ICAP PRC-3 Business operations: practice questions with answers

Answer: A. A divisional structure groups activities into self-contained divisions, each with its own functional staff and a head accountable for its results. The basis of division can be product, geography or customer type.

Zarnab Foods' units are snacks, beverages and frozen foods, which are product lines, and each unit is a profit centre with its own production, marketing and finance staff. So this is a divisional structure organised by product.

Answer: A. Centralisation means that authority to make decisions is retained by senior management at the centre. Decentralisation passes authority down to lower levels or units (for example, letting branch managers set local prices or hire staff).

At Shahbaz Pharmacies pricing, purchasing and hiring are all decided at head office, so authority is centralised. Benefits include consistency and purchasing economies; drawbacks include slower response to local conditions and less motivation for branch managers.

Answer: A. The research and development function carries out technical work to create new products, improve existing ones and develop better production processes. Its importance:

- products have limited life cycles, so new products are needed to replace those in decline;
- innovation can give a competitive advantage (and, in industries like pharmaceuticals, patent protection);
- process improvements can cut costs or raise quality.

Market research, purchasing and fund-raising belong to marketing, purchasing and finance respectively.

Answer: B. Retention measures aim to keep good employees. They include competitive pay and benefits, career paths and promotion opportunities, training and development, recognition, a good working environment and flexible working.

The right measure depends on why people leave. Here the stated cause is the lack of promotion prospects, so creating clear career paths and promoting from within addresses it directly. The other options are about replacing leavers or controlling staff, not about removing the reason for leaving.

Answer: B. An expert system captures the knowledge of human experts in a knowledge base (often as if-then rules) and uses an inference engine to apply that knowledge to a particular case. It gives a recommendation and can explain its reasoning, so less experienced staff can make consistent decisions in a narrow area such as credit approval, medical diagnosis or fault finding.

Answer: A. Product life cycle stages:

| Stage | Sales | Competitors | Profit |
|---|---|---|---|
| Introduction | Low, slow growth | Few | Usually losses |
| Growth | Rising rapidly | Entering | Becomes positive and rises |
| Maturity | Growth slows, then levels off | Many, intense | Peaks, then squeezed |
| Decline | Falling | Leaving | Falling |

The motorcycle shows sharply rising sales, new competitors and a move into profit, so it is in the growth stage.