Describe one advantage and one disadvantage for MM of decentralization (lines 44–45).

Explain how MM could reduce stakeholder conflict in relation to its gold mine in Egypt (lines 103–107).

Decentralization: Some decision making is delegated to lower level managers – in this case to subsidiary businesses.

Advantages

• Decision-making delegated to the mines (operations, wages, contracts) and hotels (prices and menus)
• Not all decisions will be decentralized (in this case strategic decisions remain with the Board)
• Better focus on core activities
• Better understanding of local issues (hotels are in Europe which might face completely different problems from mines in Africa)

Disadvantages

• Decision-making is not necessarily strategic as hotel managers and managers at mines are not part of higher level decision-making process at board level
• More difficult to ensure consistent practices and policies across different locations. Hotel customers may prefer consistency
• More difficult to achieve financial control if individual managers have more budgetary autonomy.
• As contexts and needs are different, some conflicts may arise or may lead to inter-divisional rivalry if divisions compare each other, when making decisions on budgets, wages, employment, contracts, etc. (i.e. wages in Canada vs. in Africa)

Accept any other reasonable advantage/disadvantage.
Award [1] for each advantage and one mark for each disadvantage up to a total of [2].
Award [1] for putting each advantage and [1] for putting each disadvantage into context up to a total of [2].

Refer to Paper 1 markbands for May 2016 forward, available under the "Your tests" tab > supplemental materials.

Stakeholder issues can include:

• Managers: Technical problems, safety issues, risk of flooding. These will be difficult to manage, and will have conflict with which employees who are threatening strikes. Costs will then have an impact on shareholders through lower prices.
• Employees: Threatening strikes over pay and other issues with the way mines are managed. Will want spending conflicts with owners/managers.
• Shareholders: Will want dividends maintained but mine producing below breakeven and this affects profits. Will want costs reduced, profit increased. Will not want safety issues to get out of hand – bad publicity and impact on share price. High dividends may prevent investments, may put pressure on wages. Conflict with managers/employees.
• Other stakeholders may include government (taxes, licenses), the general public, pressure groups but these do not feature much in gold mines so are non-contextual.
• Resolution of conflict: Safety is important to all – should be resolved with managed costs.
• Strikes are damaging to shareholders. Employees will lose pay. So communicate and work towards a solution.
• Managers need to create a less combative environment and find satisfactory ways of reducing costs and solving problems without upsetting employees.

Some possible solutions could be:

• identify technical problems in advance and improve processes
• think of a maintenance plan to prevent production outages
• invest more in industrial safety (but this will increase costs – possible conflict managers vs. shareholders?)
• improve employees' motivation and job satisfaction, focusing on employees' needs or maybe adopting a reward programme and/or health insurance (this will increase costs: will shareholders be happy with that?)
• find a way to improve sales (look for new markets, segments, etc.), reduce costs or/and add value to their products in order to increase profits.

The use of stakeholders might be implied especially when referring to 'conflict with the business'. In this case the 'business' might mean managers, shareholders or owners if the candidate makes this clear without using any of those terms.

Accept any other reasonable explanation/application of stakeholder conflict.
Marks should be allocated according to the paper 1 markbands for May 2016 forward section A.
Award maximum 2 marks for only explaining one strategy.
Award maximum 3 marks for a theoretical answer or an answer that describes two (or more) strategies without explaining them.
Award maximum 5 marks if the explanation is mainly descriptive but in context.

The responses to this question often moved away from decentralization and instead focused on delegation. Candidates could justifiably mention delegation as an aspect of decentralization, but they could not score highly without making sure that the focus remained on decentralization. Better responses applied specific aspects of decentralization from the pre -seen case study and showed why it was good and bad for MM.

There were very few answers that clearly laid out which stakeholders were involved and what the actual conflict was between them. Several candidates simply wrote largely pre-prepared answers about the workforce demanding more pay. Better candidates were able to identify two distinct stakeholder groups of MM and then analyse the conflict between them.