ACCA P3 Business Analysis - 2010 - Study text

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Practice questions

14 Marketing mix

(a) List the ‘4Ps’ of the marketing mix.

(b) Suggest how the 4Ps of the marketing mix might differ for a consumer

product in each of the first three stages of the product’s life cycle. (For your

answer, you should therefore complete the following table.)

Stage of life cycle Suitable marketing mix

Introduction

Growth

Maturity

15 Modelling, measuring, targeting

(a) Identify a model or techniques that you might use to carry out:

(i) an analysis of an entity and its activities

(ii) an environmental analysis

(iii) an industry analysis

(iv) a strategic position analysis

(v) an analysis of a strategy for change

(b) What measures might you use to assess the effectiveness of marketing?

city by reducing traffic congestion. At the moment, there are frequent traffic

jams and transport times through the city are very slow. The Mayor is

particularly concerned about delays to public transport services (buses) and

taxis.

He is discussing with his Road Management Committee a strategy to reduce

traffic congestion in the city.

Required

(1) Suggest two critical success factors (CSFs) that might be used for developing

the strategies to reduce road congestion.

(2) Suggest two strategies for achieving success in these areas.

(3) For each critical success factor, suggest a key performance indicator (KPI) for

setting a measurable target of performance, and comparing actual results

against the target.

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16 Core competencies

(a) Define a core competence, and describe the factors that create a core

competence.

(b) For any two successful major companies that you know, state what you

consider to be their core competence (or core competencies).

strategy.

17 SWOT

The Righton Supermarkets Group is the largest supermarket group in the country.

In spite of a decline in total consumer spending in the national economy last year,

spending in the supermarket sector as a whole increased, and Righton also

increased its market share. It now has over 20% of the market for food-and-drink

shopping in the country. It is also enjoying strong growth in the sale of non-food

products such as clothing (it has its own brand of fashion clothes) and domestic

electrical goods.

The group has just announced record annual profits, and investors expect the

growth in profitability to continue, in spite of signs of weakness in the national

economy.

Rival supermarket groups have been attempting to regain lost market share. Two

rival groups merged a year ago. Another competitor was acquired a few years ago

by a major US supermarket group and is pursuing an aggressive competitive

strategy.

Righton’s success is due partly to its reputation for low prices and reasonable-

quality products, and its efficient in-store service.

The group continues to acquire land and to purchase retail property with the

intention of building more out-of-town stores and smaller in-town convenience

stores. It does not have any business operations outside the country. There is some

concern about the possibility of government action to prevent the group from

exploiting its ‘near-monopoly’ position in the market.

Required

(a) What is the purpose of SWOT analysis?

(b) Using the information provided, carry out a SWOT analysis for the Righton

Supermarket Group.

18 More SWOT

The AZ Group is one of the world’s leading pharmaceuticals companies. It was

created five years ago by the merger of Entity A with Entity Z. The group’s

operations are based mainly in Western Europe and North America. The North

American market currently accounts for 50% of world sales for pharmaceutical

companies.

Practice questions

In the past two or three years, AZ has been involved in clinical trials in countries in

South America and Asia, aimed at developing new medicinal drugs. These

countries were selected because regulatory controls over medical research are less

stringent than in the US, Canada or Western Europe.

The group has suffered some setbacks in its business in the past twelve months:

(1) There have been serious concerns among the public and the medical

profession about the safety of one of AZ’s most successful drugs, Carora.

(2) A new drug developed by AZ failed to obtain regulatory approval in the US.

Approval is needed from the national regulator before it can be sold in the

market.

(3) Another new drug that AZ has been developing has had disappointing

clinical trials. Clinical trials are carried out before further testing and

application to the national regulators for approval.

R&D spending accounts for a substantial proportion of total annual expenditure of

the AZ Group (and other pharmaceutical companies).

Required

(a) Using the information provided, carry out a SWOT analysis for the AZ Group.

(b) Suggest a strategy that the AZ Group might pursue as a way of developing

and growing its business in the future.

19 Cultural web: culture and strategy

(a) Describe the six elements in the cultural web, as identified by Johnson and

Scholes, and explain how an understanding of the cultural web in an entity

can be useful for strategic planning.

(b) List two situations in which cultural factors should affect the planning and

implementation of strategy.

20 Mendelow

(a) Describe Mendelow’s power-interest matrix.

(b) Identify factors that may give substantial power to a stakeholder or a group of

stakeholders in an entity, who are either inside or external to the entity.

entity as an aid to implementing a strategic change.

21 CSR and environmental strategy

(a) List the main issues commonly associated with corporate social responsibility

(CSR).

(b) What is an environmental strategy?

environmental strategy?

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(d) What environmental standards might a company adopt?

(e) What is the relevance of environmental strategy to risk and corporate

governance?

22 Ken Day

Ken Day is the CEO and chairman of Highwater, a private company specialising in

the supply of sailing and boating equipment. The company plans to enter the

second-tier London stock market (AIM) in the next few months.

Ken Day currently owns 24% of the equity shares in the company.

The board of directors of Highwater consists of Ken Day, four other executive

directors and three non-executive directors, one of whom is an old family friend of

the Lay family and has been on the board for over ten years.

In view of the company’s plans to gain acceptance to AIM, its banking advisers have

been trying to arrange meetings between Ken Day and some institutional investors.

However, several such meetings have been cancelled at short notice by Ken, who

claimed pressure of work and lack of time. He feels that he will tell investors about

his plans for the future when he is ready to do so, and not before then.

The board of directors meets each year to approve the annual report and accounts,

and decide on the annual dividend payment. It meets two or three other times each

year, to discuss Ken Day’s strategic plan for the company, which he formulates with

two of his executive director colleagues, the finance director and the operations

director.

Required

(a) Using the information provided, explain how the leadership and management

of Highwater are inconsistent with best practice in corporate governance.

(b) Explain the roles that non-executive directors should play in the governance

of their company.

23 BCG

(a) Describe the Boston Consulting Group (BCG) matrix.

(b) Explain the product-market strategy that might be chosen for products in each

quadrant of the matrix.

24 Matrices

(a) What are the similarities and differences between the BCG matrix and the

Shell directional policy matrix?

(b) Why might these matrices be used for strategic analysis and planning?

Practice questions

25 Global

(a) Explain the meaning or significance of the following terms, in the context of

developing a global business.

Market convergence

Cost advantage

Government pressure

Currency volatility

Trade barriers

Emergence of global competition

(b) List three methods of entering a market for goods in another country.

difference between ethnocentric, polycentric and geocentric management

structures.

26 Collaboration

Rival firms may sometimes collaborate with each other, or might choose to avoid

being strongly competitive.

Describe three ways in which rival firms may collaborate.

27 Sustainable competitive advantage

Suggest how a company might seek to achieve a sustainable competitive advantage

in its markets.

28 Generic strategies

For each of the three generic strategies identified by Porter, give an example of a

company (or companies) that pursue such a strategy.

29 Mission

(a) A low-cost airline fastPlane has published its mission statement on its website:

‘To provide our customers with safe, good value, point-to-point services. To

effect and to offer reliable and consistent product and fares agreeable to

business and leisure markets on a range of European routes. To achieve this,

we will develop our staff and establish long-term relationships with our key

suppliers.’

Required

State the purpose of a mission statement, and suggest how the mission

statement of fastPlane meets this purpose.

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(b) The Royal Institute of British Cake-makers (RIBC) is a professional association

for cake makers in the UK. Its mission statement is as follows:

‘To advance cake making by demonstrating benefit to society and promoting

excellence in the profession.’

The RIBC was concerned about the lack of understanding amongst the general

public about the benefits of good cake making. It was also concerned that the

standards of professional ability amongst chefs might not be as high as it

should be, and that public criticisms of some new types of cake were possibly

justified.

The RIBC identified a number of strategic objectives, consistent with its

mission statement.

Required

On the basis of this information, suggest three strategic objectives that the

RIBC might have identified, that are consistent with its mission statement.

30 Product-market strategy

Red Tile Company specialises in roof repairs and new roofing. It operates in the

North Town area of a major city. The company has been successful. The success is

due largely to growing market demand for new and better roofing, due to the

increasing regularity of strong winds and gales at various times of the year.

The company has two owner-managers, Stan and Oliver, who want to grow the

business organically. They are considering several strategies for doing this.

The following information is relevant to their strategic thinking:

(1) The company’s market share of the business for new roofs and roof repairs in

North Town is estimated to be 25%.

(2) There is a strong local demand for the installation of new, improved satellite

dishes that have recently been introduced to the market. These are attached to

roofs of houses and other buildings.

(3) Stan’s sister works for the company. She has been talking to a friend, who has

told her about a severe shortage of firms that provide office cleaning services

in the North Town area. She used to work as an administration manager in an

office cleaning firm in a different part of the city.

Required

Four different product-market strategies are market penetration, product

penetration, market development and diversification. Suggest a product-market

strategy for each of these four categories that Red Tile Company could select as a

way of developing its business.

Practice questions

31 Growth strategy

List the types of strategy a company might select as a means of growing its business,

especially in other countries.

32 Suitability, acceptability and feasibility

When an entity is considering its strategic options, it may be faced with a choice

between several alternative options. These options should be compared and

evaluated, in order to select the one that seems the most suitable. Johnson and

Scholes suggest that alternative strategies should be compared according to their:

(a) suitability

(b) acceptability and

Required

Explain the meaning of the suitability, acceptability and feasibility of strategies.

33 Strategy selection

Entity X is the world’s only producer of a sugar sweetener called sucralose, which it

sells under a well-established brand name. Entity X has maintained its monopoly in

the market for sucralose by enforcing its patents over the production process for the

product. These patents have about 15 years left before they expire.

There is a rapid growth in the demand for sucralose. Demand grew by over 60% last

year, and the entity currently has insufficient production capacity to meet all the

demand. Supplies to customers are therefore rationed. Entity X is investing in an

increase in its production capacity, by expanding facilities in its existing production

plant and opening a new production facility in another country where labour costs

are lower.

The huge success of sucralose is caused by the growing concerns of the public about

obesity, and the preference of many consumers for sweeteners rather than sugar. In

addition unlike other sweeteners, sucralose is a versatile product that can be used in

the production of other consumer items, such as soft drinks, cakes, yoghurts and

cereals.

A US competitor has announced that it is exploring the possibility of developing a

rival sucralose product that would not breach the patent rights of Entity X, and that

it will hope to have a product on the market in about five years’ time.

Required

(a) Identify the stage in the product life cycle that sucralose has reached.

(b) Assuming that the US competitor does not enter the market sooner, suggest

what will happen in the market for sucralose when the patents of Entity X

eventually expire.

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dominance of the highly-profitable market for sucralose.

34 R&D strategy

Some companies invest heavily in research and development. What are the

difficulties in carrying out a financial assessment of R&D strategy?

35 Rational strategic plans

Explain the arguments against the following statement.

“A company should make rational strategic plans with the aim of maximising the

wealth of its equity shareholders.”

36 Emergent strategy

(a) The strategic management process is sometimes described as having three

stages: strategy analysis, strategy formulation and strategy implementation.

Required

Describe the nature or purpose of each of these three stages.

(b) Mintzberg argued that the process of strategy analysis, formulation and

implementation does not provide a realistic description of strategic

management. He argued that the strategies implemented by an entity are a

combination of deliberate and emergent strategies.

Required

Explain the difference between a deliberate strategy and an emergent strategy.

Give an example of an emergent strategy.

37 Stage in development

A company has been established for many years, and is now a large organisation

producing a range of food products and household goods. It is organised into a

number of investment centres, with each centre producing a different category of

product. Each investment centre manager has considerable delegated power over

decision-making for his/her business. However, head office uses sophisticated

IS/IT reporting systems, and head office management maintain their control by

monitoring closely and regularly the performance of each investment centre.

Many of the investment centre managers are now complaining strongly about the

amount of time they have to spend in dealing with demands for information from

head office – filling in forms, preparing and revising budgets and preparing returns.

They argue that all this work is taking them away from their real job, which is to

develop the business of their investment centres.

Practice questions

The relationship between head office managers and investment centre managers is

generally very poor, and this is affecting the quality of communications between

them.

The CEO has recognised the problem, and has decided that it is time for a change.

He believes that the current problem is almost inevitable for any organisation as it

grows. His plan is to improve the working relationship between head office

management and investment centre management, by reducing substantially the

amount of reports and returns that are required, but encouraging more

collaboration between them in discussing problems and solutions.

Required

Identify a model that might be used to analyse the situation that the company is in,

and the need for a change in its organisation and management structure.

38 Business processes

When employees need to have expenses reimbursed, they complete an expense

claim form and submit this to their managers. Each manager reviews the claim and

either approves it or rejects it. If the claim is approved it is passed to the accounts

department who enter post the ledgers and raise a payment request. The payment

request goes to the cashier, who sets up the payment and sends a statement to the

employee showing the amount of the payment and when it will be made. The

payment details are also sent to the company’s bank.

(a) Draw the Harmon process strategy matrix and suggest which quadrant the

expenses claim process would be in.

(b) Draw a process diagram (swim lane diagram) depicting the above process.

39 Features of organisational change

Huczynski and Buchanan identified four basic features of organisational change.

Describe them.

40 Change

A manufacturing company produces engineering items to the specifications of its

customers, and each customer order is treated as a unique job. A customer order is

taken by a sales representative. It is then processed in an order processing

department. Each job goes through three stages of manufacturing: cutting, grinding

and assembly. The despatch department is then responsible for delivering the

finished item to the customer.

The company’s management were aware that the company was losing a large

amount of potential business to rival companies, who were able to achieve a much

shorter lead time in processing orders, manufacture and delivery to customers.

The company therefore called in some BPR consultants, who recommended that the

company should restructure its order fulfilment process. The manufacturing

Paper P3: Business analysis

operations should be restructured. Instead of having three separate departments for

cutting, grinding and assembly, workers should be grouped into multi-skilled

teams, each equipped with its own machines and tools for all three stages of

production. Customer orders should be assigned to a team whose leader would be

responsible for completing the job to the required quality standards in the fastest

time possible. In addition, order processing and delivery should be combined into

an order fulfilment operation. The individual responsible for processing a customer

order should remain responsible for arranging the production work, chasing

progress of the job and arranging delivery of the finished item to the customer.

The company’s management have accepted the recommendations of the

consultants. However, they are aware that the changes will meet strong resistance

from many employees, especially production workers who will be required to

become multi-skilled. There may also be resistance from employees who will

become order fulfilment managers and made responsible for the lead times for jobs.

Required

(a) Explain the nature of business process re-engineering (BPR).

(b) Using a model of your choice, suggest how a firm of change consultants might

assist the company in planning and implementing the changes.

management.

41 Channel for marketing and distribution

The internet and e-commerce have become important channels for marketing and

selling, and the internet can also be a distribution channel for electronic products.

Required

List the potential benefits of the internet and e-commerce for:

(a) suppliers

(b) customers.

42 Stefan Lund

Stefan Lund recently graduated from the College of Fashion. Until he has

established his own business, he is working in the offices of a supermarket group,

where he is highly regarded by his managers. Stefan is keen to exploit a market

opportunity that he has identified for making fashionable hats. He believes that

there is a strong potential demand for fashionable headwear, and he believes that he

has the ability to design and manufacture a successful range of products. He has

been given capital by his family to set up the business, and he is confident that he

has the financial resources to establish the design and manufacturing side of the

business.

He is aware that in order to establish the business, he must find a ‘route to market’

for his products. He is considering three possibilities:

ACCA P3 Business Analysis - 2010 - Study text - Emile Woolf Publishing

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