(c) Assess the advantages and disadvantages to Datum Paper Products taking the greenfield option as opposedto the acquisition of Papier Presse. (15 marks)

正确答案：
(b) Divestment of products or parts of the business is one of the most difficult strategic decisions. As apparent in Bonar Paint a
reduction in the products and customers served by the firm is likely to cause significant changes to the firm’s value chain and
system. Currently Bonar Paint supplies its customers, regardless of size, directly and this inevitably means that their
distribution costs are increased. The reduction in products and customers may allow a choice to be made about the costs of
supplying customers directly as against using distributors to handle the smaller customers.
In using the value chain one is looking to identify the significant cost activities and how those costs behave. Some costs may
be affected by the overall size of the firm e.g. advertising while others affected by the batch size being processed. The changeto fewer products will lead to a bigger batch size and a number of positive consequences for costs. The value chain’s major
benefit is in identifying and quantifying the links that exist between various activities within the firm and between the firm
and its customers and suppliers. In Bonar Paint’s case does a reduction in product range lead to less product failures and
consequent warranty claims? Does simplifying the product range lead to shorter lead times and better delivery time
performance for its customers? Above all, a good understanding of its value chain will let it know if it changes an activity what
are the consequences for other parts of the system.
In terms of reducing the product range, before such a decision is taken Bonar Paint must carry out a thorough analysis of the
pattern of customer demand for each paint type. In all probability it will find that 80% of its sales come from 20% of its
product range. Having given this qualification, reducing the product range can have a number of beneficial results on other
parts of the value chain. The immediate effect is likely to be that Bonar Paint produces fewer batches over a given time period
but produces them in larger quantities. This will bring cost savings but the impact on other parts of the value chain is equally
important. The beneficial effects are:
– With a smaller product range the control of raw materials and finished inventory will be simplified affecting inbound and
outbound logistics. This will improve the inventory turn and make for better product availability.
– With an improved inventory turn this will reduce the firm’s working capital needs and release significant amounts of
cash.
– A simpler operations process should facilitate staff savings and support more automation.
– Warranty claims and support costs could be reduced.
– Bonar Paint will be purchasing fewer raw materials but in greater volume and on a more regular basis. This will lead to
improved price and delivery terms from its suppliers.
– Bonar Paint can offer improved product reliability and better delivery to its customers and should improve its market
share.
In terms of operational disadvantages, these therefore are largely in terms of the impact on customer service levels seen in
terms of product range availability. Once again it is important to have accurate information on the sales and profitability of
each product so informed divestment decisions could be taken. Care must be taken to identify any paints, which though
ordered infrequently, and in small quantities are a pre-cursor for customers ordering other paints. Some important customers
may require that the full range of their paint needs are met in order to continue buying from Bonar Paint.
Reduction of the product range and customer base is an important strategic decision. Eliminating non-contributors or ‘dog’
products both in terms of paints and customers is a key part of managing the product portfolio. However, inertia both in terms
of products and customers is a real strategic weakness. In terms of the three tests of suitability, acceptability and feasibility
the analysis suggests that only acceptability is likely to be an issue. Tony Edmunds needs to be convinced that it is an
appropriate strategy to adopt. It is the lack of accurate sales analysis that lies at the heart of the problem and that is his areaof responsibility!

正确答案：
(b) Johnson, Scholes and Whittington define a strategic alliance as ‘where two or more organisations share resources and
activities to pursue a strategy’. There are a number of types of alliance ranging from a formal joint venture through to networks
where there is collaboration but no formal agreement. The type of strategic alliance will be affected by how quickly market
conditions are changing – swift rates of change may require flexible less formal types of alliance and determine whether
specific dedicated resources are required or whether the partners can use existing resources. Johnson, Scholes and
Whittington argue that for an alliance to be successful there needs to be a clear strategic purpose and senior management
support; compatibility between the partners at all levels – this may be complicated if it is a cross-border alliance; time spent
defining and meeting performance expectations including clear goals, governance and organisational arrangements; and
finally trust both in terms of respective competences and trustworthiness.

6D–ENGAA
Paper 3.5
6D–ENGAA
Paper 3.5
The advantages that may be gained by a successful strategic alliance include creating a joint operation that has a ‘critical
mass’ that may lead to lower costs or an improved offer to the customer. It may also allow each partner to specialise in areas
where they have a particular advantage or competence. Interestingly, alliances are often entered into where a company is
seeking to enter new geographical markets, as is the case with both divisions. The partner brings local knowledge and
expertise in distribution, marketing and customer support. A good strategic alliance will also enable the partners to learn from
one another and develop competences that may be used in other markets. Often firms looking to develop an e-business will
use an alliance with a partner with experience in website development. Once its e-business is up and running a firm may
eventually decide to bring the website design skills in-house and acquire the partner.
Disadvantages of alliances range from over-dependence on the partner, not developing own core competences and a tendency
for them not to have a defined end date. Clearly there is a real danger of the partner eventually becoming a competitor.
In assessing the suitability for each division in using a strategic alliance to enter European markets one clearly has to analyse
the very different positions of the divisions in terms of what they can offer a potential partner. The earlier analysis suggests
that the Shirtmaster division may have the greater difficulty in attracting a partner. One may seriously question the feasibility
of using the Shirtmaster brand in Europe and the competences the division has in terms of manufacturing and selling to large
numbers of small independent UK clothing retailers would seem inappropriate to potential European partners. Ironically, if
the management consultant recommends that the Shirtmaster division sources some or all of its shirts from low cost
manufacturers in Europe this may provide a reason for setting up an alliance with such a manufacturer.
The prospects of developing a strategic alliance in the Corporate Clothing division are much more favourable. The division
has developed a value added service for its corporate customers, indeed its relationship with its customers can be seen as a
relatively informal network or alliance and there seems every chance this could be replicated with large corporate customers
in Europe. Equally, there may be European workwear companies looking to grow and develop who would welcome sharingthe Corporate Clothing division’s expertise.

正确答案：
(b) Clearly, there is a link between the ability to write a business plan and the willingness, or otherwise, of small firms to carry
out strategic planning. Whilst writing a business plan may be a necessity in order to acquire financial support, there is much
more question over the benefits to the existing small business, such as Gould and King, of carrying out strategic planning.
One of the areas of greatest debate is whether carrying out strategic planning leads to improved performance. Equally
contentious is whether the formal rational planning model is worthwhile or whether strategy is much more of an emergent
process, with the firm responding to changes in its competitive environment.
One source argues that small firms may be reluctant to create a strategic plan because of the time involved; small firms may
find day-to-day survival and crisis management prevents them having the luxury of planning where they mean to be over the
next few years. Secondly, strategic plans may also be viewed as too restricting, stopping the firm responding flexibly and
quickly to opportunities and threats. Thirdly, many small firms may feel that they lack the necessary skills to carry out strategic
planning. Strategic planning is seen as a ‘big’ firm process and inappropriate for small firms. Again, there is evidence to
suggest that owner-managers are much less aware of strategic management tools such as SWOT, PESTEL and mission
statements than their managers. Finally, owner-managers may be reluctant to involve others in the planning process, which
would necessitate giving them access to key information about the business. Here there is an issue of the lack of trust and
openness preventing the owner-manager developing and sharing a strategic plan. Many owner-managers may be quite happy
to limit the size of the business to one which they can personally control.
On the positive side there is evidence to show that a commitment to strategic planning results in speedier decision making,
a better ability to introduce change and innovation and being good at managing change. This in turn results in better
performance including higher rates of growth and profits, clear indicators of competitive advantage. If Gould and King arelooking to grow the business as suggested, this means some strategic planning will necessarily be involved

正确答案：
(b) Developing a shared culture will be one of the key determinants of whether the anticipated benefits of the acquisition actually
materialise. Due diligence procedures before the merger should have established the key people issues. This will include
reviewing the two management styles and cultures. Clearly these are very different, looking at internal communication pre
and post acquisition, understanding the nature of reward systems in the firm to be acquired, assessing the nature of training
programmes in the firm both before and after the acquisition and attempting to gauge existing employee attitudes towards
Papier Presse and the likely reaction to the acquisition. Reviewing areas where there have been significant staff problems and
consequent negotiations will also be an important clue as to employee attitudes and morale. ‘Hard’ people issues including
pensions, management rewards, health insurance and redundancy terms will need to be realistically assessed and the
implications for both the price paid for the company and subsequent integration fully understood. All too often the compelling
strategic vision for the enlarged company ignores the people costs involved and the time needed to develop shared HR
systems.
Many models on culture and culture management could help to achieve a successful transition. Mintzberg’s cultural or
organisational configuration model, which would facilitate an understanding of the difference in structures and systems, could
be a useful starting point. DPP comes from a divisionalised company where the middle line managers are given considerable
autonomy in achieving agreed levels of performance. Papier Presse, with its dominance by family ownership and
management, could be argued to be entrepreneurial in character, where the owner/managers at the strategic apex of the
company operate a ‘hands-on’ approach and direct control of subordinates. Reconciling these different cultures and structures
will not be an easy task.
Lewin’s 3-step model of change can be used in helping a positive culture emerge from the combining of the two companies.
There is a need to unfreeze the current situation in which employees of both organisations are likely to be reluctant or resistant
to change. There needs to be a clear understanding of who does what in the new organisation – leadership and the role of
the French owners will be a critical factor in successfully changing the culture. Robbins emphasises the need for positive top
management role models in promoting and communicating the need for a change in culture. Policies to affect change on both
the hard and soft factors referred to above need to be in place to move the integration forward. A clear timescale and vision
for change will be a key part of the change process. Finally the systems will need to be in place to re-freeze or rather reinforce
the attitudes and behaviours necessary to achieve success in the merged organisation. Operating across national borderscreates real culture issues to be solved as shown in studies by Hofstede and Bartlett and Ghoshal.

正确答案：
(b) In many ways Lawson Engineering and its performance explains why Kaplan and Norton developed the balanced scorecard
to overcome the reliance on traditional, and they would argue flawed, financial measures of performance such as return on
capital employed (ROCE). Lawson Engineering as a privately owned company does not have the same pressure to maximise
shareholder wealth, which is the overarching long-term goal of publicly quoted companies. The intangible resources discussed
above – both internal and external – reflect the success of the company in meeting the expectations of the other key
stakeholders in the business, namely customers, employees and suppliers. In terms of the other measures of performance
used in the balanced scorecard the customer perspective seems to be very much a positive area of performance. Lawson
Engineering has developed a clear niche strategy based on the excellence of its products. Market share as a measure of
customer satisfaction is not too relevant as the company has chosen to develop its own markets and is not looking for large
volumes and a dominant market share. The growth of the company suggests that it is both retaining its existing customer
base and acquiring new ones. Clearly there need to be measures in place to show where its growth is coming from. Customer
acquisition is usually an expensive but necessary activity and cutomer retention a more positive route to profitability. Today
there is increasing emphasis on customer relationship management (CRM) and measures to show the share of a particular
customer’s business the company has, rather than the overall market share the company has achieved. Michael Porter has
drawn attention to the fact that having the biggest market share is not necessarily associated with being the most profitable
company in that market. Customer acquisition and retention are both useful indicators of customer satisfaction which many
companies have problems in measuring. Finally, knowing which customers are profitable ones is a key requirement.
Surprisingly there is a lot of evidence to suggest that many companies are unsure which of their products and which
customers actually contribute to their profits.
The third measure in the balanced scorecard is an internal one – the effectiveness or otherwise of the firm’s internal processes.
In turn there are three areas where performance should be measured – innovation, operational processes and after sales
service (where appropriate). Innovation itself is a result of effective internal processes and Lawson Engineering through its
patents and awards has tangible evidence of its success. Many firms are measuring the contribution of products introduced
in the last three or four years – 3M, a global manufacturer of consumer and industrial products looks to achieve 30% of its
sales from products that are less than four years old. Equally important in a company such as Lawson Engineering is the time
taken to develop and get new products to their customers. The strategy of being ‘first to market’ can be a very effective
competitive strategy.
Equally important for the customers are the operational processes that produce and deliver the inputs from their suppliers.
The introduction of JIT and the use of technology to shorten and simplify the links between supplier and customer are ways
of shortening lead times and increasing customer satisfaction. Lawson Engineering has looked to innovate its processes as
well as its products and can look to develop measures of key areas of operational performance. Finally it is worth stressing
that financial performance, customer satisfaction and effective internal processes are all dependent on the people who make
things happen in the firm. Employees and the way they learn and grow in their jobs will determine whether or not the firm
succeeds. Again there is evidence to suggest that Lawson Engineering’s employees are being trained and developed and as
a consequence are well motivated.
The balanced scorecard has been criticised on a number of accounts. Firstly, such a comprehensive set of performance
measures will take considerable time and commitment on the part of senior management to develop. There is a need to avoid
over-complexity and assess the costs and benefits of the process. Secondly, there is the question of whether all the key
stakeholders have shared goals and expectations and whether the measures are focused on short-, medium- or long-term
performance. Thirdly, its focus on internal and external processes may not come easily to firms that have organised themselves
on traditional lines. Most organisations have retained departments within which functional specialists are located, e.g.
production, marketing etc. Changing the way performance is measured may need a radical change in culture and meetsignificant resistance.

正确答案：
(ii) Advantages and disadvantages of being non-executive rather than executive
The UK Combined Code, for example, allows for risk committees to be made up of either executive or non-executive
members.
Advantages of non-executive membership
Separation and detachment from the content being discussed is more likely to bring independent scrutiny.
Sensitive issues relating to one or more areas of executive oversight can be aired without vested interests being present.
Non-executive directors often bring specific expertise that will be more relevant to a risk problem than more
operationally-minded executive directors will have.
Chen’s four members, being from different backgrounds, are likely to bring a range of perspectives and suggested
strategies which may enrich the options open to the committee when considering specific risks.
Disadvantages of non-executive membership (advantages of executive membership)
Direct input and relevant information would be available from executives working directly with the products, systems
and procedures being discussed if they were on the committee. Non-executives are less likely to have specialist
knowledge of products, systems and procedures being discussed and will therefore be less likely to be able to comment
intelligently during meetings.
The membership, of four people, none of whom ‘had direct experience of Chen’s industry or products’ could produce
decisions taken without relevant information that an executive member could provide.
Non-executive directors will need to report their findings to the executive board. This reporting stage slows down the
process, thus requiring more time before actions can be implemented, and introducing the possibility of some
misunderstanding.

正确答案：
(b) Nominations committees
General roles of a nominations committee.
It advises on the balance between executives and independent non-executive directors and establishes the appropriate
number and type of NEDs on the board. The nominations committee is usually made up of NEDs.
It establishes the skills, knowledge and experience possessed by current board and notes any gaps that will need to be filled.
It acts to meet the needs for continuity and succession planning, especially among the most senior members of the board.
It establishes the desirable and optimal size of the board, bearing in mind the current size and complexity of existing and
planned activities and strategies.
It seeks to ensure that the board is balanced in terms of it having board members from a diversity of backgrounds so as to
reflect its main constituencies and ensure a flow of new ideas and the scrutiny of existing strategies.
In the case of Rosh, the needs that a nominations committee could address are:
To recommend how many directors would be needed to run the business and plan for recruitment accordingly. The perceived
similarity of skills and interests of existing directors is also likely to be an issue.
To resolve the issues over numbers of NEDs. It seems likely that the current number is inadequate and would put Rosh in a
position of non-compliance with many of the corporate governance guidelines pertaining to NEDs.
To resolve the issues over the independence of NEDs. The closeness that the NEDs have to existing executive board members
potentially undermines their independence and a nominations committee should be able to identify this as an issue and make
recommendations to rectify it.
To make recommendations over the succession of the chairmanship. It may not be in the interests of Rosh for family members
to always occupy senior positions in the business.

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.

正确答案：
(c) A joint audit is when two or more audit firms are jointly responsible for giving the audit opinion. This is very common in a
group situation where the principal auditor is appointed jointly with the auditor of a subsidiary to provide a joint opinion on
the subsidiary’s financial statements. There are several advantages and disadvantages in a joint audit being performed.
Advantages
It can be beneficial in terms of audit efficiency for a joint audit to be conducted, especially in the case of a new subsidiary.
In this case, Lead & Co will have built up an understanding of Maxwell Co’s business, systems and controls, and financial
statement issues. It will be time efficient for the two firms of auditors to work together in order for Chien & Co to build up
knowledge of the new subsidiary. This is a key issue, as Chien & Co need to acquire a thorough understanding of the
subsidiary in order to assess any risks inherent in the company which could impact on the overall assessment of risk within
the group. Lead & Co will be able to provide a good insight into the company, and advise Chien & Co of the key risk areas
they have previously identified.
On the practical side, it seems that Maxwell Co is a significant addition to the group, as it is expected to increase operating
facilities by 40%. If Chien & Co were appointed as sole auditors to Maxwell Co it may be difficult for the audit firm to provide
adequate resources to conduct the audit at the same time as auditing the other group companies. A joint audit will allow
sufficient resources to be allocated to the audit of Maxwell Co, assuring the quality of the opinion provided.
If there is a tight deadline, as is common with the audit of subsidiaries, which should be completed before the group audit
commences, then having access to two firms’ resources should enable the audit to be completed in good time.
The audit should also benefit from an improvement in quality. The two audit firms may have different points of view, and
would be able to discuss contentious issues throughout the audit process. In particular, the newly appointed audit team will
have a ‘fresh pair of eyes’ and be able to offer new insight to matters identified. It should be easier to challenge management
and therefore ensure that the auditors’ position is taken seriously.
Tutorial note: Candidates may have referred to the recent debate over whether joint audits increase competition in the
profession. In particular, joint audits have been proposed as a way for ‘mid tier’ audit firms to break into the market of
auditing large companies and groups, which at the moment is monopolised by the ‘Big 4’. Although this does not answer
the specific question set, credit will be awarded for demonstration of awareness of this topical issue.
Disadvantages
For the client, it is likely to be more expensive to engage two audit firms than to have the audit opinion provided by one firm.
From a cost/benefit point of view there is clearly no point in paying twice for one opinion to be provided. Despite the audit
workload being shared, both firms will have a high cost for being involved in the audit in terms of senior manager and partner
time. These costs will be passed on to the client within the audit fee.
The two audit firms may use very different audit approaches and terminology. This could make it difficult for the audit firms
to work closely together, negating some of the efficiency and cost benefits discussed above. Problems could arise in deciding
which firm’s method to use, for example, to calculate materiality, design and pick samples for audit procedures, or evaluate
controls within the accounting system. It may be impossible to reconcile two different methods and one firm’s methods may
end up dominating the audit process, which then eliminates the benefit of a joint audit being conducted. It could be time
consuming to develop a ‘joint’ audit approach, based on elements of each of the two firms’ methodologies, time which
obviously would not have been spent if a single firm was providing the audit.
There may be problems for the two audit firms to work together harmoniously. Lead & Co may feel that ultimately they will
be replaced by Chien & Co as audit provider, and therefore could be unwilling to offer assistance and help.
Potentially, problems could arise in terms of liability. In the event of litigation, because both firms have provided the audit
opinion, it follows that the firms would be jointly liable. The firms could blame each other for any negligence which was
discovered, making the litigation process more complex than if a single audit firm had provided the opinion. However, it could
be argued that joint liability is not necessarily a drawback, as the firms should both be covered by professional indemnity
insurance.

正确答案：B
While“虽然，尽管”的意思，用在句首最恰当。

正确答案：
(d) The change in ownership represents a major change in the life of any organisation and the opportunity to convince the various
stakeholders of the strategic direction the firm is going in should not be missed. Mission statements are not something that
can be created at five minutes notice and once created need to be revisited to ensure they are still relevant and engaging.
Some experts argue that the mission can only be developed once the firm’s competitive strategy has been developed. Others
argue that it is the starting point for the whole strategic planning process.
A mission statement expresses the purpose of the business and great care will need to be taken to clarify the new role and
status of the buyout directors. Two other critical stakeholders are the workforce and the customers – alienation of either group
will have serious consequences for the firm. Customers need to be convinced that they should stay with the firm and staff
that there is a future for them in the new set up. Bonar Paint needs to ensure that its reputation for customer care is part of
the statement.
The strategy of the firm in terms of where and how it is going to compete again should create confidence in the key
stakeholders. Developing this clear sense of where Bonar Paint is going and how it is going to get there will be of particular
interest to its financial backers. Expressing the mission of the business will be a key part of any business plan. Bonar Paint
may also choose to emphasise the standards of behaviour that will underpin the way it does business. This may include an
explicit commitment to innovative products and customer service. Once again the impact and relevance to both internal and
external stakeholders is important.
Finally, the buyout managers have to convince stakeholders that the culture and values associated with that culture will be
retained after the change in ownership. Bonar Paint, under the Bonar brothers’ ownership and direction, did not feel that
strategic planning was a necessary activity. A succinct and meaningful mission statement may be an excellent way to
communicate the new ownership and sense of purpose in Bonar Paint.
Creating mission statements that convey a sense of purpose may not be easy for the buyout team. The time spent creating
the statement has to have positive outcomes or it will be time wasted. Creating such a statement with no previous experience
increases the difficulties. Seeing it as an integral part of a strategic planning process is important. Care must be taken to
involve other stakeholders in the process or statements may be made with little meaning for them. The degree of involvement
is also significant; most stakeholders are more likely to be useful as ‘sounding boards’ for testing and refining the statement.
The danger is that a statement is produced that few stakeholders buy into and does not affect attitudes or behaviours towardBonar Paint.

正确答案：
(c) The Shirtmaster Group has decided to structure itself using two divisions who are dealing with very different markets,
customers and buying behaviours. In so doing the intention is to provide more value to the customer through a better
understanding of their needs. The existence of the two divisions also reflects the origins of the two family businesses.
Mintzberg in his work on organisation design and structure sees divisional configurations as being appropriate in relatively
simple and static environments where significant strategic power is delegated from the ‘strategic apex’ to the ‘middle line‘
general managers with responsibility for the performance of the division. Indeed one of the benefits cited for divisionalised
companies is their ability to provide a good training ground in strategic decision making for general managers who can then
progress to senior positions at company headquarters. Tony Masters’s reluctance to delegate real strategic decision making
power to the senior managers in the Shirtmaster division may be preventing those managers developing key managerial skills.
Using the Boston Box model one could classify the Shirtmaster division as a ‘dog’ with low market share in a market exhibiting
change but little growth. The Corporate Clothing division, by contrast, can be regarded as a ‘problem child’ having a small
share but of a growing market. Porter’s ‘better-off test’ needs to be met – are the two divisions better off being in the same
Group? As it stands there seems little synergy between the two divisions – there seems to be little evidence of the two divisions
sharing resources or transferring skills or learning between the two divisions. Their two value chains and systems are both
separate and different though on the face of it there are many activities that are similar. Operating independently may
encourage healthy competition between the two divisions and consequently better performance through better motivated staff.
Specialised competences such as Corporate Clothing division’s on-line response to customer orders and design changes are
more easily developed within a divisionalised structure. Performance can be clearly identified and controlled and resources
channelled to those areas showing potential. However, this may be at the expense of costly duplication of resources and an
inability to get the necessary scale to compete in either of their separate markets. Certainly, the lack of co-operation betweenthe divisions in areas such as information systems may lead to higher costs and poorer performance.

正确答案：
(b) It is important to note that there is nothing in the nature of the activities carried out by HR staff and departments that prevents
outsourcing being looked at as a serious option. Indeed, amongst larger companies the outsourcing of some parts of the HR
function is already well under way, with one source estimating that HR outsourcing is growing by 27% each year. Paul,
therefore, needs to look at the HR activities identified above and assess the advantages and disadvantages of outsourcing a
particular HR activity. Outsourcing certain parts of the recruitment process has long been accepted, with professional
recruitment agencies and ‘head-hunters’ being heavily involved in the advertising and short listing of candidates for senior
management positions. Some HR specialists argue that outsourcing much of the routine personnel work, including
maintaining employees’ records, frees the HR specialist to make a real contribution to the strategic planning process. One
study argues that ‘HR should become a partner with senior and line managers in strategy execution’.
If Paul is able to outsource the routine HR activities this will free him to contribute to the development of the growth strategy
and the critical people needs that strategy will require. In many ways the HR specialist is in a unique position to assess current
skills and capabilities of existing staff and the extent to which these can be ‘leveraged’ to achieve the desired strategy. In
Hamel and Prahalad’s terms this strategy is likely to ‘stretch’ the people resources of the company and require the recruitment
of additional staff with the relevant capabilities. Paul needs to show how long it will take to develop the necessary staff
resources as this will significantly influence the time needed to achieve the growth strategy.
Outsourcing passes on to the provider the heavy investment needed if the company sets up its own internal HR services with
much of this investment now going into web-based systems. The benefits are reduced costs and improved service quality.
The downside is a perceived loss of control and a reduced ability to differentiate the HR function from that of competitors.
Issues of employee confidentiality are also relevant in the decision to outsource.

正确答案：
(b) Franchising is typically seen as a quick and cost effective way of growing the business but Ramon should be aware of both
the advantages and disadvantages of using it as the preferred method of growth. Franchised chains are argued to benefit from
the sort of brand recognition and economies of scale not enjoyed by independent owner/managers. When combined with the
high levels of motivation normally associated with owner/managed businesses, franchises can be argued to get the best of
both worlds.
Franchising is defined as ‘a contractual agreement between two legally independent companies whereby the franchisor grants
the right to the franchisee to sell the franchisor’s product or do business under its trademarks in a given location for a specified
period of time. In return, the franchisee agrees to pay the franchisor a combination of fees, usually including an up-front
franchise fee, royalties calculated as a percentage of unit revenues, and an advertising conbribution that is also usually a
percentage of unit sales.’
Ramon is considering a type of franchising called ‘business-format franchising’, where the franchisor sells a way of doing
business to its franchisees. Business-format franchising is a model frequently found in the fast food and restaurant industry,
hotels and motels, construction and maintenance, and non-food retailing. Often these franchises are labour intensive and
relatively small-scale operations.
Franchising is seen as a safer alternative to growing the business organically, so while this may be true of well established
global franchises, failure rates among franchised small businesses were greater than those of independent businesses (in one
US study a 34·7% failure rate for franchises as opposed to 28·0% for independents over a six or seven year period). Often
it is the failure of the franchisor that brings down its franchisees. Failure stems from the franchisee not only having to rely on
their own skills and enthusiasm but also the capacity of the franchisor and other franchisees to make the overall operation
work.
The advantages to the franchisee are through gaining access to a well-regarded brand name that will generate a higher level
of demand and use of a tried and tested business model that should reduce the franchisee’s operating costs. Both of these
benefits stem from being a member of a well-established franchised system. Yet La Familia Amable along with many other
franchises will be new and small. These smaller franchises tend to be regional in scope, and fairly unknown outside their
regional market. This has a significant effect on what the franchisees can expect to gain from their franchisors and their
prospects of success. Both parties need to carefully assess the strengths and weaknesses of the system. Companies growing
via franchises need to take the time to understand their business model thoroughly and determine how franchising fits with
their long-term strategy. Care must be taken with the franchise agreement that creates a genuine partnership with the rightbalance between freedom and control over the franchisees.

正确答案：
(d) One of the most widely used models to identify excellence is that of Peters and Waterman developed in their research into
excellent American companies. Interestingly, they agreed with Leavitt in that the companies identified as excellent, whether
they were manufacturers or service businesses, could be seen as offering an excellent service to their customers. This required
them to understand what their customers really valued and then put in place the resources, competences and decision making
processes that delivered the desired attributes. Excellence was positively associated with innovation. Using their checklist of
excellent attributes, Universal could see to be excellent in the following ways:
A bias for action – there is evidence to suggest that both Matthew and Simon are action orientated. They showed an admirable
willingness to experiment and develop a service that added significant value to the customer experience.
Hands-on, value driven – again, the commitment to deliver a quality service – one that they are totally familiar with and able
to deliver themselves – suggests that this value is communicated and shared with staff. The use of self employed installers
and sales people make this commitment particularly important.
Close to the customer – all the evidence points to a real and deep understanding of customer needs. The opportunity for the
business stems from the poor customer service provided by their small competitors. Systems are designed to achieve the ‘no
surprises’ service, which leads to significant levels of customer recommendation and advocacy.
Autonomy and entrepreneurship – there is evidence of a strong belief that individuals and teams should be encouraged to
compete with one another, but not in ways that compromise the quality of the service delivered.
Simple form. – lean staff – Universal is a small functionally managed firm. There is no evidence of creating a large
headquarters, since managers are closely involved with the day-to-day management of their function.
Productivity through people – people are key to the service provided and there is recognition that teams are crucial to the
firm’s growth and success.
Simultaneous loose-tight properties – more difficult to identify in a small company, but there is clearly commitment to shared
values and giving people the freedom to achieve results within this value framework.
These measures of excellence again show the importance of ‘hard’ and ‘soft’ factors in achieving outstanding performance.
An alternative interpretation is to see these attributes as critical success factors, which if achieved, are clearly linked to key
performance indicators. Universal’s growth shows the link between strategy and the qualities needed to achieve this growth.
The ubiquitous balanced scorecard could also be used to measure four key criteria of company performance and
benchmarking the company against the major installers could also provide evidence of excellence. The recent gaining of a
government award for Universal’s contribution to inner city job creation is also a useful indicator of all round excellence.

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(c) Assessment of three risks
Disruption and resistance by Stop-the-dam. Stop-the-dam seems very determined to delay and disrupt progress as much as
possible. The impact of its activity can be seen on two levels. It is likely that the tunnelling and other ‘human’ disruption will
cause a short-term delay but the more significant impact is that of exposing the lenders. In terms of probability, the case says
that it ‘would definitely be attempting to resist the Giant Dam Project when it started’ but the probability of exposing the
lenders is a much lower probability event if the syndicate membership is not disclosed.
Impact/hazard: low
Probability/likelihood: high
The risk to progress offered by First Nation can probably be considered to be low impact/hazard but high probability. The case
says that it ‘would be unlikely to disrupt the building of the dam’, meaning low impact/hazard, but that ‘it was highly likely
that they would protest’, meaning a high level of probability that the risk event would occur.
Impact: low
Probability: high
There are financing risks as banks seems to be hesitant when it comes to lending to R&M for the project. Such a risk event,
if realised, would have a high potential for disruption to progress as it may leave R&M with working capital financing
difficulties. The impact would be high because the bank may refuse to grant or extend loans if exposed (subject to existing
contractual terms). It is difficult to estimate the probability. Perhaps there will be a range of attitudes by the lending banks
with some more reticent than others (perhaps making it a ‘medium’ probability event).
Impact: medium to high (depending on the reaction of the bank)
Probability: low to medium (depending on how easy it would be to discover the lender)

正确答案：
(c) (i) Organic Foods Ltd (OFL) with a market share of 6·66% is the market leader at 30 November 2005 and is forecast to
have a market share of 8% by 30 November 2007. Operating profits appear to be healthy and therefore it seems
reasonable to regard OFL as a current ‘strength’ of Diverse Holdings Plc. This is supported by the fact that OFL has built
up a very good reputation as a supplier of quality produce.
Haul Trans Ltd was acquired on 1 December 2005 and has a demonstrable record of recent profitability. It is noticeable
that the profitability of HTL is forecast to increase by 40% (excluding inflation) during its first two years of ownership.
No one organisation appears to dominate the market. Forecast profits are expected to grow significantly from an almost
static turnover and thus more information is required regarding how this increase in profitability is to be achieved.
Management may have identified opportunities for achieving significant cost savings and/or forming business
relationships with new and more profitable customers, while ceasing to service those customers who are less profitable.
Kitchen Appliances Ltd (KAL) has been identified as both a weakness and threat. KAL’s market is slowly contracting,
but its share is falling more quickly. It was almost the market leader at 30 November 2005. Judging by its fall in the
level of operating profit KAL is carrying heavy fixed costs which must make it more difficult to compete. Indeed, it is
forecast to make a loss during the year ending 30 November 2007. KAL has suffered from squeezed margins as a
consequence of competition from low cost imports. The situation may be further exacerbated as competition from abroad
intensifies.
Paper Supplies Ltd (PSL) has stood still in a growing market, one which is dominated by a single supplier. PSL appears
to be struggling to achieve any growth in turnover, profits and therefore cash flow. PSL cannot really compete with a
narrow range of products and only two customers.
Office Products Ltd (OPL) is growing but appears unable to increase its operating profit in % terms. It appears to be
operating in a high-growth market but unable to achieve a reasonable market share in spite of the fact that its products
are highly regarded by health and safety experts.

正确答案：
(b) In a market place such as that in which SSH competes, product and service quality assumes critical significance. Quality is
a key determinant of the financial results and the level of competitiveness achieved by SSH. This will always be the case and
therefore quality may be viewed as a strategic necessity if SSH is to prosper in the future. Therefore, the statements of the
manager of Bonlandia operations are myopic at best and unethical at worst! Businesses use software in a variety of different
ways but poor quality software can do serious harm to businesses. Much will depend on the extent to which a business uses
its information for strategic reasons as opposed to meeting operational needs. The more a business uses its information
systems for strategic reasons then the greater the potential damage suffered as a consequence of poor quality software. It is
wrong for the manager of Bonlandia operations to knowingly promote the installation of poor quality business software in
clients’ businesses. The effects can be costly to clients in terms of poor planning, control and decision-making with potential
losses of client goodwill and reputation.

参考答案：B

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