IB Business Management HL Unit 2 Human Resource Management Questions

Taxi-M (TM)


Taxi-M (TM) operates 2500 taxis in a developing country. All drivers are full-time employees and have a professional taxi license. Although not compulsory, TM regularly conducts safety inspections of the taxis. Though safe, most of TM's taxis are old and TM charges high prices. Many customers complain.
However, a multinational company, R E, with offices around the world, has started to offer a mobile application (app) called Best-Taxi (BT). Using their mobile phones, passengers can use B T to book and pay for a car journey. Any car owner can offer journeys through BT. For security reasons, the B T app registers passengers' and drivers' personal details.
TM's sales are falling and profits are down. A number of TM's drivers are becoming demotivated. Facing lower incomes, poor management and rumours of redundancies, many loyal drivers have left to offer taxi services using their own cars and the B T app. Some of these drivers are earning considerably higher wages than before.
The situation for TM appeared critical. However, local media have reported a higher rate of road accidents by B T drivers than licensed taxi drivers. Several of its drivers have assaulted and robbed customers. In response, TM's management decided to downsize and differentiate itself from B T by positioning its service as a high-price, high-quality traditional taxi service. TM will:
- sell older cars and lease new luxury cars
- develop a unique selling point/proposition (USP) emphasizing comfort and safety.
Customers can book taxis by telephone and by stopping them in the street. TM's target market will be business people, higher income families and passengers concerned about safety.

Define the term redundancy.

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.

Describe one industrial/employee relations method used by employers.

FrioAire Appliances (FA)


FrioAire Appliances (FA) manufactures medium-priced and medium-quality refrigerators. It is a multinational public limited company. Its factory is located in a less economically developed country that has high unemployment, a tradition of autocratic leadership and labour costs lower than FA's home country. The factory is profitable, and FA pays consistently good dividends. Market growth for medium-priced and medium-quality refrigerators is limited.
As part of a strategic objective to increase productivity and to enter a fast-growing market for high-priced and high-quality refrigerators, F A is considering building a new factory in and relocating production to Germany. This would require closing the factory in the less economically developed country. The new factory will:
- use innovative technologies, including advanced robotics and 3D processes
- require fewer employees, but those it does require will need to have better skills and qualifications.
Germany has a highly skilled, qualified and productive workforce. The new factory would allow FA to reposition its products. However, FA would need to raise significant finance to build and equip the new factory.
FA's leadership style at the factory in the less economically developed country is autocratic. Members of FA's board wonder whether this style would be suitable for the new factory in Germany, where workers have more bargaining power because of their high skill level and the labour-friendly cultural traditions. In Germany, FA would have to follow more regulations regarding the environment, health and safety, and employee rights.
FA workers in the less economically developed country are very loyal to F A, which has continued operation through a civil war at significant cost to itself (for security). If FA were to close in the less economically developed country, the workers would not find such good jobs.

Explain one benefit and one cost to FA of using an autocratic leadership style.

Kayla and Aran decided that Kayla should manage marketing and finance, and Aran manage the operations and supply chain. They chose not to create a human resource department because Accord had a small workforce. Aran already had the overseas supplier contacts but would need additional suppliers of fruit and vegetables. He would also need to find space to prepare and store the energy drinks. Aran thought that if Enrich was successful, they might need to find a small factory. This factory would use job/customized production. Aran knew the price of the Enrich range was significantly more expensive than those charged by the large MNCs, which supplied an ever-increasing range of energy drinks, fruit drinks and other beverages. Enrich’s drinks averaged $3.00 per bottle, compared with a typical price of $2.20 for similar drinks from MNCs. These MNCs, such as ABC, were large and experienced in the beverage market and had significant branding advantages, economies of scale and wider promotional reach. Enrich was restricted to below-the-line promotional methods, which Kayla thought the most cost effective. Kayla’s secondary market research indicated that many of the competing energy drinks produced by MNCs were being sold to teenagers, contrary to government policies and agreements with retailers such as supermarkets. Kayla became convinced that Enrich could create a USP as the only locally produced, caffeine-free, all-natural energy drink. Enrich would be sold only through affiliated sports and leisure clubs. The additional health benefits and cost savings experienced by their customers would strengthen their USP and brand value. Aran saw things differently. He thought that treating Enrich as a niche product would narrow the possible market segments. He favoured a mass-market approach. Aran considered Enrich a significant product innovation. If Accord waited to launch the brand as a mass-market product, they would be missing out on potentially high profits. Becoming impatient, he argued that they should borrow immediately for revenue and capital expenditures to finance increased production. They would soon need more skilled employees to manage the equipment. After three months of operation without a decision, sales of Enrich were satisfactory but below forecasts. Aran and Kayla were both working very long hours. Feedback from their friends and fellow athletes was positive, yet new customers contacting Accord through social media said they were confused about whether Enrich was a fruit juice or an energy drink. They also claimed that the health benefits of Enrich were exaggerated and the drink was too expensive. After some further investigations into suitable premises and production equipment to support the future growth of Enrich, Kayla and Aran found an affordable abandoned confectionery production plant that would increase the production capacity. Some of the older confectionery-making equipment would need to be replaced. Kayla carried out some further market research to see if the additional capacity could be used for another drink that would complement Enrich. These drinks could form part of the lifestyle brand that Aran had envisaged. Her investigations led her to discuss with Aran the idea of a drink based on green tea, called Detox, which could allow athletes to relax after a hard training day. However, Kayla argued that unless they introduced this new product, Enrich would struggle to be economically sustainable.

Problems are continuing with Enrich drinks. Aran is becoming increasingly frustrated with the lack of growth of sales. He always wants to succeed and is driven by the need to get tasks completed. The Enrich part of his life is not a success. He blames the workforce. The workforce does not share his vision. Employees are mainly part-time workers and parents who value jobs that enable them to fit work around school hours. As Aran has become more autocratic in his leadership style, labour turnover has increased. Last month, from a workforce of twelve, one retired and two left for what they called "better jobs".
There are also increasing problems with the quality of Enrich drinks, as batches of Enrich are rejected by the quality control department. Elsie, the manager of the production department, blamed suppliers, saying that Aran had damaged business relations with them due to his impatience. Elsie also blamed Aran for poor stock management. She has proposed total quality management (TQM) as a solution to these problems.
Detox
Accord decided to start the production and marketing of Detox, the green tea drink that helps athletes to relax. Detox proved to be very successful. Encouraged by the success and boosted cash inflow, Kayla is considering producing a range of snack bars based on Enrich and Detox flavours and recipes. Accord would use the Enrich brand name for the snack bars. The market for healthy snack bars is very competitive and dominated by a few large companies who spend large amounts of money on advertising. The market is growing rapidly - some market researchers estimate by 34 % per annum. There are many examples of small businesses entering the market successfully on a small scale. Kayla estimates that the proposal would involve an investment of $ 100000, with forecast net returns of $ 80000 for four years. Aran thinks that the money could be better spent on marketing Enrich drinks.