved by entering the United States (US) market.

The US market has similarities with Europe, with an aging population and low birth rate. Demand for customized healthcare devices is high. However, the healthcare system in the US is very different, with a much greater role for private sector healthcare compared to Europe, where much of the healthcare is state funded. In the US, 18 % of gross domestic product (GDP) is spent on healthcare compared with an average of 11 % in Europe. Advertising spend in the US is very high for the typical healthcare equipment business, which uses TV and the internet to reach individuals, whereas in Europe healthcare equipment businesses typically negotiate with government organizations. Average incomes in the US are higher than in Europe. Competition in the US is very high, although some major healthcare equipment businesses dominate the market. Industrial/ employee relations in the US are generally more decentralized than in Europe, with a lower level of unionization.

To assess the best way to enter the US market, some senior managers may have to move to the US and Xi may need to recruit some new staff in the US with specialized knowledge of US laws and regulations, as well as some additional marketing employees. Xi is aware that industrial/ employee relations are different in the US.

Existing staff will have to get used to new ways of working and are concerned about having to work with new staff in the US.

Explain two possible reasons for RDM employees' resistance to change if RDM enters the US market.