(ii) Comment briefly on how divisional managers might respond to the results achieved and ONE potentialproblem that might be experienced by Our Timbers Ltd. (2 marks)

题目

(ii) Comment briefly on how divisional managers might respond to the results achieved and ONE potential

problem that might be experienced by Our Timbers Ltd. (2 marks)


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  • 第1题:

    (b) Explain how Perfect Shopper might re-structure its upstream supply chain to address the problems identified

    in the scenario. (10 marks)


    正确答案:
    (b) Perfect Shopper currently has a relatively short upstream supply chain. They are bulk purchasers from established suppliers
    of branded goods. Their main strength at the moment is to offer these branded goods at discounted prices to neighbourhood
    shops that would normally have to pay premium prices for these goods.
    In the upstream supply chain, the issue of branding is a significant one. At present, Perfect Shopper only provides branded
    goods from established names to its customers. As far as the suppliers are concerned, Perfect Shopper is the customer and
    the company’s regional warehouses are supplied as if they were the warehouses of conventional supermarkets. Perfect
    Shopper might look at the following restructuring opportunities within this context:
    – Examining the arrangements for the delivery of products from suppliers to the regional warehouses. At present this is in
    the hands of the suppliers or contractors appointed by suppliers. It appears that when Perfect Shopper was established
    it decided not to contract its own distribution. This must now be open to review. It is likely that competitors have
    established contractual arrangements with logistics companies to collect products from suppliers. Perfect Shopper must
    examine this, accompanied by an investigation into downstream distribution. A significant distribution contract would
    probably include the branding of lorries and vans and this would provide an opportunity to increase brand visibility and
    so tackle this issue at the same time.
    – Contracting the supply and distribution of goods also offers other opportunities. Many integrated logistics contractors also
    supply storage and warehousing solutions and it would be useful for Perfect Shopper to evaluate the costs of these.
    Essentially, distribution, warehousing and packaging could be outsourced to an integrated logistics company and Perfect
    Shopper could re-position itself as a primarily sales and marketing operation.
    – Finally, Perfect Shopper must review how it communicates orders and ordering requirements with its suppliers. Their
    reliance on supplier deliveries suggests that the relationship is a relatively straightforward one. There may be
    opportunities for sharing information and allowing suppliers access to forecasted demand. There are many examples
    where organisations have allowed suppliers access to their information to reduce costs and to improve the efficiency of
    the supply chain as a whole.
    The suggestions listed above assume that Perfect Shopper continues to only supply branded goods. Moving further upstream
    in the supply chain potentially moves the company into the manufacture and supply of goods. This will raise a number of
    significant issues about the franchise itself.
    At present Perfect Shopper has, by necessity, concentrated on branded goods. It has not really had to understand how these
    goods sell in specific locations because it has not been able to offer alternatives. The content of the standing order reflects
    how the neighbourhood shop wishes to compete in its locality. However, if Perfect Shopper decides to commission its own
    brand then the breadth of products is increased. Neighbourhood shops would be able to offer ‘own brand’ products to compete
    with supermarkets who also focus on own brand products. It would also increase the visibility of the brand. However, Perfect
    Shopper must be sure that this approach is appropriate as a whole. It could easily produce an own brand that reduces the
    overall image of the company and hence devalues the franchise. Much more research is needed to assess the viability ofproducing ‘own brand’ goods.

  • 第2题:

    (b) Explain how the process of developing scenarios might help John better understand the macro-environmental

    factors influencing Airtite’s future strategy. (8 marks)


    正确答案:

    (b) Carrying out a systematic PESTEL analysis is a key step in developing alternative scenarios about the future. Johnson and
    Scholes define scenarios as ‘detailed and plausible views of how the business environment of an organisation might develop
    in the future based on groupings of key environmental influences and drivers of change about which there is a high level of
    uncertainty’. In developing scenarios it is necessary to isolate the key drivers of change, which have the potential to have a
    significant impact on the company and are associated with high levels of uncertainty. Development of scenarios enables
    managers to share assumptions about the future and the key variables shaping that future. This provides an opportunity for
    real organisational learning. They are then in a position to monitor these key variables and amend strategies accordingly. It
    is important to note that different stakeholder groups will have different expectations about the future and each may provide
    a key input to the process of developing scenarios. By their very nature scenarios should not attempt to allocate probabilities
    to the key factors and in so doing creating ‘spurious accuracy’ about those factors. A positive scenario is shown below and

    should provide a shared insight into the external factors most likely to have a significant impact on Airtite‘s future strategy.
    For most companies operating in global environments the ability to respond flexibly and quickly to macro-environmental
    change would seem to be a key capability.
    The scenario as illustrated below, clearly could have a major impact on the success or otherwise of Airtite’s strategy for the
    future. The key drivers for change would seem to be the link between technology and global emissions, fuel prices and the
    stability of the global political environment. Through creating a process which considers the drivers which will have most
    impact on Airtite and which are subject to the greatest uncertainty, Airtite will have a greater chance of its strategy adaptingto changing circumstances.

  • 第3题:

    (d) Draft a letter for Tim Blake to send to WM’s investors to include the following:

    (i) why you believe robust internal controls to be important; and

    (ii) proposals on how internal systems might be improved in the light of the overestimation of mallerite at

    WM.

    Note: four professional marks are available within the marks allocated to requirement (d) for the structure,

    content, style. and layout of the letter.

    (16 marks)


    正确答案:

    You will be aware of the importance of accurate resource valuation to Worldwide Minerals (WM). Unfortunately, I have to
    inform. you that the reserve of mallerite, one of our key minerals in a new area of exploration, was found to have been
    overestimated after the purchase of a mine. It has been suggested that this information may have an effect on shareholder
    value and so I thought it appropriate to write to inform. you of how the board intends to respond to the situation.
    In particular, I would like to address two issues. It has been suggested that the overestimation arose because of issues with
    the internal control systems at WM. I would firstly like to reassure you of the importance that your board places on sound
    internal control systems and then I would like to highlight improvements to internal controls that we shall be implementing
    to ensure that the problem should not recur.
    (i) Importance of internal control
    Internal control systems are essential in all public companies and Worldwide Minerals (WM) is no exception. If anything,
    WM’s strategic position makes internal control even more important, operating as it does in many international situations
    and dealing with minerals that must be guaranteed in terms of volume, grade and quality. Accordingly, your board
    recognises that internal control underpins investor confidence. Investors have traditionally trusted WM’s management
    because they have assumed it capable of managing its internal operations. This has, specifically, meant becoming aware
    of and controlling known risks. Risks would not be known about and managed without adequate internal control
    systems. Internal control, furthermore, helps to manage quality throughout the organisation and it provides
    management with information on internal operations and compliance. These features are important in ensuring quality
    at all stages in the WM value chain from the extraction of minerals to the delivery of product to our customers. Linked
    to this is the importance of internal control in helping to expose and improve underperforming internal operations.
    Finally, internal control systems are essential in providing information for internal and external reporting upon which, in
    turn, investor confidence rests.
    (ii) Proposals to improve internal systems at WM
    As you may be aware, mineral estimation and measurement can be problematic, particularly in some regions. Indeed,
    there are several factors that can lead to under or overestimation of reserves valuations as a result of geological survey
    techniques and regional cultural/social factors. In the case of mallerite, however, the issues that have been brought to
    the board’s attention are matters of internal control and it is to these that I would now like to turn.
    In first instance, it is clear from the fact that the overestimate was made that we will need to audit geological reports at
    an appropriate (and probably lower) level in the organisation in future.
    Once a claim has been made about a given mineral resource level, especially one upon which investor returns might
    depend, appropriate systems will be instituted to ask for and obtain evidence that such reserves have been correctly and
    accurately quantified.
    We will recognise that single and verbal source reports of reserve quantities may not necessarily be accurate. This was
    one of the apparent causes of the overestimation of mallerite. A system of auditing actual reserves rather than relying
    on verbal evidence will rectify this.
    The purchase of any going concern business, such as the mallerite mine, is subject to due diligence. WM will be
    examining its procedures in this area to ensure that they are fit for purpose in the way that they may not have been in
    respect of the purchase of the mallerite mine. I will be taking all appropriate steps to ensure that all of these internal
    control issues can be addressed in future.
    Thank you for your continued support of Worldwide Minerals and I hope the foregoing goes some way to reassure you
    that the company places the highest value on its investors and their loyalty.
    Yours faithfully,
    Tim Blake
    Chairman

  • 第4题:

    (c) Identify TWO QUALITATIVE benefits that might arise as a consequence of the investment in a new IT system

    and explain how you would attempt to assess them. (4 marks)


    正确答案:
    (c) One of the main qualitative benefits that may arise from an investment in a new IT system by Moffat Ltd is the improved level
    of service to its customers in the form. of reduced waiting times which may arise as a consequence of better scheduling of
    appointments, inventory management etc. This could be assessed via the introduction of a questionnaire requiring customers
    to rate the service that they have received from their recent visit to a location within Moffat Ltd according to specific criteria
    such as adherence to appointment times, time taken to service the vehicle, cleanliness of the vehicle, attitude of staff etc.
    Alternatively a follow-up telephone call from a centralised customer services department may be made by Moffat Ltd
    personnel in order to gather such information.
    Another qualitative benefit of the proposed investment may arise in the form. of competitive advantage. Improvements in
    customer specific information and service levels may give Moffat Ltd a competitive advantage. Likewise, improved inventory
    management may enable costs to be reduced thereby enabling a ‘win-win’ relationship to be enjoyed with its customers.

  • 第5题:

    (c) Comment on four reasons why the Managing Director of Quicklink Ltd might consider the acquisition of the

    Celer Transport business to be a ‘good strategic move’ insofar as may be determined from the information

    provided. (5 marks)


    正确答案:

  • 第6题:

    (ii) Briefly discuss FOUR non-financial factors which might influence the above decision. (4 marks)


    正确答案:
    (ii) Four factors that could be considered are as follows:
    (i) The quality of the service provided by NSC as evidenced by, for example, the comfort of the ferries, on-board
    facilities, friendliness and responsiveness of staff.
    (ii) The health and safety track record of NSC – passenger safety is a ‘must’ in such operations.
    (iii) The reliability, timeliness and dependability of NSC as a service provider.
    (iv) The potential loss of image due to redundancies within Wonderland plc.

  • 第7题:

    (b) (i) Explain how the use of Ansoff’s product-market matrix might assist the management of Vision plc to

    reduce the profit-gap that is forecast to exist at 30 November 2009. (3 marks)


    正确答案:

  • 第8题:

    (ii) Briefly explain the extent to which the application of sensitivity analysis might be useful in deciding

    which refrigeration system to purchase and discuss the limitations inherent in its use. (3 marks)


    正确答案:
    (ii) Sensitivity analysis could be used to assess how responsive the NPV calculated in part (a) in respect of each decision
    option change is to changes in the variables used to calculate it. The application of sensitivity analysis requires that the
    net present values are calculated under alternative assumptions in order to determine how sensitive they are to changing
    conditions. In this particular example then a relatively small change in the forecast cash flows might lead to a change
    in the investment decision. The application of sensitivity analysis can indicate those variables to which the NPV is most
    sensitive and the extent to which these variables may change before an investment results in a negative NPV. Thus the
    application of sensitivity analysis may provide management with an indication of why a particular project might fail. The
    directors of Stay Cool Ltd should give consideration to the potential variations in the independent variables which feature
    in the decision-making process such as:
    – estimated revenues
    – estimated operating costs
    – estimated working lives
    – estimated repair costs
    – the estimated discount rate i.e. cost of capital of each alternative investment.
    Sensitivity analysis has some serious limitations. The use of the method requires changes in each variable under
    consideration are isolated. However management may be focused on what happens if changes occur in two or more
    critical variables. Another problem relating to the use of sensitivity analysis to forecast outcomes lies in the fact that it
    provides no indication of the likelihood of the occurrence of changes in critical variables.

  • 第9题:

    (ii) Suggest THREE other performance measures (not applied in (i)) which might be used to assess the

    customer perspective of the balanced scorecard of GER. (3 marks)


    正确答案:
    (ii) Performance measures that may be used to assess the customer perspective of the balanced scorecard of GER include
    the following:
    Lost or damaged luggage per 1,000 passengers
    Train cancellation rate
    Denied boarding rate
    Number of passenger complaints.
    Note: Only three measures were required.

  • 第10题:

    JOL Co was the market leader with a share of 30% three years ago. The managing director of JOL Co stated at a

    recent meeting of the board of directors that: ‘our loss of market share during the last three years might lead to the

    end of JOL Co as an organisation and therefore we must address this issue immediately’.

    Required:

    (b) Discuss the statement of the managing director of JOL Co and discuss six performance indicators, other than

    decreasing market share, which might indicate that JOL Co might fail as a corporate entity. (10 marks)


    正确答案:
    (b) It would appear that JOL’s market share has declined from 30% to (80 – 26)/3 = 18% during the last three years. A 12%
    fall in market share is probably very significant with a knock-on effect on profits and resultant cash flows. Obviously such a
    declining trend needs to be arrested immediately and this will require a detailed investigation to be undertaken by the directors
    of JOL. Consequently loss of market share can be seen to be an indicator of potential corporate failure. Other indicators of
    corporate failure are as follows:
    Six performance indicators that an organisation might fail are as follows:
    Poor cash flow
    Poor cash flow might render an organisation unable to pay its debts as and when they fall due for payment. This might mean,
    for example, that providers of finance might be able to invoke the terms of a loan covenant and commence legal action against
    an organisation which might eventually lead to its winding-up.
    Lack of new production/service introduction
    Innovation can often be seen to be the difference between ‘life and death’ as new products and services provide continuity
    of income streams in an ever-changing business environment. A lack of new product/service introduction may arise from a
    shortage of funds available for re-investment. This can lead to organisations attempting to compete with their competitors with
    an out of date range of products and services, the consequences of which will invariably turn out to be disastrous.
    General economic conditions
    Falling demand and increasing interest rates can precipitate the demise of organisations. Highly geared organisations will
    suffer as demand falls and the weight of the interest burden increases. Organisations can find themselves in a vicious circle
    as increasing amounts of interest payable are paid from diminishing gross margins leading to falling profits/increasing losses
    and negative cash flows. This leads to the need for further loan finance and even higher interest burden, further diminution
    in margins and so on.
    Lack of financial controls
    The absence of sound financial controls has proven costly to many organisations. In extreme circumstances it can lead to
    outright fraud (e.g. Enron and WorldCom).
    Internal rivalry
    The extent of internal rivalry that exists within an organisation can prove to be of critical significance to an organisation as
    managerial effort is effectively channeled into increasing the amount of internal conflict that exists to the detriment of the
    organisation as a whole. Unfortunately the adverse consequences of internal rivalry remain latent until it is too late to redress
    them.
    Loss of key personnel
    In certain types of organisation the loss of key personnel can ‘spell the beginning of the end’ for an organisation. This is
    particularly the case when individuals possess knowledge which can be exploited by direct competitors, e.g. sales contacts,
    product specifications, product recipes, etc.

  • 第11题:

    (ii) Briefly outline the tax consequences for Henry if the types of protection identified in (i) were to be

    provided for him by Happy Home Ltd compared to providing them for himself. You are not required to

    discuss the corporation tax (CT) consequences for Happy Home Ltd. (4 marks)


    正确答案:
    (ii) Provision of protection: company or individual
    If any of the policies are taken out and paid for by Henry personally, then there will be no tax relief on the premiums,
    but neither will there normally be any tax payable on the proceeds or benefits received.
    If Happy Home Ltd were to pay the premiums on a policy taken out by Henry, and of which he was the direct beneficiary,
    then this will constitute a benefit, on the grounds that the company will have satisfied a personal liability of Henry’s.
    Accordingly, income tax and Class 1A national insurance contributions will be payable on the benefit.
    If, however, Happy Home Ltd were to decide to offer protection benefits to their employees on a group basis (and not
    just to Henry), then it would be possible to avoid a charge under the benefits rules and/or obtain a lower rate of premium
    under a collective policy. For example:
    – A death in service benefit of up to four times remuneration can be provided as part of an approved pension scheme.
    No benefit charge arises on Henry and any lump sum will be paid tax free. This could be considered a substitute
    for a term assurance policy.
    – If a group permanent health insurance policy were taken out, no benefit charge would arise on Henry, but any
    benefits payable under the policy would be paid to Happy Home Ltd in the first instance. When subsequently paid
    on to Henry, such payments would be treated as arising from his employment and subject to PAYE and national
    insurance as for normal salary payments.
    – If a group critical illness policy were taken out, again no benefit charge would arise on Henry, but in this case also,
    any benefits received by Henry directly from Happy Home Ltd as a result of the payments under the policy would
    be considered as derived from his employment and subject to income tax and national insurance. Such a charge
    to tax and national insurance would however be avoided if these payments were made in terms of a trust.

  • 第12题:

    (b) Illustrate how you might use analytical procedures to provide audit evidence and reduce the level of detailed

    substantive procedures. (7 marks)


    正确答案:
    (b) Illustration of use of analytical procedures as audit evidence
    Tutorial note: Note that ‘as audit evidence’ requires consideration of substantive analytical procedures rather that the
    identification of risks (relevant to part (a)).
    Revenue
    Analytical procedures may be used in testing revenue for completeness of recording (‘understatement’). The average selling
    price of a vehicle in 2005 was $68,830 ($526·0 million ÷ 7,642 vehicles). Applying this to the number of vehicles sold
    in 2006, might be projected to generate $698·8 million ($68,830 × 10,153) revenue from the sale of vehicles. The draft
    financial statements therefore show a potential shortfall of $110·8 million ($(698·8 – 588·0) million) that is, 15·6%.
    This should be investigated and substantiated through more detailed analytical procedures. For example, the number of
    vehicles sold should be analysed into models and multiplied by the list price of each for a more accurate estimate of potential
    revenue. The impact of discounts and other incentives (e.g. 0% finance) on the list prices should then be allowed for. If
    recorded revenue for 2006 (as per draft income statement adjusted for cutoff and consignment inventories) is materially lower
    than that calculated, detailed substantive procedures may be required in order to show that there is no material error.
    ‘Proof in total’/reasonableness tests
    The material correctness, or otherwise, of income statement items (in particular) may be assessed through appropriate ‘proof
    in total’ calculations (or ‘reasonableness’ tests). For example:
    ■ Employee benefits costs: the average number of employees by category (waged/salaried/apprenticed) × the average pay
    rate for each might prove that in total $91·0 million (as adjusted to actual at 31 December 2006) is not materially
    misstated. The average number of employees needs to be checked substantively (e.g. recalculated based on the number
    of employees on each payroll) and the average pay rates (e.g. to rates agreed with employee representatives).
    Tutorial note: An alternative reasonableness might be to take last year’s actual adjusted for 2006 numbers of
    employees grossed-up for any pay increases during the year (pro-rated as necessary).
    ■ Depreciation: the cost (or net book value) of each category of asset × by the relevant straight-line (or reducing balance)
    depreciation rate. If a ‘ballpark’ calculation for the year is materially different to the annual charge a more detailed
    calculation can be made using monthly depreciation calculations. The cost (or net book value) on which depreciation
    is calculated should be substantively tested, for example by agreeing brought forward balances to prior year working
    papers and additions to purchase invoices (costings in respect of assets under construction).
    Tutorial note: Alternatively, last year’s depreciation charge may be reconciled to this year’s by considering depreciation
    rates applied to brought forward balances with adjustments for additions/disposals.
    ■ Interest income: an average interest rate for the year can be applied to the monthly balance invested (e.g. in deposit
    accounts) and compared with the amount recognised for the year to 31 December 2006 (as adjusted for any accrued
    interest per the bank letter for audit purposes). The monthly balances (or averages) on which the calculation is
    performed should be substantiated to bank deposit statements.
    ■ Interest expense: if the cash balances do not go into overdraft then this may be similar expenses (e.g. prompt payment
    discounts to customers). If this is to particular dealers then a proof in total might be to apply the discount rate to the
    amounts invoiced to the dealer during the period.
    Immaterial items
    For immaterial items analytical procedures alone may provide sufficient audit evidence that amounts in the financial
    statements are not materially misstated so that detailed substantive procedures are not required. For example, a comparison
    of administration and distribution, maintenance and insurance costs for 2006 compared with 2005 may be sufficient to show
    that material error is highly unlikely. If necessary, further reasonableness tests could be performed. For example, considering
    insurance costs to value of assets insured or maintenance costs to costs of assets maintained.
    Ratio analysis
    Ratio analysis can provide substantive evidence that income statement and balance sheet items are not materially misstated
    by considering their inter-relationships. For example:
    ■ Asset turnover: Based on the draft financial statements property, plant and equipment has turned over 5·2 times
    ($645·5/124·5) compared with 5·9 times in 2005. This again highlights that income may be overstated, or assets
    overstated (e.g. if depreciation is understated).
    ■ Inventory turnover: Using cost of materials adjusted for changes in inventories this has remained stable at 10·9 times.
    Tutorial note: This is to be expected as in (a) the cost in the income statement has increased by 9% and the value of
    inventories by 8·5%.
    Inventories represent the smallest asset value on the balance sheet at 31 December 2006 (7·8% of total assets).
    Therefore substantive procedures may be limited to agreeing physical count of material items (vehicles) and agreeing
    cutoff.
    ■ Average collection period: This has increased to 41 days (73·1/645·5 × 365) from 30 days. Further substantive analysis
    is required, for example, separating out non-current amounts (for sales on 0% finance terms). Substantive procedures
    may be limited to confirmation of amounts due from dealers (and/or receipt of after-date cash) and agreeing cutoff of
    goods on consignment.
    ■ Payment periods: This has remained constant at 37 days (2005 – 38 days). Detailed substantive procedures may be
    restricted to reconciling only major suppliers’ statements and agreeing the cutoff on parts purchased from them.

  • 第13题:

    (c) Explain how Perfect Shopper might re-structure its downstream supply chain to address the problems

    identified in the scenario. (10 marks)


    正确答案:
    (c) A number of opportunities appear to exist in the downstream supply chain.
    As already mentioned above, Perfect Shopper can revisit its contract distribution arrangements. At present, distribution to
    neighbourhood shops is in the hands of locally appointed contract distributors. As already suggested, it may be possible to
    contract one integrated logistics company to carry out both inbound and outbound logistics, so gaining economies of scale
    and opportunities for branding.
    One of the problems identified in the independent report was the inflexibility of the ordering and delivering system. The
    ordering system appears to be built around a fixed standard delivery made every two weeks, agreed in advance for a three
    month period. Variations can be made to this standard order, but only increases – not decreases. Presumably, this
    arrangement is required to allow Perfect Shopper to forecast demand over a three month period and to place bulk orders to
    reflect these commitments. However, this may cause at least two problems. The first is that participating shops place a
    relatively low standard order and rely on variations to fulfil demand. This causes problems for Perfect Shopper. Secondly, any
    unpredictable fall in demand during the three month period leads to the shop having storage problems and unsold stock. This
    potentially creates problems for the shop owner, who may also begin to question the value of the franchise. Hence Perfect
    Shopper might wish to consider a much more flexible system where orders can be made to match demand and deliveries
    can be made as required. This would also remove the requirement for a three monthly meeting between the franchisee andthe sales representative from Perfect Shopper. Investments in IT systems will be required to support this, with participating
    shops placing orders over the Internet to reflect their requirements. This move towards a more flexible purchasing arrangement
    may also make the outsourcing of warehousing and distribution even more appealing.
    Perfect Shopper may also wish to investigate whether they can also provide value added services to customers, which not
    only simplify the ordering system but also allow the shop managers to better understand their customers and fulfil their
    requirements. The supply chain may legitimately include the customer’s customers, particularly for franchisers. This is already
    acknowledged because Perfect Shopper produces tailored marketing material aimed at the end-consumer. Point of Sales (PoS)
    devices feeding information back to Perfect Shopper would allow sales information to be analysed and fed back to the
    shopkeeper as well as allowing automatic replenishment based on purchasing trends. However, this may be culturally difficult
    for independent neighbourhood shopkeepers to accept. Furthermore, it would potentially include information outside the
    products offered by Perfect Shopper and the implications of this would have to be considered. However, a whole shop sales
    analysis might be a useful service to offer existing and potential franchisees.
    Customers are increasingly willing to order products over the Internet. It seems unlikely that individual shopkeepers would be
    able to establish and maintain their own Internet-based service. It would be useful for Perfect Shopper to explore the potential
    of establishing a central website with customers placing orders from local shops. Again there are issues about scope, because
    Perfect Shopper does not offer a whole-shop service. However, Michael de Kare-Silver has identified groceries as a product
    area that has good potential for Internet purchase. In his electronic shopping potential test any product scoring over 20 hasgood potential. Groceries scored 27.

  • 第14题:

    (b) How might the marketing mix vary between the three channels Helen is considering using? (8 marks)


    正确答案:
    (b) The analysis of each of the market entry strategies has begun the process of identifying how the marketing mix of product,
    price, place and promotion will vary significantly between the three outlets.
    Product – here the nature of the product in terms of recipes and product range can be varied reasonably easily to meet the
    demands of the outlet.
    Price – again this will vary in significance between the three outlets with the greatest pressure coming from the supermarkets
    and catering wholesalers. Margins may come under pressure with the supermarkets looking for a contribution to sales
    promotions.
    Promotion – here the issue of brand development is a crucial factor. Using her own brand, Helen can develop the product
    range and extend the outlets she sells through.

  • 第15题:

    (b) Using the TARA framework, construct four possible strategies for managing the risk presented by Product 2.

    Your answer should describe each strategy and explain how each might be applied in the case.

    (10 marks)


    正确答案:
    (b) Risk management strategies and Chen Products
    Risk transference strategy
    This would involve the company accepting a portion of the risk and seeking to transfer a part to a third party. Although an
    unlikely possibility given the state of existing claims, insurance against future claims would serve to limit Chen’s potential
    losses and place a limit on its losses. Outsourcing manufacture may be a way of transferring risk if the ourtsourcee can be
    persuaded to accept some of the product liability.
    Risk avoidance strategy
    An avoidance strategy involves discontinuing the activity that is exposing the company to risk. In the case of Chen this would
    involve ceasing production of Product 2. This would be pursued if the impact (hazard) and probability of incurring an
    acceptable level of liability were both considered to be unacceptably high and there were no options for transference or
    reduction.
    Risk reduction strategy
    A risk reduction strategy involves seeking to retain a component of the risk (in order to enjoy the return assumed to be
    associated with that risk) but to reduce it and thereby limit its ability to create liability. Chen produces four products and it
    could reconfigure its production capacity to produce proportionately more of Products 1, 3 and 4 and proportionately less of
    Product 2. This would reduce Product 2 in the overall portfolio and therefore Chen’s exposure to its risks. This would need
    to be associated with instructions to other departments (e.g. sales and marketing) to similarly reconfigure activities to sell
    more of the other products and less of Product 2.
    Risk acceptance strategy
    A risk acceptance strategy involves taking limited or no action to reduce the exposure to risk and would be taken if the returns
    expected from bearing the risk were expected to be greater than the potential liabilities. The case mentions that Product 2 is
    highly profitable and it may be that the returns attainable by maintaining and even increasing Product 2’s sales are worth the
    liabilities incurred by compensation claims. This is a risk acceptance strategy.

  • 第16题:

    (ii) Explain THREE strategies that might be adopted in order to improve the future prospects of Diverse

    Holdings Plc. (6 marks)


    正确答案:
    (ii) The forecast situation of Diverse Holdings Plc is not without its problems. KAL and OPL require the immediate attention
    of management. The position of KAL is precarious to say the least. There is a choice of strategies for it:
    (i) Outsource the manufacture of appliances
    (ii) Set up a manufacturing operation overseas
    (ii) Withdraw from the market.
    Each alternative must be assessed. Whatever decision is taken it is unlikely to affect the other four subsidiaries.
    PSL is also independent of the other subsidiaries. A strategic decision to widen its range of products and outlets must
    surely help. Hence management should endeavour to find new markets for its products, which are separate and distinct
    from those markets served by its appointed distributors.
    21
    In order to improve the prospects of OPL management need to adopt appropriate strategies since at the present time the
    company appears to be in a high growth market but is unable to capture a reasonable market share. Perhaps the answer
    lies in increased or more effective advertising of the endorsement of the product range by health and safety experts.
    Management should endeavour to develop a strategy to integrate further its subsidiaries so that they can benefit from
    each other and also derive as much synergy as possible from the acquisition of HTL.
    It is of paramount importance that management ensure that sufficient funds are channelled into growing OFL and HTL,
    which are both showing a rising trend in profitability. The group has depleted cash reserves which must to some extent
    be attributable to the purchase of HTL. It is possible that the divestment of KAL would provide some much needed
    funding.

  • 第17题:

    (c) Explain how the use of activity-based techniques may benefit Taliesin Ltd. (5 marks)


    正确答案:
    (c) The usefulness of activity-based techniques is accentuated in situations where overheads comprise a significant proportion of
    product costs. Manufacturing overheads comprise 30·9% of turnover during the year ended 31 May 2005. Traditional
    methods of allocating overheads to products might result in product cost information which is misleading and detrimental to
    managerial decision-making. Calculations of product costs are more prone to error in situations where higher levels of
    overhead exist. The consequences can prove disastrous as, for example, in the under-pricing or over-pricing of products.
    Since Taliesin Ltd is going to confine its activities to its home country it must be prepared to face increased competition and
    this increases the need for greater visibility and more accurate product cost information.
    At present, Taliesin Ltd offers a range of products which is increasing in number and this may lead to the need for a more
    detailed costing system. Traditional absorption systems might well be inadequate as the number of product variants increases.
    One would expect that each new product developed is more complex than its predecessors. The company would probably
    start with simple Vanilla, then a few basic flavours but as Taliesin Ltd has expanded one would expect it to take longer to
    originate and test new products until they are ready to be introduced. It will probably take longer to mix the ingredients for a
    run of each product.
    These two, development and mixing ingredients, are examples of activities which arise when new products are considered.
    If traditional absorption costing and budgeting are used based on machine-time in production then the effect of these activities
    would be ignored.
    In order to gain a full appreciation of the impact of new product introduction activity-based techniques should be used to
    guide Taliesin Ltd into the easiest way to maintain its policy of growth. It may be a better decision to expand abroad or into
    new markets at home with the existing products than pursue growth by introducing new products to a dwindling number of
    customers.
    We are not told of the composition of the customer base of Taliesin Ltd. However, one thing we do know is that the scope of
    activity-based techniques extends beyond products and services. For example, the application of activity-based costing can
    provide vital information that enables management to undertake customer profitability analysis, thereby further improving
    management decision-making and operating performance.

  • 第18题:

    (e) Briefly discuss FOUR initiatives that management might consider in order to further enhance profitability.

    (4 marks)


    正确答案:
    (e) In order to enhance profitability management might take the following actions:
    (i) Increase the maximum capacity of the circus.
    (ii) Undertake a detailed review of operating costs which are budgeted at £239,200,000. Such a review might identify nonvalue
    added costs which may be eliminated thereby increasing profitability.
    (iii) Enter into a strategic arrangement with large hotels and travel agencies to offer travel and accommodation inclusive
    arrangements for visitors to Cinola Island. This might help to increase the number of visitors to the zoo thereby increasing
    profits.
    (iv) Change the price structure and entitlement of tickets so that purchasers might visit Cinola Island on two separate days
    in order to attend the zoo and circus. Additional revenues would arise as a consequence of the increased number of
    visitors to the zoo, thereby increasing profitability.
    (v) Hold prize draws for free tickets to the zoo for families on an ‘all-inclusive basis’, including restaurants, photographs,
    souvenirs etc.
    N.B. Only four initiatives were required to be discussed.

  • 第19题:

    (ii) Comment briefly on the use of its own tree plantations as a source of raw materials by Our Timbers Ltd.

    (3 marks)


    正确答案:
    (ii) The use of its own tree plantations as a source of raw materials not only ensures available supplies of timber but may
    also demonstrate that the directors of Our Timbers Ltd are mindful of the need for careful planning in the consumption
    of natural resources. This concern with the need to protect the environment will enhance the reputation of Our Timbers
    Ltd as an environmentally-conscious organisation which in turn may translate into a source of competitive advantage
    since contemporary thought is very much focused on the environmental responsibilities of organisations with particular
    regard to the use of natural resources such as timber.

  • 第20题:

    (c) Briefly discuss why the directors of HFL might choose contract D irrespective of whether or not contract D

    would have been selected using expected values as per part (a). (2 marks)


    正确答案:
    (c) The directors might select Contract D under which 360,000 kilograms of organic mushrooms would be supplied to HFL for
    each outlet. This is the entire capacity of HFL which would ensure that competitors would not be able to supply the same
    product and hence the competitive advantage held by HFL might be preserved.

  • 第21题:

    (ii) Briefly discuss THREE disadvantages of using EVA? in the measurement of financial performance.

    (3 marks)


    正确答案:
    (ii) Disadvantages of an EVA approach to the measurement of financial performance include:
    (i) The calculation of EVA may be complicated due to the number of adjustments required.
    (ii) It is difficult to use EVA for inter-firm and inter-divisional comparisons because it is not a ratio measure.
    (iii) Economic depreciation is difficult to estimate and conflicts with generally accepted accounting principles.
    Note: Other relevant discussion would be acceptable.

  • 第22题:

    (ii) Comment on the figures in the statement prepared in (a)(i) above. (4 marks)


    正确答案:
    (ii) The statement of product profitability shows that CTC is forecast to achieve a profit of $2·185 million in 2008 giving a
    profit:sales ratio of 11·9%. However, the forecast profit in 2009 is only $22,000 which would give a profit:sales ratio
    of just 0·19%! Total sales volume in 2008 is 390,000 units which represent 97·5% utilisation of total annual capacity.
    In stark contrast, the total sales volume in 2009 is forecast to be 240,000 units which represents 60% utilisation of
    total annual capacity and shows the expected rapid decline in sales volumes of Bruno and Kong products. The rapid
    decline in the sales of these two products is only offset to a relatively small extent by increased sales volume from the
    Leo product. It is vital that a new product or products with healthy contribution to sales ratios are introduced.
    Management should also undertake cost/benefit analyses in order to assess the potential of extending the life of Bruno
    and Kong products.

  • 第23题:

    (ii) analytical procedures, (6 marks)

    might appropriately be used in the due diligence review of MCM.


    正确答案:
    (ii) Analytical procedures
    Tutorial note: The range of valid answer points is very broad for this part.
    ■ Review the trend of MCM’s profit (gross and net) for the last five years (say). Similarly earnings per share and
    gearing.
    ■ For both the National and International businesses compare:
    – gross profit, net profit, and return on assets for the last five years (say);
    – actual monthly revenue against budget for the last 18 months (say). Similarly, for major items of expenditure
    such as:
    – full-time salaries;
    – freelance consultancy fees;
    – premises costs (e.g. depreciation, lease rentals, maintenance, etc);
    – monthly revenue (also costs and profit) by centre.
    ■ Review projections of future profitability of MCM against net profit percentage at 31 December 2004 for:
    – the National business (10·4%);
    – the International business (38·1%); and
    – overall (19·9%).
    ■ Review of disposal value of owned premises against book values.
    ■ Compare actual cash balances with budget on a monthly basis and compare borrowings against loan and overdraft
    facilities.
    ■ Compare the average collection period for International’s trade receivables month on month since 31 December
    2004 (when it was nearly seven months, i.e.
    $3·7
    –––– × 365 days) and compare with the National business.
    $6·3
    ■ Compare financial ratios for each of the national centres against the National business overall (and similarly for the
    International Business). For example:
    – gross and net profit margins;
    – return on centre assets;
    – average collection period;
    – average payment period;
    – liquidity ratio.
    ■ Compare key performance indicators across the centres for the year to 31 December 2004 and 2005 to date. For
    example:
    – number of corporate clients;
    – number of delegates;
    – number of training days;
    – average revenue per delegate per day;
    – average cost per consultancy day.