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ACCA P3 - Business
Analysis
Workbook
ACCA P3 Workbook Questions! www.mapitaccountancy.com
Lecture 1 - Strategy
Formation
2
Illustration 1
F is a leading manufacturer of plastics. Its major products are beer crates and small
containers for food sold in supermarkets. Together these two product ranges constitute
90% of F’s business, the remainder coming from selling more technologically sophisticated
products.
The company is faced with a number of difficulties and may have to issue a profits warning
in the coming year. Although the profit levels have been uneven for the past five years, this
is the first time that F will have to report significantly reduced profits.
F has been adversely affected by the aggressive marketing of foreign companies importing
beer crates into the market, such that F’s market share has fallen from 80% to 60% in the
past three years. Consolidation in the brewery industry has meant that profit margins for
crate manufacturers have been squeezed.
The company is heavily dependent upon the home market, which accounts for 75% of its
total sales. Exports have been mainly of food containers for supermarkets in neighbouring
countries.
F has invested heavily in research and development (R&D) and, although there is one
exciting proposition in electro-plastics, most expenditure has been on projects selected by
R&D managers who have little commercial awareness. There is the possibility that some
new products may be developed from the electro-plastics research.
F is highly centralised, with many decisions taken by the 20 members of the board of
directors. The workforce is highly unionised, with a number of different unions represented.
Each factory has several negotiating committees set up to agree pay and conditions.
Negotiations are often time consuming and confrontational. This has resulted in very
precise job definitions, which are strictly adhered to. This has further resulted in
considerable inflexibility, together with a complicated system of labour grades.
The directors have had little communication with stock market analysts and investors, who
have little knowledge of the company other than what is shown in the published accounts.
An informal group of institutional shareholders has asked for a strategic review and has
suggested that F should withdraw from the beer crate market.
Required:
(i) Discuss the main difficulties faced by F.
! ! ! ! ! ! ! ! ! ! ! (5 marks)
(ii) Identify and evaluate alternative strategies that F could adopt to address its difficulties
and recommend those that are most appropriate
! ! ! ! ! ! ! ! ! ! ! (12 marks)
3
Lecture 2 - External
Factors
4
Illustration 1
D is an international logging company, which cuts down timber and supplies sawmills
where the timber is seasoned and then cut to appropriate sizes for use in a range of
industries. D will work with any timber, ranging from softwoods used in construction or
paper manufacture to exotic hardwoods used in expensive furniture. Its usual approach is
to secure the rights from a landowner, or in some cases a national government, to cut
timber. This can often involve the payment of large initial cash deposits to these suppliers,
money which D usually borrows. A logging team then cuts down the trees as quickly as
possible and hauls the timber to a convenient river where it is floated to a sawmill. Moving
on rapidly to the next site, the loggers usually leave considerable surface damage behind
them.
Since an increasing proportion of the company’s work has been in the tropical rainforest, it
has recently come under pressure from environmental groups that have protested that it is
not socially responsible to act in this way. Whilst the softwood forests can be regenerated
in a couple of decades by replanting, hardwoods in tropical forests take far longer to
mature.
The Chief Executive of the company has argued that he is not concerned about these
protests since, as far as he is concerned, the company always acts ethically, as it has the
agreement of the national government in any country in which the company operates.
A recent development in the timber industry has been the harvesting of timber from the
bottom of reservoirs which have been created by flooding valleys. Although the capital
equipment required for this approach is significantly more expensive than that used in
conventional logging, the operating costs are lower. Waterlogged trees in reservoirs have
balloons attached, are cut, float to the surface and are towed to a sawmill. The underwater
process is quieter and less disruptive to wildlife and the environment.
It has been estimated that there are over half a billion trees, or 20 years’ supply,
submerged in reservoirs across the world, but it can take considerable research and
expense to find them. As long as the timber has remained submerged deeply enough, it is
of the same quality as timber harvested from the land. There is currently only one
company conducting underwater logging, although a number of other companies are also
considering this development.
Some of the board of directors feel that D should pursue this underwater approach and
abandon land based logging. The Chief Executive and one other director feel that the
underwater approach carries too high a risk.
Required:
(i) Briefly explain the differences between business ethics and corporate social
responsibility (CSR).
" " " " " " " " " " (5 marks)
(ii) Discuss the CSR issues relating to D’s business and how the company might
improve its CSR position.
" " " " " " " " " " (8 marks)
5
Illustration 2
E is a multinational organisation and is one of the largest global producers of chocolate,

coffee and other foodstuffs. E categorises the countries in which it operates as follows:
Less developed countries, from which E sources raw materials, but where there is no
established local market for the finished products.
Fully developed countries, into which E imports raw materials, manufactures, and serves
the local and export markets.
In every country in which E operates, it follows the OECD (Organisation for Economic
Cooperation and Development) guidelines for multinationals.
In the particular case of country F, a less developed country, E has helped the local
farmers to organise themselves into cooperatives to produce their crops. E has also
funded schooling for the children of both the farmers and their workers, built and staffed a
hospital and has provided other welfare benefits. E considers itself to be a good ‘corporate
citizen’ and is used as an example of good practice on the OECD website.
Although the farmers’ cooperatives are free to sell to E’s two main competitors, they tend
not to do so because of the close and friendly working relationship that they have with E.
Both of E’s main competitors are multinationals, but both are smaller than E.
E has recently been receiving some bad publicity in country F. The management of E feels
that this is being organised by the government and the national labour union of country F.
The government of F is reasonably supportive of business, but won the last election with a
narrow majority. The government is now under pressure to raise the standard of living of
the population. An election is due within the next fifteen months. The national labour union,
which is increasingly being supported by the main opposition party in country F, is
extremely anti- business. It would like to see all foreign companies removed from country
F and all foreign- owned assets, and co-operatives nationalised.
The government of country F has stated that the prices paid for cocoa beans are too low,
and that country F is not gaining sufficient tax revenue from the exports. The government
of country F has threatened to impose an export tariff on cocoa beans, unless prices are
increased, and unless E opens a manufacturing facility in the country F. The management
of E feels that it has been targeted by the government because it is the largest of the three
multinationals operating in the country.
The national labour union of country F has argued that the farm workers are being
victimised by the farmers, who have become too powerful because of the cooperatives. It
states that the government of F should not allow the farmers to operate in this way.
The management of E does not want to build a factory because the transport costs from
such a factory to the nearest market for finished products would force the company to
operate the factory at a loss.
The Chief Executive of E is due to meet with government ministers from country F to
discuss E’s future operations and involvement in the country.
6
Required
(a) Explain the advantages to E of conducting a stakeholder analysis of its

operations in country F.
" " " " " " " " " " " (4 marks)
(b) Produce a stakeholder analysis for E’s operations in country F.

" " " " " " " " " " " (14 marks)
7
Lecture 3 - Environmental
Analysis
8
Environment I
9
Illustration 1
B is a media company, publishing lifestyle magazines for the consumer market. These
lifestyle magazines contain articles and advertisements about fashion, health and beauty
products, homes, furniture, and hobbies and are bought by people aspiring to a high
standard of living.
Increasingly, consumers are turning to other media for the information and entertainment
traditionally provided by this type of magazine.
Traditionally, 60% of B’s revenue has been derived from selling advertising, the balance
being provided by the cover price of each magazine. Over the last four years both the
revenue and profits have declined as there has been a steady reduction in the sale of both
advertising space and the number of magazines sold.
The industry is very dependent upon the level of discretionary disposable income. If this
income is at a low level, fewer luxury goods are advertised. However, people still buy the
magazines to read about these goods.
The company has tried to expand abroad but has failed, expensively, to achieve this.
Similarly, attempts to enter other segments of the home market, particularly teenage
magazines, have failed. Both of these failures have come as a surprise to the Board of
Directors who thought that they understood the respective markets well enough to make
the appropriate decisions.
New technology, in the form of digital media, has also affected the magazines industry.
These changes have been felt in both production methods, such as broadband distribution
of proof copies, and the choice of media, such as the Internet, available to consumers. To
a large extent, the speed of these developments was a surprise to the directors of B.
Required:
Evaluate the benefits to B of implementing a process of systematic environmental

analysis.
10
Illustration 2
Based in a European country, BBB is a charity which raises funds to provide portable
equipment to remove the poison arsenic from drinking water in villages, in less developed
countries. Run by a Board of Trustees, the organisation operates on laissez faire
management principles. There are few full-time paid employees and BBB is heavily
dependent upon the work of volunteers. Although these volunteers are dedicated, many
have said that they do not feel the organisation knows where it is going and have said that
they are not confident about the future of BBB.
Funding comes from appeals to the general population, which are made through
newspaper advertisements. BBB does not use the Internet to promote or raise donations
and, generally, does not use available technology to any extent in its organisation.
Additionally, BBB receives corporate donations, most of which come from old school
friends of the trustees. There is no government funding.
Recently BBB has had difficulty in attracting donations and is at risk of not being able to
carry on its work. The charity industry has become more competitive and many other
organisations within it have become more aggressive in their marketing and promotion.
None of the Board of Trustees has a commercial background. The Chairman of Trustees
has recently been to a number of conferences where the value of foresight and the need
to conduct a frequent and thorough ‘environmental analysis’ have been discussed.
The Chairman has accepted that there is a serious gap in the knowledge that the trustees
have about the environment in which BBB operates. Recognising that BBB needs a more
proactive approach to the environment in which it operates, your help as a management
accountant has been sought.
Required
Using appropriate models, discuss how conducting a frequent and thorough

environmental analysis would help the Board of Trustees of BBB.
11
Illustration 3
D is a printing company that was founded by three people 20 years ago. At that time, the
company used a new technology which had been developed by one of the founders.
Another founder member was a finance professional. The third person is Mr Z, who has a
strong, dynamic, personality. Mr Z has been the driving force behind the development and
growth of the business to its present size of 350 employees. With a charismatic leadership
style, Mr Z was very proud of the fact that he knew all employees by their first names and
considered everyone to be part of one big team. Everyone understood exactly what the
company stood for and how things should be done.
As the company has grown, Mr Z feels he is not in touch with newer members of staff and
that they do not understand his, and the company’s, values.
In addition, the technology used by D is no longer considered innovative and there are a
number of other competitors operating in exactly the same way. D is still market leader
within the industry, but only by a few percentage points. Mr Z feels that the industry has
reached the maturity stage of its lifecycle.
An acquaintance of Mr Z, a management consultant, has suggested that the company

should have a published mission statement and a clear set of strategic objectives.
Required
Explain the characteristics of the maturity stage of the industry lifecycle.
12
Illustration 4
B is an established publisher of training manuals and other training material for members
of professional bodies and for personal development. The products are sold all over the
world by major bookshops and online book vendors. Although the company has a website,
it does not sell directly to colleges or private individuals.
Currently, all stages of the production and distribution processes are conducted within
mainland Europe. All stages of these processes are conducted in-house by B.
Over the past five years, sales of B’s training manuals have declined and the company is
expecting to make little, if any, profit in the coming year.
B’s manuals are of the traditional style, that is, an extensive amount of printed material
bound in a single volume. An initial market study has shown that B’s training manuals do
not appeal to readers, because they are under heavy time pressure and are unable to
devote sufficient time to reading these manuals. The manuals, because of their bulk, are
also considered to be difficult to work with.
There are three other direct competitors in the market, which is highly competitive. In this
market the products are difficult to differentiate and profit margins are low. Although B has
no firm evidence, the directors believe that all three of their competitors are more profitable
than B. However, the directors are not aware that any of the competitors are operating in a
different way to B, and their training manuals are virtually identical to those offered by B.
The directors of B believe that there are product development and market development
opportunities that could be pursued. They also believe that the cost structure of the
products could be improved. However, they are prepared to consider any reasonable
alternative strategy that will improve the competitive position of the company.
Required
Explain how more detailed knowledge about B’s competitors would help the
directors of B.
13
Environment II
14
Illustration 1
G supplies electronic components to the automobile industry by exporting from the home
country in which it is currently based. The company has recently set up a research facility
in the home country to develop hydrogen fuel cells. The concept of hydrogen fuel cells has
attracted a great deal of interest from the environmental lobby since it offers the prospect
of very environmentally friendly vehicles. The market for these vehicles is in the
development stage and there have been relatively few sales so far for this new technology.
G hopes that the current pressure from environmental groups and governments will lead to
large volume sales.
Increasingly, electronic component manufacturers are under pressure to manufacture

close to the locations of their customers, the automobile manufacturers.
The research and development (R&D) director has decided that there is a need to open a
research facility abroad, to work in partnership with the facility in the home country and
capitalise on the benefits that a foreign base could offer. If this venture were successful, G
would open a manufacturing facility next to the proposed overseas R&D base.
The board of directors recognises that different countries will offer different potential
advantages and disadvantages. It has been decided that the ideal characteristics and
factors for the chosen country should be determined, so that potential choices can be
screened effectively before a final decision is made.
Required
Advise what ideal characteristics and factors should be present in the chosen
country.
15
Lecture 6 - Internal
Environment
16
Illustration 1
C is a manufacturer of test equipment for electronic circuits. In the past, C was a dominant
player in the international market. However, over the past three years, the company has
found that its profits have declined as it has lost market share to other companies in the
market.
C’s business model consists of the following stages:
1.C’s highly skilled engineers first visit client sites and, after discussions with the client’s
engineers, identify and design the appropriate testing equipment to meet the client’s
requirements. C’s engineers are still recognised as the best in the industry, and customers
agree that they produce the most effective solutions to the increasingly complex problems
presented by C’s clients. This stage of the process is seen as a very collaborative process
between the engineers employed by C and the engineers employed by its clients.
2.In the laboratories at C, the equipment design goes through a fairly complicated process.
Prototypes are developed, based on the discussions in stage. These prototypes are then
tested. Once a final design is agreed, the plans are passed to the manufacturing
department for production.
3.The manufacturing department of C then produces the appropriate equipment to the

desired specification and installs it at the client’s site.
4.After the equipment has been installed, C conducts maintenance on an annual basis.
It is standard practice within the industry for clients to pay a total price for design,
manufacture and initial installation of the equipment and an annual maintenance charge
after that. Total prices are quoted before design work commences. It is unusual for
companies in the industry to maintain other manufacturers’ equipment.
Although clients recognise the high quality of the solutions provided, they are increasingly
complaining that the overall prices are too high. Clients have said that although other
suppliers do not solve their problems as well as C, they do charge less. As a result, C has
reduced its prices to compete with other companies. There is a suspicion that the
manufacturing and installation stages of the business are not contributing sufficiently to the
business because the costs may be too high.
Some of the Board of Directors of C have recognised that this situation cannot continue
and have recommended that a value chain analysis be conducted, to identify the way
forward for C. The Board feels that it is important that it identifies which activities in the
current business model actually add value and whether all of them should be continued.
One of the directors has suggested that C should actually be a solutions provider and not
a manufacturer.
Although most directors are in agreement with the proposed value chain analysis, the
managing director has argued that value chain analysis is a bad idea. He says that he has
heard a number of criticisms of the value chain model.
Explain the benefits that C might gain from conducting a value chain analysis.
17
Lecture 7 - Position
Analysis
18
Illustration 1
Briefly explain what is meant by ‘gap analysis’ in the context of strategic analysis.
Illustration 2
B is a media company, publishing lifestyle magazines for the consumer market. These
lifestyle magazines contain articles and advertisements about fashion, health and beauty
products, homes, furniture, and hobbies and are bought by people aspiring to a high
standard of living.
Increasingly, consumers are turning to other media for the information and entertainment
traditionally provided by this type of magazine.
Traditionally, 60% of B’s revenue has been derived from selling advertising, the balance
being provided by the cover price of each magazine. Over the last four years both the
revenue and profits have declined as there has been a steady reduction in the sale of both
advertising space and the number of magazines sold.
The industry is very dependent upon the level of discretionary disposable income. If this
income is at a low level, fewer luxury goods are advertised. However, people still buy the
magazines to read about these goods.
The company has tried to expand abroad but has failed, expensively, to achieve this.
Similarly, attempts to enter other segments of the home market, particularly teenage
magazines, have failed. Both of these failures have come as a surprise to the Board of
Directors who thought that they understood the respective markets well enough to make
the appropriate decisions.
New technology, in the form of digital media, has also affected the magazines industry.
These changes have been felt in both production methods, such as broadband distribution
of proof copies, and the choice of media, such as the Internet, available to consumers. To
a large extent, the speed of these developments was a surprise to the directors of B.
Describe the essential stages that should be included in a scenario planning

process that could be introduced by B.
19
Lecture 8 - Strategic Choice

I
20
Illustration 1
GHK is a restaurant chain consisting of eight restaurants in an attractive part of a

European country which is popular with tourists. GHK has been owned by the same family
for the previous15 years and has always traded at a profit. However, a number of factors
have meant that GHK is now in danger of making a trading loss. There has been a
substantial drop in the number of tourists visiting the region whilst, at the same time, the
prices of many of the foodstuffs and drinks used in its restaurants has increased. Added to
this, the local economy has shrunk with several large employers reducing the size of their
workforce.
The owners of GHK commissioned a restaurant consultant to give them an independent

view of their business. The consultant observed that the eight restaurants were all very
different in appearance. They also served menus that were very different, for example, one
restaurant which was located on a barge in a coastal town specialised in fish dishes,
whereas another restaurant 20 miles away had a good reputation as a steak house. The
prices varied greatly amongst the restaurants; one restaurant in a historic country house
offered ‘fine dining’ and was extremely expensive; yet another located near a busy railway
station served mainly fast food and claimed that its prices were ‘the cheapest in town’.
Three of GHK’s restaurants offered a ‘middle of the road’ dining experience with
conventional menus and average prices. Some of the restaurants had licences which
enabled them to serve alcohol with their meals but three restaurants did not have such
licences. One restaurant had a good trade in children’s birthday parties whereas the
restaurant in the historic country house did not admit diners under the age of 18.
The consultant recommended that GHK should examine these differences but did not
suggest how. The owners responded that the chain had grown organically over a number
of years and that the location, style and pricing decisions made in each restaurant had all
been made at different times and depended on trends current at that time.
Advise the owners of GHK how the application of Porter’s Three Generic Strategies
Model could assist them in maintaining or improving the profitability of their
restaurants.
21
Illustration 2
XZY, a publicly quoted company has expanded rapidly since its formation in 2005. Its rapid
growth rate, based on a broad range of well-regarded products manufactured and sold
exclusively within Asia, has led to high profits and an ever increasing share price.
However, in the last year, XZY has found its growth rate difficult to sustain. XZY’s core
strategy has been described by its CEO as ‘selling what we know to who we know’.
However, this view has been criticised by a number of financial analysts and journalists
who have warned that if XZY’s growth rate is not maintained its share price will fall and the
value of the company will reduce. XZY has a functional organisational structure and
currently employs around 800 employees. The number of employees has grown by 20%
since 2008.
Evaluate, using Ansoff’s product market scope matrix, the alternative strategies
XZY could follow to maintain its growth rate in profits and share price.
22
Lecture 9 - Strategic Choice

II
23
Illustration 1
JKL is a small European company based in the south of the UK which employs 35 people.
It has an annual revenue of €9 million. One aspect of its recently formulated strategy is an
aspiration to expand into a neighbouring country, France, by means of organic growth.
The reason that JKL’s strategy for expansion is based on organic growth is due to JKL’s
past experience. Two years ago, the directors of JKL negotiated the purchase of a UK
business, LMN, located in the west of the UK. At the time of this acquisition, LMN was
regarded by JKL as having complementary capabilities and competences. However, within
a short time after the acquisition, JKL judged it to have been a failure and LMN was sold
back to its original owner at a loss for JKL.
JKL employed consultants to analyse the reasons for the failure of the acquisition. The
consultants concluded that the failure had happened because:
1. JKL and LMN had very different accounting and control systems and these had not
been satisfactorily combined;
2. JKL and LMN had very different corporate cultures and this had posed many difficulties
which were not resolved;
3. JKL had used an autocratic management style to manage the acquisition and this had
been resented by the employees of both companies.
The consultants recommended that JKL should consider the use of change agents to
assist in any future acquisitions.
JKL has learnt that a French competitor company, XYZ, may shortly be up for sale at a
price which would be very attractive to JKL. XYZ has a very good reputation in its domestic
market for all aspects of its operations and its acquisition would offer JKL the opportunity
to widen its skill set. None of JKL’s staff speaks fluent French or is able to correspond in
French. A small number of XYZ’s staff speak English fluently but none of its staff are able
to correspond in English.
Discuss how JKL could grow their business by:
(i) Organic Growth

(ii)Acquisition
24
Illustration 2
DDD is a biotechnology company which develops drugs. It was founded seven years ago
by three scientists when they left the university medical school, where they had been
senior researchers. The Company employs 10 other scientists who joined from different
universities. All of these employees are receiving relatively low salaries but participate in a
share option scheme. This means that when DDD is successfully floated on the stock
exchange they will receive shares in the company.
DDD currently has a number of new, innovative drugs in development, but the earliest any
of these drugs might come to market is two years from now. It is expected that there would
be one successful drug launched in most years after that for at least six years. However,
successful drug launches are never guaranteed, due to the speculative nature of
biotechnology and the long period of clinical trials through which any new drug must pass.
DDD has to invest a significant amount of resources into the development of each
potential drug, whether they are successfully launched or not. Currently, it has 12 drugs in
development, a number of which may not be successfully launched. Due to the speculative
nature of the industry, companies such as DDD are unable to obtain bank loans on
commercial terms.
DDD is funded by an exclusive arrangement with a venture capital company. However,

there is only sufficient cash in place to maintain the present level of activity for a further
nine months. The venture capital company owns 15% of the equity of the company. The
rest is owned by the three founders. It has always been the intention of the venture capital
company and the founders that, once the company has a sufficient number of drugs in
production and on the market, the company would be floated on the stock exchange. This
is expected to happen in five years’ time.
Recently there have been a number of approaches to DDD which might solve its cash flow
problems. The three founders have identified the following options:
1. The venture capital company has suggested that it will guarantee the cash flow until the
first drug is successfully launched in commercial quantities. However, it would expect its
equity holding to rise to 60% once this offer is accepted.
2. A large pharmaceutical company has offered to buy DDD outright and retain the
services of the three founders (in research roles) and a few of the staff.
3. Another biotechnology company has offered to enter into a merger with DDD. This
company has also been established for seven years and has one drug which will be
launched in six months. However, of the four other potential drugs it has in
development, none are likely to be commercially viable for 5 years. This company would
expect the three founders to stay with the newly merged company but feels a
rationalisation of the combined staff would be needed.
Describe the ‘Suitability, Feasibility and Acceptability (SFA) framework as used for
evaluating strategic options. Evaluate the option to take up the venture capital using
the framework.
25
Lecture 12
Pricing Strategy
26
Test Your Knowledge

If you can’t answer all of the questions below without
looking at the answer then you need to do some more
work on this area!
1. What are the downsides of full-cost plus pricing?
2. What are the benefits of marginal-cost plus pricing?
3. What are the downsides of marginal-cost plus pricing?
4. When is it appropriate to undertake a strategy of Price Skimming?
5. When is it appropriate to undertake a strategy of Penetration Pricing?
6. What are complementary products?
7. What is price discrimination?
8. What conditions must exist for price discrimination?
If you’ve successfully answered all of the above

questions then you’re ready to do the exam questions
below:
None yet - New syllabus area!
27
Lecture 13 - Measuring
Performance
28
Illustration 1
DD is a research company operating in the computer hardware industry. It has been

established for three years. The company employs 30 scientists and engineers working in
three research teams. One of those teams has invented an innovative processor which is
significantly faster than any processor that is currently available commercially. It is likely
that the new processor will be usable in computers used for industrial and, possibly,
gaming purposes. The other teams are working in similar areas, developing processors.
Although all of the researchers have done new and innovative work, which has led to a
number of published academic papers, no patents have been filed since the company
started. Therefore, none of DD’s innovative products has ever become commercially
available.
The company is privately funded by an entrepreneur (Mr X), who made $350m from the
sale of his previous computer business.
Mr X has, to date, allowed his research staff to conduct research which is focused on
creativity rather than commercial viability. He does not want to lose any of the current
research staff but now wants to encourage them to be more commercially aware.
Mr X has decided that the company must now capitalise upon the innovative computer
processor that one of the DD teams has invented. He intends that some of the focus
should shift to the development of commercially available products rather than purely
research activities.
Mr X recognises that this will be a significant change in strategy and culture for the
company and that the change will require significant planning and management. Mr X
intends to hire marketing staff and five additional engineers to bring the processor, and any
other potential products, to market as soon as possible.
Currently there is no performance measurement system in place within the company. Mr X

believes that the Balanced Scorecard might be the best performance measurement
system for DD.
(i) Explain the components of the Balanced Scorecard model.
(ii)Recommend, with reasons, two measures that DD should use in each of the
components of the Balanced Scorecard model.
29
Lecture 14 - Performance I
30
Illustration 1
Background
Aybe, located in Country C, was formed by the merger of two companies in 2001. It is a
listed company which manufactures, markets and distributes a large range of components
throughout Europe and the United States of America. Aybe employs approximately 700
people at its three factories in Eastern Europe and supplies products to over 0·5 million
customers in 20 countries. Aybe holds stocks of about 100,000 different electronic
components.
Aybe is regarded within its industry as being a well-established business. Company Ay had
operated successfully for nearly 17 years before its merger with Company Be. Company
Ay can therefore trace its history back for 25 years which is a long time in the fast moving
electronic component business.
The company is organised into three divisions, the Domestic Electronic Components
division (DEC), the Industrial Electronic Components division (IEC) and the Specialist
Components division (SC). The Domestic and Industrial Electronic Components divisions
supply standard electronic components for domestic and industrial use whereas the
Specialist Components division supplies components which are often unique and made to
specific customer requirements. Each of the three divisions has its own factory in Country
C.
Organisational structure
Aybe is organised along traditional functional/unitary lines. The Board considers continuity
to be a very important value. The present structure was established by Company Ay in
1990 and continued after the merger with Company Be. Many of Aybe’s competitors have
carried out structural reorganisations since then.
In 2008, Aybe commissioned a review of its organisational structure from a human

resource consultancy. The consultants suggested alternative structures which they thought
Aybe could employ to its advantage. However, Aybe’s Board felt that continuity was more
important and no change to the organisational structure took place.
The business environment in Asia

Aybe has taken advice from a number of expert sources about market prospects in Asia.
The research concluded Asian markets have excellent potential for growth and profitability,
because of increasing industrialisation, for one of Aybe’s divisions, IEC. The markets are
fast- moving and highly adaptive. Some countries in Asia are highly entrepreneurial whilst
in others there is much involvement of the State in business.
In some countries there is a mixed economy. In general, Asia encourages free markets but
this is also allied to a requirement in some countries for local involvement in any business
enterprise. Most Asian countries make extensive use of sophisticated information systems
and information technology. A considerable amount of outsourcing from Western countries
has taken place to Asia’s benefit.
Although this had originally been in areas of manufacturing, outsourcing has now
developed extensively and many service and administrative functions have also been
outsourced to Asia. All of these influences have led to a variety of organisational structures
in Asian business.
31
Director of Operations
Aybe is organised along traditional functional lines and one of the most important
departments is ‘Operations’. The director with responsibility for this department is the
Director of Operations. The Director of Operations had recently joined Aybe and one of the
reasons for his appointment was his experience in managing the electronics division of a
multinational company in China.
He is very energetic and ambitious and had been supported in his appointment at Aybe by
the Non-Executive Director (NED) who chairs the Nominations Committee. This NED
considers that the Director of Operations has the potential to become the Chief Executive
Officer (CEO) of Aybe within the next five years.
Expansion of electronic components business into Asia

Prior to 2010, the IEC division of Aybe had carried out a limited amount of business in
Asia. The results of this business are shown in the column ‘Actual 2009’.
Aybe’s Management Accountant has prepared a forecast for the period 31 December 2010
to 2014 which shows the incremental effects of expansion into Asia of products from the
IEC division.
Aybe has been fortunate in that the Asian government in the country where it intends to
trade has granted a tax ‘holiday’ for eight years to new overseas businesses. This means
that Aybe’s operations will not be liable to tax. Country C has a double taxation treaty with
the Asian country.
32
Lecture 15 - Performance II
33
Illustration 1
EEE is a divisionalised company, based in F, where it is quoted on the stock exchange.

EEE manufactures and sells small electrical equipment products. As a country, F is more
highly developed than the neighbouring countries. EEE has enjoyed a strong home market
and has exported to the neighbouring countries.
EEE has had a reputation for producing high quality products. Recently, it has come under
increasing competitive pressure from new, privately held, companies based in the
neighbouring countries.
It appears that competitors based in these neighbouring countries have been selling lower
quality products than EEE and have been undercutting it quite significantly in terms of
price. Sales in both EEE’s home and export markets have been badly affected by the
actions of these competitors in the neighbouring countries.
EEE has looked at a number of possible solutions to this situation and has decided to
acquire a manufacturing company in one of the neighbouring countries and move all of its
production there, completely closing the manufacturing division in F. This would mean that
EEE would purchase one of the companies that has recently become a competitor. EEE
would maintain its present divisionalised structure within its home country F and treat the
acquired company as a new division.
The Board of Directors recognises the need to carefully select a suitable acquisition target
company. The Board also recognises that careful consideration will need to be given to the
most suitable approach to performance management once the acquisition has been made.
The Board is considering an approach based on either Return On Investment (ROI) or
Residual Income (RI).
(i) Discuss the difficulties that EEE may experience with the performance
measurement of its divisions, post acquisition.
(ii)Discuss the disadvantages that EEE may experience if it chooses to use ROI as
its primary performance measure.
34
Lecture 16 - IT & Strategy
35
Illustration 1
GHK is a restaurant chain consisting of eight restaurants in an attractive part of a

European country which is popular with tourists. GHK has been owned by the same family
for the previous15 years and has always traded at a profit. However, a number of factors
have meant that GHK is now in danger of making a trading loss. There has been a
substantial drop in the number of tourists visiting the region whilst, at the same time, the
prices of many of the foodstuffs and drinks used in its restaurants has increased. Added to
this, the local economy has shrunk with several large employers reducing the size of their
workforce.
The owners of GHK commissioned a restaurant consultant to give them an independent
view of their business. The consultant observed that the eight restaurants were all very
different in appearance. They also served menus that were very different, for example, one
restaurant which was located on a barge in a coastal town specialised in fish dishes,
whereas another restaurant 20 miles away had a good reputation as a steak house. The
prices varied greatly amongst the restaurants; one restaurant in a historic country house
offered ‘fine dining’ and was extremely expensive; yet another located near a busy railway
station served mainly fast food and claimed that its prices were ‘the cheapest in town’.
Three of GHK’s restaurants offered a ‘middle of the road’ dining experience with
conventional menus and average prices. Some of the restaurants had licences which
enabled them to serve alcohol with their meals but three restaurants did not have such
licences. One restaurant had a good trade in children’s birthday parties whereas the
restaurant in the historic country house did not admit diners under the age of 18.
The consultant recommended that GHK should examine these differences but did not
suggest how. The owners responded that the chain had grown organically over a number
of years and that the location, style and pricing decisions made in each restaurant had all
been made at different times and depended on trends current at that time.
(i) Advise the owners of GHK how the application of Porter’s Three Generic
Strategies Model could assist them in maintaining or improving the profitability of
their restaurants.
(ii)Advise how GHK could employ a range of organisational information systems to

support whichever generic strategy it chooses to adopt.
36
Lecture 17 - E-Business
37
Illustration 1
Introduction
AAA is a small manufacturer of replacement machine components for machinery used in
the mining and oil exploration industries. It is based in an African country. It was formed in
1952, as a partnership between two engineers, and incorporated in 1977. AAA now
employs 120 staff, and has an annual turnover equivalent to one million US dollars. AAA is
proud to offer the very highest levels of customer service. Much of the machinery used by
AAA’s customers is quite old and, as a result, components are no longer available from the
original equipment manufacturers (OEMs), most of which are large multinational
companies. AAA mostly supplies parts directly to the end-users but also receives a small
but significant proportion of its business from OEMs, who then supply the components to
their customers.
The current business model

AAA has always run its business in a very traditional way. The sales manager receives
most orders by telephone or fax. The order specifies the OEM part number that the
component is to replace. If AAA has previously supplied that component, the sales
manager checks the price list and tells the customer the price. AAA holds very low levels of
finished goods inventory, and then only of the most commonly ordered components.
Where AAA needs to make a component for the first time, an AAA ‘estimator’ (a qualified
engineer, responsible for producing an estimate of the material and labour involved in
manufacturing the item) obtains the original drawings of the component, either from AAA’s
extensive archives or from the OEM.
The estimator then produces detailed engineering drawings, a list of materials and parts
required, and an estimate of the labour hours likely to be used at each stage of the
manufacturing process. The estimate is passed to a costing clerk in the accounts
department who calculates the likely product cost (labour, materials and overheads), adds
a ‘mark-up’ of 50%, and advises the sales manager of the price. If the customer accepts
the price, an order is passed to the production department, which schedules and
completes the work. If the actual cost of production is significantly different from that
estimated, the price list is amended to reflect the actual manufacturing cost.
Very occasionally, a customer sends (or brings in) an old component, which cannot be
traced back to an OEM. The sales manager gives the component to an estimator, who
dismantles the component and produces the necessary engineering drawings and
estimate. This process is called ‘reverse engineering’, and is common in the component
manufacturing industry. Reverse engineering currently accounts for about 5% of AAA’s
business.
When an order is fulfilled, the component is delivered to the customer, together with an
invoice. Most customers pay within 30 days, by cash or cheque. AAA does not have a
problem with bad debts. An increasing proportion of AAA’s business is now transacted in
US dollars, as African currencies tend to be unstable.
AAA prides itself on the personal service it provides. The close contact it has with its
customers means that AAA receives a significant amount of repeat business. AAA has
never advertised its services, but grew significantly until 2005 as a result of ‘word of
mouth’ recommendations by satisfied customers. AAA, however, has not experienced
growth for the last two years, although turnover and profit have remained stable.
38
AAA uses only very basic Information Systems (IS), and reports its performance using a
simple comparison between budget and actual, which is produced using a spreadsheet
package. AAA’s accounting system is not automated, and transactions are recorded in
traditional ledgers.
Project E: Computerised accounting and e-commerce systems

The sales manager of AAA has noticed that customers are increasingly mentioning that
they would like to be able to order online. He knows that there has been a significant
growth in business-to-business (B2B) e-commerce in recent years. The sales manager
has recognised that in order to grow and to make a move into e-commerce possible, AAA’s
accounting system will have to be updated to a computerised one.
Having spoken to a number of potential suppliers, the sales manager has now received a
proposal from SSS, a local company, to supply tailored ‘off-the-shelf’ systems for both
accounting and e-commerce. SSS has provided a detailed breakdown of its proposal, to
be known as Project E, which is summarised below.
The sales manager believes that, following implementation of the new systems (likely to be
12 months from contract agreement) e-commerce should lead to an increase in the
company’s turnover of 10% in its first year of operation. Thereafter, the turnover resulting
from e- commerce should grow at a rate of 10% each year for the foreseeable future.
The sales manager also thinks that any increase in indirect costs as a result of this higher
volume of business will be fully offset by a reduction in administration workload as a result
of the new computerised accounting system. The gross margin earned from e-commerce
business can therefore be used as the effective cash inflow for evaluation purposes. The
current turnover of AAA is, as stated earlier, $1 million a year. The mark-up on products
sold by e-commerce will be the same as at present (that is, 50%).
However, the sales manager thinks that a cautious approach should be taken to the
evaluation of the proposal, and that any benefits after 5 years from implementation should
be ignored. AAA has a weighted average cost of capital (WACC) of 15%.
Briefly explain how e-business has impacted on the way business is conducted.
Briefly discuss how a new Information Systems (IS) strategy might impact upon
corporate, business and functional strategies.
Evaluate the strategic and competitive benefits to AAA of the proposed e-

commerce system.
Discuss how AAA might use its e-commerce system to increase the volume of
business from ‘reverse engineering’ projects.
39
Lecture 18 - Knowledge
Management
40
Illustration 1
Distinguish between data mining and data warehousing.
Illustration 2
Introduction
AAA is a small management consultancy practice, based in the capital city of an African
country. Since 2004, AAA has grown significantly. In 2008 AAA earned a fee income of US
$ 2.8 million (2004: US$ 1.6 million), and profit after tax of US$ 0.6 million (2004: US$ 0.4
million).
AAA now employs a total of 14 consultants (including the partners) and 11 support staff.
The support staff mainly work in administration, finance, research and marketing roles.
AAA’s accounts for 2008 showed net assets of US$ 1.1 million (2004: US$ 1.0 million).
The business of AAA
AAA has a number of clients in financial services, manufacturing, construction, retail and
logistics. Most of AAA’s clients can still be regarded as Small and Medium Enterprises
(SMEs), but a few of them have now grown to become large and successful organisations.
Indeed, AAA now has three clients in the ‘top ten’ of the country, ranked by turnover.
In all projects, AAA ensures that the staff of the client organisation are fully involved in the
consultancy process. Client staff are normally included as members of the project team,
thus ensuring that the project has greater acceptance from the client organisation. As a
result of this approach, AAA has a reputation for successful projects and has achieved
some client referral and repeat business.
The staff retention problem

Until 2007, AAA had never ‘lost’ a key employee. The partnership was, and still is, viewed
as a caring and loyal employer, at least matching the market rate in terms of salaries and
benefits. The partners were confident that staff loyalty would continue, as AAA was still
growing and provided both interesting and challenging projects and opportunities for
career progression.
The partners were shocked when, in 2007, two consultants resigned to join rival
consultancy firms. In 2008, another consultant left, this time to join a client organisation as
director of finance. So far this year, a consultant resigned to set up his own business, and
another chose not to return to the partnership at the end of an interim management
assignment with a client. Although AAA has recruited suitably qualified replacements for
the staff who have left, the cumulative effect of all these losses is that about a third of all
AAA consultants have been with the firm for less than five years.
Mr Amit
Mr Amit is the partner of AAA responsible for administration, marketing and IT. He is keen
to use AAA itself as a ‘pilot study’, with a view to offering knowledge management
41
consultancy services to AAA’s clients. Mr Amit has found some information about
knowledge management on the internet, part of which is reproduced below.
“Definition: Knowledge Management (KM) is the use of an organisation’s Intranet to allow staff to record their knowledge
so it can be accessed by others. It is a modern IT solution to improve communication and facilitate organisational
learning.”
Project resourcing
When AAA begins a new consultancy project, the designated project manager ‘recruits’ the
consultancy team from those consultants who are not engaged in another project. Staff are
allocated to projects on a ‘first come, first served’ basis, so it is common for project
managers to find that some of the consultants with the greatest experience in the required
specialist areas are already engaged on another project and are thus unavailable.
Discuss the definition of Knowledge Management that Mr Amit obtained from the
Internet.
Discuss the three main potential benefits of Knowledge Management to AAA.
42
Lecture 19 - Managing
Supply Chain
43
Illustration 1
B is a public company that operates 100 supermarkets in a European country. There are a
number of other supermarkets operating in the country and the market is fiercely
competitive. All of the supermarkets find it difficult to generate any customer loyalty and
have found that customers are very price sensitive.
Like all other supermarkets in the country, B suffers a higher staff turnover than other retail
outlets and this is recognised as one of the reasons for relatively low customer satisfaction
and retention.
The marketing director has suggested that the company would benefit from introducing a
credit card that its customers could use in its supermarkets and in other retail outlets within
the country. At present, although all supermarkets in the country accept credit cards for
payment for goods, no other supermarket offers its own credit card.
The marketing director claims that, in addition to the appeal to the customers, the credit
card would allow B to gather large quantities of data about its customers. He feels this
would offer advantages in terms of data mining, data warehousing and relationship
marketing.
You are the management accountant for B. The finance director has said that she is
unfamiliar with these techniques and has asked you to provide some explanations and
advice in the context of B’s business.
(i) Describe relationship marketing in the context of B’s business applying the “six
markets” model.
(ii)Recommend, with reasons, strategies that B can use to develop relationship

marketing and improve customer loyalty.
44
Lecture 20 - Marketing
45
Illustration 1
Introduction
The Accounting Education Consortium (AEC) offers professional accountancy education
and training courses. It currently runs classroom-based training courses preparing
candidates for professional examinations in eight worldwide centres. Three of these
centres are also used for delivering continuing professional development (CPD) courses to
qualified accountants. However, only about 30% of the advertised CPD courses and
seminars actually run. The rest are cancelled through not having enough participants to
make them economically viable.
AEC has developed a comprehensive set of course manuals to support the preparation of
its candidates for professional examinations. There is a course manual for every
examination paper in the professional examination scheme. As well as being used on its
classroom-based courses, these course manuals are also available for purchase over the
Internet. The complete set of manuals for a professional examinations scheme costs
$180·00 and the web site has a secure payment facility which allows this to be paid by
credit card.
Once purchased, the manuals may be downloaded or they may be sent on a CD to the
home address of the purchaser. It is only possible to purchase the complete set of
manuals for the scheme, not individual manuals for particular examinations. To help the
student decide if he or she wishes to buy the complete manual set, the web site has
extracts from a sample course manual. This sample may be accessed, viewed and printed
once a student has registered their email address, name and address on the web site.
AEC has recently won a contract to supply professional accountancy training to a global
accounting company. All students working for this company will now be trained by AEC at
one of its worldwide centres.
Web site
The AEC web site has the following functionality: Who we are: A short description of the
company and its products and services. Professional education courses: Course dates,
locations and standard fees for professional examination courses. This schedule of
courses is printable. Continuing professional development: Course dates, locations and
standard fees for CPD courses and seminars. This schedule is also printable. CPD
catalogue: Detailed course and seminar descriptions for CPD courses and seminars.
Downloadable study material: Extracts from a sample course manual.
Visitors to the site wishing to access this material must register their email address, name
and address. 5,500 people registered last year to download study material. Purchase
study material: Secure purchase of a complete manual set for the professional scheme.
Payment is by credit card. On completion of successful payment, the visitor is able to
download the manuals or to request them to be shipped to a certain address on a CD. At
present, 10% of the people who view downloadable study material proceed to purchase.
Who to contact: Who to contact for booking professional training courses or CPD courses
and seminars. It provides the name, email address, fax number, telephone number and
address of a contact at each of the eight worldwide centres.
Marketing strategy
The marketing manager of AEC has traditionally used magazines, newspapers and direct
mail to promote its courses and products. Direct mail is primarily used for sending printed
course catalogues to potential customers for CPD courses and seminars. However, she is
46
now keen to develop the potential of the Internet and to increase investment in this
medium at the expense of the traditional marketing media. Table 1 shows the percentage
allocation of her budget for 2008, compared with 2007. The actual budget has only been
increased by 3% in 2008.
Percentage allocation of marketing budget (2007–2008)
! ! ! 2007" " 2008

Advertising ! ! 30% 40%
Direct mail ! ! 10%! ! 30%
Sponsorship ! 10%! ! 10%
Internet! ! 50%! ! 20%
Explain, in the context of AEC, how the marketing characteristics of electronic

media (such as the Internet) differ from those of traditional marketing media such as
advertising and direct mail.
47
Lecture 21 - Roll of Process
48
Illustration 1
Explain, using Harmon’s process-strategy matrix, how the complexity and strategic
importance of process initiatives can be classified.
Illustration 2
Branch rationalisation project Four years ago Lowlands Bank acquired Doe Bank, one of
its smaller rivals. Both had relatively large local branch bank networks and the newly
merged bank (now called LDB) found that it now had duplicated branches in many towns.
One year after the takeover was finalised, LDB set up a project to review the branch bank
network and carry out a rationalisation that aimed to cut the number of branches by at
least 20% and branch employment costs by at least 10%. It was agreed that the project
should be completed in two years. There were to be no compulsory staff redundancies. All
branch employment savings would have to be realised through voluntary redundancy and
natural wastage.
LDB appointed its operations director, Len Peters as the sponsor of the project. The
designated project manager was Glenys Hopkins, an experienced project manager who
had worked for Lowlands Bank for over fifteen years. The project team consisted of six
employees who formerly worked for Lowlands Bank and six employees who formerly
worked for Doe Bank. They were seconded full-time to the project.
Project issues and conclusion

During the project there were two major issues. The first concerned the precise terms of
the voluntary redundancy arrangements. The terms of the offer were quickly specified by
Len Peters. The second issue arose one year into the project and it concerned the amount
of time it took to dispose of unwanted branches. The original project estimates had
underestimated how long it would take to sell property the bank owned or to re-assign or
terminate the leases for branches it rented. The project board overseeing the project
agreed to the project manager’s submission that the estimates had been too optimistic and
they extended the project deadline for a further six months.
The project team completed the required changes one week before the rearranged
deadline. Glenys Hopkins was able to confirm that the branch network had been cut by
23%. Six months later, in a benefits realisation review, she was also able to confirm that
branch employment costs had been reduced by 12%. At a post-project review the project
support office of the bank confirmed that they had changed their project estimating
assumptions to reflect the experience of the project team.
Potential process initiatives

LDB is now ready to undertake three process initiatives in the Information Technology
area. The IT departments and systems of the two banks are still separate. The three
process initiatives under consideration are:
49
1. The integration of the two bespoke payroll systems currently operated by the two
banks into one consolidated payroll system. This will save the costs of updating and
maintaining two separate systems.
2. The updating of all personal desktop computer hardware and software to reflect
contemporary technologies and the subsequent maintenance of that hardware. This
will allow the desktop to be standardised and bring staff efficiency savings.
3. The bank has recently identified the need for a private personal banking service for
wealthy customers. Processes, systems and software have to be developed to
support this new service. High net worth customers have been identified by the bank
as an important growth area.
The bank will consider three solution options for each initiative. These are outsourcing or
software package solution or bespoke development.
The branch rationalisation was a successful project.
Recommend and justify a solution option for each of the three process initiatives.
50
Lecture 22 - Lean Systems

& Innovation
51
Illustration 1
C is one of several insurance companies which offer insurance policies covering general
risks relating to individuals and families. Cost efficiency is a major factor in the success of
the companies in this industry. Competition is fierce.
Over the past three years C has seen the volume of business increase but profits have
remained static due to declining margins.
Although some of the processes within C are computerised, most of the processes which
involve communication with customers are still paper-based. Responses from telephone
enquiries involve paper-based communications both with the enquirers and internally
within C. Additionally, sales staff visit potential customers in their homes to try to sell them
insurance policies for their homes and their possessions. These transactions are again
paper-based. This process is often slow and has led to complaints both from customers
and from the company’s sales staff.
C has also been receiving a regular, and increasing, number of complaints from current
and potential customers about errors in the paperwork that they receive.
The Board of Directors of C has announced that there is a need for a business process re-
engineering exercise to be conducted with the intention of modernising the business. The
intention is to streamline the business model as much as possible and to increase the
profitability of the company. C intends to computerise almost all of the work done within the
company.
A number of staff have expressed concern about business process re-engineering and its
implications for those who work at C.
Explain the stages involved in implementing a BPR exercise that might be

undertaken by C.
52
Lecture 23 - Change
Management
53
Illustration 1
WAL is a manufacturer of biscuits which it sells to retailers. Its current year’s revenue of
£120 million represents approximately 3% of the UK market. WAL has a centralised
marketing information system based on a software package bought in 2005. This package
is financial accounts orientated: the only management information provided to support the
marketing staff consists of reports showing revenue, profit, inventory value, receivables
and payables balances. WAL’s marketing staff and the Marketing Director, M, have
complained that they are not provided with information such as customers’ profitability,
market share and market growth which would support their strategic decision-making.
They consider the inadequacies of the current marketing information system to be so

serious that they would like a Big Bang change which would mean moving straightaway to
a new marketing information system that would give them the information they need. They
feel WAL is being left behind by its competitors and is losing customers.
The Company Secretary, R, manages WAL’s IS/IT staff. R was responsible for buying the
existing marketing information software in 2005 and he would also be responsible for the
procurement of its replacement. R has identified three possible solutions to meeting the
marketing staff’s needs: the first two are evolutionary, the third would be a 'Big Bang'.
Solution 1
Modification: the existing marketing information system would be redesigned by WAL’s in-
house IS/IT staff to meet the needs of the marketing staff. Although WAL’s IS/IT staff have
limited experience of the type of work which would be required, they are confident the
redesign could be done within a year. The IS/IT staff are unsure of the cost.
Solution 2
Development: WAL’s in-house IS/IT staff would develop new bespoke software to meet the
marketing staff’s needs. The IS/IT staff have stated that ‘because WAL’s needs are unique,
costs can only be roughly estimated. However, this solution is likely to be considerably
more expensive than the 'Modification' solution. The final cost would be dependent upon
the length of the project. It should take a minimum of six months to develop new software
but it might take as long as two years. We have little experience of software development
but are very enthusiastic about trying’.
Solution 3
Purchase: WAL could purchase the biscuit industry standard marketing information system
software: this would be an expensive purchase but the product is well proven. Some of
WAL’s marketing staff have experience of using this software in other companies, are very
appreciative of its benefits and believe it would help them considerably in their jobs. The
software supplier claims that ‘90% of the biscuit industry uses our product and if you buy it
we guarantee to have it working inside WAL within three months of you buying it’.
R believes that he represents the majority of opinion within the IS/IT staff who very much
prefer that change should be evolutionary. They would be very resistant to change if it was
carried out in any other way. R also pointed out that WAL has experience of 'Big Bang'
organisational change in the recent past which failed because WAL’s culture didn’t change
to reflect this.
R stated, ‘It looks straightforward to go out and buy a software package but it’s a lot more
complicated than people think and it’s my department that would have to do all the work.
54
(i) Explain the circumstances in which it would be appropriate to use
1. Evolutionary change.
2. 'Big Bang' change.
(ii) Evaluate each of the three solutions proposed by R. and suggest which should
be adopted.
55
Illustration 2
Introduction
Frigate Limited is based in the country of Egdon. It imports electrical components from
other countries and distributes them throughout the domestic market. The company was
formed twenty years ago by Ron Frew, who now owns 80% of the shares. A further 10% of
the company is owned by his wife and 5% each by his two daughters.
Although he has never been in the navy, Ron is obsessed by ships, sailing and naval
history. He is known to everyone as ‘The Commander’ and this is how he expects his
employees to address him. He increasingly spends time on his own boat, an expensive
motor cruiser, which is moored in the local harbour twenty minutes drive away. When he is
not on holiday, Ron is always at work at 8.00 am in the morning to make sure that
employees arrive on time and he is also there at 5.30 pm to ensure that they do not leave
early.
However, he spends large parts of the working day on his boat, although he can be
contacted by mobile telephone. Employees who arrive late for work have to immediately
explain the circumstances to Ron. If he feels that the explanation is unacceptable then he
makes an appropriate deduction from their wages. Wages, like all costs in the company,
are closely monitored by Ron.
Employees, customers and suppliers

Frigate currently has 25 employees primarily undertaking sales, warehousing, accounts
and administration. Although employees are nominally allocated to one role, they are
required to work anywhere in the company as required by Ron. They are also expected to
help Ron in personal tasks, such as booking holidays for his family, filling in his personal
tax returns and organising social events.
Egdon has laws concerning minimum wages and holidays. All employees at Frigate Ltd
are only given the minimum holiday allocation. They have to use this allocation not only for
holidays but also for events such as visiting the doctor, attending funerals and dealing with
domestic problems and emergencies. Ron is particularly inflexible about holidays and work
hours. He has even turned down requests for unpaid leave. In contrast, Ron is often away
from work for long periods, sailing in various parts of the world.
Ron is increasingly critical of suppliers (‘trying to sell me inferior quality goods for higher
prices’), customers (‘moaning about prices and paying later and later’) and society in
general (‘a period working in the navy would do everyone good’). He has also been in
dispute with the tax authority who he accused of squandering his ‘hard-earned’ money. An
investigation by the tax authority led to him being fined for not disclosing the fact that
significant family expenditure (such as a holiday for his daughters overseas) had been
declared as company expenditure.
Company accountant
It was this action by the tax authority that prompted Ron to appoint Ann Li as company
accountant. Ann had previously worked as an accountant in a number of public sector
organisations, culminating in a role as a compliance officer in the tax authority itself. Ron
felt that ‘recruiting someone like Ann should help keep the tax authorities happy. After all,
she is one of them’.
56
Ann was used to working in organisations which had formal organisational hierarchies,
specialised roles and formal controls and systems. She tried to install such formal
arrangements within Frigate. As she said to Ron ‘we cannot have everyone working as if
they were just your personal assistants. We need structure, standardised processes and
accountability’. Ron resisted her plans, at first through delaying tactics and then through
explicit opposition, tearing up her proposed organisational chart and budget in front of
other employees. ‘I regret the day I ever made that appointment’, he said. After six months
he terminated her contract. Ann returned to the tax authority as a tax inspector.
Required:
The cultural web allows the business analyst to explore ‘the way things are done
around here’.
Analyse Frigate Ltd using the cultural web or any other appropriate framework for
understanding organisational culture.
57
Lecture 24 - Managing
Change
58
Illustration 1
WAL is a manufacturer of biscuits which it sells to retailers. Its current year’s revenue of
£120 million represents approximately 3% of the UK market. WAL has a centralised
marketing information system based on a software package bought in 2005. This package
is financial accounts orientated: the only management information provided to support the
marketing staff consists of reports showing revenue, profit, inventory value, receivables
and payables balances. WAL’s marketing staff and the Marketing Director, M, have
complained that they are not provided with information such as customers’ profitability,
market share and market growth which would support their strategic decision-making.
They consider the inadequacies of the current marketing information system to be so

serious that they would like a Big Bang* change which would mean moving straightaway to
a new marketing information system that would give them the information they need. They
feel WAL is being left behind by its competitors and is losing customers.
The Company Secretary, R, manages WAL’s IS/IT staff. R was responsible for buying the
existing marketing information software in 2005 and he would also be responsible for the
procurement of its replacement. R has identified three possible solutions to meeting the
marketing staff’s needs: the first two are evolutionary, the third would be a 'Big Bang'.
Solution 1
Modification: the existing marketing information system would be redesigned by WAL’s in-
house IS/IT staff to meet the needs of the marketing staff. Although WAL’s IS/IT staff have
limited experience of the type of work which would be required, they are confident the
redesign could be done within a year. The IS/IT staff are unsure of the cost.
Solution 2
Development: WAL’s in-house IS/IT staff would develop new bespoke software to meet the
marketing staff’s needs. The IS/IT staff have stated that ‘because WAL’s needs are unique,
costs can only be roughly estimated. However, this solution is likely to be considerably
more expensive than the 'Modification' solution. The final cost would be dependent upon
the length of the project. It should take a minimum of six months to develop new software
but it might take as long as two years. We have little experience of software development
but are very enthusiastic about trying’.
Solution 3
Purchase: WAL could purchase the biscuit industry standard marketing information system
software: this would be an expensive purchase but the product is well proven. Some of
WAL’s marketing staff have experience of using this software in other companies, are very
appreciative of its benefits and believe it would help them considerably in their jobs. The
software supplier claims that ‘90% of the biscuit industry uses our product and if you buy it
we guarantee to have it working inside WAL within three months of you buying it’.
R believes that he represents the majority of opinion within the IS/IT staff who very much
prefer that change should be evolutionary. They would be very resistant to change if it was
carried out in any other way. R also pointed out that WAL has experience of 'Big Bang'
organisational change in the recent past which failed because WAL’s culture didn’t change
to reflect this.
R stated, ‘It looks straightforward to go out and buy a software package but it’s a lot more
complicated than people think and it’s my department that would have to do all the work.
59
Advise how WAL could overcome the resistance to change which would arise if
Solution 3, the purchase solution, were to be adopted.
60
Illustration 2
MMM is a university whose mission is 'to be the best'. It has a wide range of educational
activities and is organised into six departments:
1. Arts
2. Medicine
3. Law
4. Engineering
5. Natural Sciences
6. Theology
Each of the six departments above is controlled by a senior manager, known as a Head
who has operational responsibility for their department’s activities throughout the
university.
On the advice of management consultants, it has now been decided to reorganise the
University and establish the following three new departments which will replace the current
six departments listed above:
1. Student experience: this includes teaching, welfare, progression, pass rates and quality
for both undergraduates and postgraduates.
2. Research: this includes academic research and commercial research.
3. All profit-making activities other than commercial research.
Each of the new departments will be managed by one of the existing Heads. MMM wants
to introduce a control system for its Heads and departments that will measure their
performance against strategic and operational targets using quantitative and qualitative
criteria. MMM’s executive board has the following objectives for the new control system:
To develop the Heads' motivation

To encourage the Heads to accept responsibility for achieving strategic and operational
targets
To encourage activities that generate income from external activities
MMM's executive board believes that the departmental reorganisation and the introduction
of the new control measures will require cultural change within the university.
Discuss the role that a change agent could play in the change process in MMM.
61
Lecture 25 - Project
Management I
62
Illustration 1
A clothing company sells 40% of its goods directly to customers through its website. The
marketing manager of the company (MM) has decided that this is insufficient and has put a
small team together to re-design the site. MM feels that the site looks ‘amateur and old-
fashioned and does not project the right image’. The board of the company has given the
go-ahead for the MM ‘to re-design the website’. The following notes summarise the
outcomes of the meetings on the website re-design. The team consists of the marketing
manager (MM), a product range manager (RP), a marketing image consultant (IC) and a
technical developer (TD).
Meeting 1: 9 July attended by MM, RP, IC and TD The need for a re-designed website to
increase sales volume through the website and to ‘improve our market visibility’ was
explained by MM. IC was asked to produce a draft design.
Meeting 2: 16 August attended by MM, RP, IC and TD IC presented a draft design. MM

and RP were happy with its image but not its functionality, suggesting that it was too
similar to the current site. ‘We expected it to do much more’ was their view.
Meeting 3: 4 September attended by MM, RP and IC IC produced a re-drafted design. This

overall design was agreed and the go-ahead was given for TD to produce a prototype of
the design to show to the board.
Meeting 4: 11 September attended by RP, IC and TD TD explained that elements of the

drafted re-design were not technically feasible to implement in the programming language
being used. Changes to the design were agreed at the meeting to overcome these issues
and signed off by RP.
Meeting 5: 13 October attended by MM, RP, IC and TD The prototype re-design was
demonstrated by TD. MM was unhappy with the re-design as it was ‘moving too far away
from the original objective and lacked functionality that should be there’. TD agreed to
write a technical report to explain why the original design (agreed on 4 September) could
not be adhered to.
Meeting 6: 9 November attended by MM, IC and TD It was agreed to return to the 4

September design with slight alterations to make it technically feasible. TD expressed
concerns that the suggested design would not work properly with all web browsers.
At the board meeting of 9 December the board expressed concern about the time taken to
produce the re-design and the finance director highlighted the rising costs (currently
$25,000) of the project. They asked MM to produce a formal cost-benefit of the re-design.
The board were also concerned that the scope of the project, which they had felt to be
about re-design, had somehow been interpreted as including development and
implementation.
On 22 December MM produced the following cost-benefit analysis of the project and

confirmed that the word ‘re- design’ had been interpreted as including the development
and implementation of the website.
63
Year 1 2 3 4 5
Costs 50,000 10,000 10,000 10,000 10,000
Benefits* 0 15,000 25,000 35,000 35,000
*These benefits are extra sales volumes created by the website’s extra functionality and
the company’s increased visibility in the market place.
Meeting 7: 24 February attended by MM, RP, IC and TD A partial prototype system was
demonstrated by TD. RP felt that the functionality of the re-design was too limited and that
the software was not robust enough. It had crashed twice during the demonstration. He
suggested that the company delay the introduction of the re-designed website until it was
complete and robust. MM declared this to be impossible.
Conclusion
The re-designed website was launched on 1 March. MM declared the re-design a success
that ‘had come in on time and under budget’. On 2 and 3 March, numerous complaints
were received from customers. The website was unreliable and did not work with a
particular popular web browser. On 4 March an emergency board meeting decided to
withdraw the site and reinstate the old one. On 5 March, MM resigned.
Most project management methods have an initiation or definition stage which includes the
production of a document that serves as an agreement between the sponsors and
deliverers of the project. This may be called a project initiation document or a project
charter. Defining the business case is also an important part of the initiation or definition
stage of the project.
Explain how a business case and a project initiation document would have helped
prevent some of the problems that emerged during the conduct of the website re-
design project.
64
Management II
65
Illustration 1
HomeDeliver is a nationwide company that sells small household goods to consumers. It

produces an attractive, comprehensive catalogue which it distributes to staff known as
catalogue supervisors. There are 150 of these supervisors in the country. Each supervisor
has approximately 30 part-time home-based agents, who then deliver the catalogue to
consumers in their homes. Agents subsequently collect the catalogue and any completed
order forms and forward these forms to their supervisor. Payment is also taken when the
order is collected.
Payment is by cash or cheque and these payments are also forwarded to the supervisor
by the agent. At the end of the week the supervisor returns completed order forms (and
payments) to HomeDeliver. Order details are then entered into a computer system by
order entry administrators at HomeDeliver and this starts an order fulfilment process that
ends with goods being delivered directly to the customer. The supervisors and the agents
are all self-employed. HomeDeliver rewards supervisors on the basis of how many agents
they manage. Agents’ reward packages are based on how many catalogues they deliver
and a commission based on orders received from the homes they have collected orders
from.
In August 2010 HomeDeliver decided to replace the physical ordering system with a new
electronic ordering system. Agents would be provided with software which would allow
them to enter customer orders directly into the computer system using their home personal
computer at the end of each day. Payments would also be paid directly into a HomeDeliver
bank account by agents at the end of each day.
The software to support the new ordering system was developed in-house to requirements
provided by the current order entry administrators at HomeDeliver and managers
concerned with order fulfilment and invoicing. The software was tested internally by the
order entry administrators. At first, both the specification of requirements and initial
software testing progressed very slowly because order administrators were continuing with
their normal operational duties. However, as project delays became more significant,
selected order administrators were seconded to the project full-time. As a result the
software was fully acceptance tested by the end of July 2011, two months behind
schedule.
In August 2011 the software was rolled out to all supervisors and agents. The software
was claimed to be easy to use, so no formal training was given. A large comprehensive
manual with colour screenshots was attached as a PDF to an email sent to all supervisors
and agents. This gave detailed instructions on how to set up and use the software.
Unfortunately, problems began to appear as soon as the agents tried to load and use the
software. It was found to be incompatible with one particular popular browser, and agents
whose computers used that browser were advised to use an alternative browser or
computer. Agents also criticised the functionality of the software because it did not allow
for the amendment of orders once they had been submitted. It emerged that customers
often contacted agents and supervisors to amend their order prior to it being sent to
HomeDeliver. This was no longer possible with the new system. Many agents also claimed
that it was not possible to enter multiple orders for one household. However, HomeDeliver
confirmed that entering multiple orders was possible; it was just not clear from the
software, or from the instructions provided, how this could be achieved.
66
Most of the agents were reluctant to print off the manual (preferring to read it on screen)
and a significant number claimed that they did not receive the email with the manual
attachment. Agents also found quite a number of spelling and functionality errors in the
manual. At certain points the software did not perform in the way the manual stated that it
would.
Internal standards at HomeDeliver require both a post-project and a post-implementation

review.
HomeDeliver does not have a benefits management process and so a benefits realisation
review is inappropriate. However, it does feel that it would be useful to retrospectively
define the benefits to HomeDeliver of the new electronic ordering system.
Identify and discuss the potential benefits to HomeDeliver of the new electronic
ordering system.
67
Management III
68
Illustration 1
Explain briefly the difference between the project sponsor and the project manager.
Illustration 2
ASW is a software house which specialises in producing software packages for insurance
companies. ASW has a basic software package for the insurance industry that can be
used immediately out of the box. However, most customers wish ASW to tailor the
package to reflect their own products and requirements. In a typical ASW project, ASW’s
business analysts define the gap between the customer’s requirements and the basic
package.
These business analysts then specify the complete software requirement in a system
specification. This specification is used by its programmers to produce a customised
version of the software. It is also used by the system testers at ASW to perform their
system tests before releasing it to the customer for acceptance testing.
One of ASW’s new customers is CaetInsure. Initially CaetInsure sent ASW a set of
requirements for their proposed new system. Business analysts from ASW then worked
with CaetInsure staff to produce a full system specification for CaetInsure’s specific
requirements. ASW do not begin any development until this system specification is signed
off. After some delay (see below), the system specification was eventually signed off by
CaetInsure.
Since sign-off, ASW developers have been working on tailoring the product to obtain an
appropriate software solution. The project is currently at week 16 and the software is ready
for system testing. The remaining activities in the project are shown in figure 1. This simple
plan has been put together by the project manager. It also shows who has responsibility
for undertaking the activities shown on the plan.
The problem that the project manager faces is that the plan now suggests that
implementation (parallel running) cannot take place until part way through week 28. The
original plan was for implementation in week 23. Three weeks of the delay were due to
problems in signing off the system specification. Key CaetInsure employees were
unavailable to make decisions about requirements, particularly in the re-insurance part of
the system. Too many requirements in this module were either unclear or kept changing as
users sought clarification from their managers. There have also been two further weeks of
slippage since the sign-off of the system specification.
The CaetInsure contract had been won in the face of stiff competition. As part of securing
the deal, the ASW sales account manager responsible for the CaetInsure contract agreed
that penalty clauses could be inserted into the contract. The financial penalty for late
delivery of the software increases with every week’s delay. CaetInsure had insisted on
these clauses as they have tied the delivery of the software in with the launch of a new
69
product. Although the delay in signing off the system specification was due to CaetInsure,
the penalty clauses still remain in the contract. When the delay was discussed with the
customer and ASW’s project manager, the sales account manager assured CaetInsure
that the ‘time could be made up in programming’.
The initial planned delivery date (week 23) is now only seven weeks away. The project
manager is now under intense pressure to come up with solutions which address the
project slippage.
Evaluate the alternative strategies available to ASW’s project manager to address

the slippage problem in the CaetInsure project.
Illustration 3
Explain the purpose of each of the following: a post-project review, a post-

implementation review and a benefits realisation review.
70
Lecture 28 - Forecasting &

Analysis
71
Illustration 1
The following information applies to a product:
Total Cost Level of Activity
26,000 20,000
21,000 10,000
Calculate the split between fixed costs and variable costs using the high/low method.
Illustration 2
ABC have the following total costs and units of production for the six month period in
question.
Total Costs Units

$
January 13,600 2,100
February 15,800 2,800
March 14,500 2,200
April 16,200 3,000
May 14,900 2,600
June 15,000 2,500
Analyse the data into fixed and variable costs using linear regression analysis
72
Illustration 3
Using the information in illustration 2 calculate the correlation coefficient and the
percentage change in costs that can be explained by changes in the level of activity.
Illustration 4
A business has had the following costs over the last year:
Quarter Costs
$‘000
1 150
2 192
3 206
4 245
Calculate the average growth in costs over the year.
73
Illustration 5
A business has had the following sales over the last 5 years:
Year Sales
$‘000
1 160
2 195
3 220
4 245
5 270
Calculate the average growth in sales over the year.
Illustration 6
A business has had a 12% increase in sales results each year over the last 5 years. The
sales in the current period were $100,000.
Predict the sales for the following year.
74
Illustration 7
A business has had a trend of sales increases of 5% per quarter over the last 5 years. The
seasonal variations for each quarter are shown below
Quarter Seasonal Variation
1 25,000
2 -10,000
3 55,000
4 -70,000
The sales in Q4 of the current year were $100,000.
Forecast the sales for each of the 4 quarters of the next year.
Illustration 8
A business has had a trend of sales increases shown by the formula Y = 100 + 5X where
Y = Sales in thousands and X is the quarter number.
X1 was Quarter 1 of 2009 making X5 Quarter 1 of 2010.
The seasonal variation is as shown below:
1 1.10
2 0.94
3 1.06
4 0.90
Forecast the sales for each of the 4 quarters of 2011.
75
Test Your Knowledge

work on this area!
1. The total costs of production at ABC Co. are $25,000 when 5,000 units are produced
and $35,000 when 7,000 units are produced. Calculate the total fixed costs and the
variable cost per unit.
2. Why might regression analysis be used by a business?
3. Are there any problems with regression analysis?
4. ABC Co. had sales of $435,000 in 2005 and $500,000 in 2010. Calculate the average
growth in sales each year between 2005 and 2010.
5. What are the 4 elements of time series analysis?
6. A business has had a 7% increase in sales results each year over the last 5 years. The
sales in the current period were $200,000. Predict the sales for the following year.
7. A business has had a trend of sales increases of 3% per quarter over the last 5 years.
The seasonal variations for each quarter are shown below
1 35,000
2 -20,000
3 27,000
4 -42,000
Forecast the sales for each of the 4 quarters of the next year and the total sales for the
year..
8. Are there any problems with time series analysis?
76
Test Your Knowledge Answers

work on this area!
1. The total costs of production at ABC Co. are $25,000 when 52,000 units are produced
and $35,000 when 79,000 units are produced. Calculate the total fixed costs and the
variable cost per unit.
High/Low Method
Total costs at high level of activity 35,000
Total costs at low level of activity 25,000
Difference 10,000
Total units at high level of activity 79,000
Total units at low level of activity 52,000
Difference 27,000
Difference in Costs 10,000

Variable cost per unit
Difference in Units 27,000 = $0.37
Fixed Costs $25,000 - (52,000 x 0.37) $5,760
2. Why might regression analysis be used by a business?
To separate out fixed and variable costs.

To establish relationships between different costs etc. in the business.
3. Are there any problems with regression analysis?
The relationship must be linear to use it to predict anything.

If results are outside the range of the data tested it will be less reliable.
It’s based on historic data so using it to predict the future may well not be
appropriate.
If a small amount of data is used in the analysis it will be less reliable.
It assumes that Y can be predicted from X which is not always the case.
77
4. ABC Co. had sales of $435,000 in 2005 and $500,000 in 2010. Calculate the average
growth in sales each year between 2005 and 2010.
Average Growth
[n√Value in most recent period / Value in period 1] -1
[5√(500,000/435,000)] -1
2.8%
5. What are the 4 elements of time series analysis?
Trend - Underlying long term movement.

Seasonal variation - Short term movements due to seasonal factors.
Cyclical variation - Longer term cycles of movement.
Random - Unexpected fluctuations due to unpredictable events.
6. A business has had a 7% increase in sales results each year over the last 5 years. The
sales in the current period were $200,000. Predict the sales for the following year.
Sales Prediction
Sales in current year $200,000
Trend in sales +7%
Forecast sales for following year 214,000
78
7. A business has had a trend of sales increases of 3% per quarter over the last 5 years.
The seasonal variations for each quarter are shown below
1 35,000
2 -20,000
3 27,000
4 -42,000
Forecast the sales for each of the 4 quarters of the next year and the total sales for the
year.
Quarter Trend Seasonal Variation Forecast
4 Current Period 500,000
1 515,000 35,000 550,000
2 530,450 -20,000 510,450
3 546,364 27,000 573,364
4 562,754 -42,000 520,754
Total Annual Sales 2,154,568 0 2,154,568
8. Are there any problems with time series analysis?
The future is inherently unpredictable.

All of the results are based on historic data which is not necessarily a good
predictor of future results.
Random events are ignored.
All forecasting requires the use of judgements which are not necessarily correct.
79
Lecture 29 - Interpretation
of Financial Statements
80
Illustration 1
2011 2010
ASSETS $‘000 $‘000
Non Current Assets 1000 1000
Inventory 300 400
Receivables 200 300
Cash 300 200
1800 1900
LIABILITIES
Ordinary Shares 800 800
Reserves 200 100
Long term Liabilities 700 900
Payables 100 100
Overdraft -
1800 1900
$‘000 $‘000
Revenue 1000 1200
COS 800 1100
Gross Profit 200 100
Other Costs 100 90
Net Profit 100 10
All sales are made on credit.
Required:
Calculate the Inventory, Receivables and Payables days for Inter Ltd. in each of the
2 years as well as the current and quick ratios.
81
Illustration 2
X1 X2 X3
Non Current Assets 500 700 1000
Current Assets 150 200 300
650 900 1300
Ordinary Shares ($1) 300 300 300
Reserves 100 280 430
Loan Notes 150 200 300
Payables 100 120 270
650 900 1300
Revenue 3000 3500 4200
COS 2000 2400 3200
Gross Profit 1000 1100 1000
Admin Costs 300 350 400
Distribution Costs 200 250 300
PBIT 500 500 300
Interest 100 150 220
Tax 120 90 50
Profit After Tax 280 260 30
Dividends 100 110 30
Retained Earnings 180 150 0
Share Price $3.30 $4.00 $2.20
82
Using the information on the previous page calculate and comment on the following
Ratios:
I. Return on Capital Employed

II. Return on Equity
III. Gross Margin
IV. Net Margin
V. Operating Margin
VI. Revenue Growth
VII. Gearing
VIII. Interest Cover
IX. Dividend Cover
X. Dividend Yield
XI. P/E Ratio
83
Lecture 31 - Decision Trees
84
Illustration 1
A student is deciding how to get to class and has 2 choices:
1. Walk to class which is free.
2. Take the bus costing $5.
There is a 25% chance that it will rain and if it does the student will have to pay $10 to get
their clothes dry cleaned.
Draw a decision tree to assess whether the student should walk or take the bus.
Illustration 2
Say that the student in the above illustration could take an umbrella to avoid getting wet
when walking but there is a 10% chance that the student will lose the umbrella costing $20
at college.
85
Illustration 3
We have 3 choices, we can invest in stocks, bonds or put the money on deposit. The
returns of each are sumarised below:
Market Return on Return on Return on

Direction Stocks Bonds Deposit
Up
$1,500 $900 $500
(50% chance)
Even
$300 $600 $500
(30% chance)
Down
-$800 $200 $500
(20% chance)
(i) Calculate the expected value for investing in each of stocks, bonds and deposit.
(ii)Select the best investment for each of the 3 possibilities i.e that the market goes up,
goes down and is even and calculate the expected value of these ‘best’ choices.
(iii)Based on the above answers, what is the price of perfect information in this instance?
86
Test Your Knowledge

work on this area!
1. What is a decision tree?
2. What is the decision?
3. What is the event?
4. How is each of the items outlined in Q2 & Q3 represented on the decision tree?
5. How is the value of perfect information calculated?
If you’ve successfully answered all of the above

questions then you’re ready to do the exam questions
below:
New area of the syllabus so no questions (yet!)
87
Lecture 33 - Strategy &

People II
88
Illustration 1
Judy Sodhi is in her first teaching year at the National College, a private college offering
short courses in accounting, auditing and management. In her first year Judy has primarily
taught the Certificate in Managerial Finance. This is a three-day short course which ends
in an externally set examination, marked and invigilated by staff employed by the Institute
of Managerial Finance (IMF). The IMF also defines the syllabus, the length of the course
and accredits colleges to run the course. There are no pre-conditions for candidates who
wish to attend the course. Last year Judy ran the course 20 times with an average of nine
students on each running of the course. At the end of each course every student has to
complete a post-course evaluation questionnaire. Judy does not see these questionnaires
and has received no feedback about her performance.
As the college is a virtual organisation using serviced training rooms, Judy rarely sees her
manager Blake Jones. However, he contacted her recently to suggest that they should
conduct her first appraisal and a date and time was agreed. Blake explained that ‘it would
be just a general chat looking at how the year had gone. We need to do one to satisfy the
college and the IMF’. The time of the appraisal was set for 3.00 pm, finishing at 5.00 pm.
The appraisal did start with a general discussion. Blake outlined the plans of the
organisation and his own promotion hopes. Judy was surprised to see that Blake was not
following any standard list of questions or noting down any of the answers she made. She
told him that one of her main problems was the numeracy level of some of the candidates.
She recognised that the course had no pre-conditions, ‘but it does require some basic
mathematical skills that some of our candidates just do not have’.
After listening to Judy for a while Blake produced a statistical summary of the feedback
questionnaires from the courses she had run in the last year. He said that the organisation
expected its lecturers to attain an acceptable result in all 10 questions given in the post-
course questionnaire. An acceptable result ‘is that 90% of all candidates said that they
were ‘satisfied or very satisfied’ with key aspects of the course’. Judy had achieved this on
seven of the questions but specifically failed on the following performance measures;
– Percentage of candidates who felt that the course was relevant to their current job – only
65% of your candidates felt that the course was relevant to their current job.
– Percentage of candidates who passed the examination – only 88·88% of your

candidates passed the examination.
– Percentage of candidates who felt that the course pace was satisfactory – only 75% of
your candidates felt that the pace of the course was satisfactory.
After expressing her surprise that she had not been given this information before, she
immediately returned to the problem of numeracy skills. ‘As I told you’ she said ‘some of
these students lack the mathematical skills to pass. That’s not my fault, it is yours – you
should not have let them on the course in the first place. You are just filling the places to
make money’.
After a heated discussion, Blake then turned to the ‘last thing on my agenda’. He
explained that it was only college policy to give pay increases to lecturers who had
achieved 90% in all 10 questions, so there would be no increase for Judy next year.
However, he also needed to discuss her workload for next year. He produced a
spreadsheet and had just begun to discuss course planning and locations in great detail
89
when his mobile phone rang. ‘I am sorry, Judy, I have to collect the children from school – I
must go. I will write down your planned course assignments and e-mail them to you. I think
that was a very useful discussion. Overall we are very happy with you. See you at the end-
of-year party, and of course at next year’s appraisal.’ He left at 4.30 pm.
Explain the concept and purpose of competency frameworks for organisations,

assessing their potential use at the National College and the Institute of Managerial
Finance.
90
Lecture 34 - Financial
Strategy
No illustrations
91
92
Lecture 35 - IT Risks &

Controls
93
Illustration 1
H is a training company that provides executive training in management subjects. H

provides short courses that range from a single day to five days. H has five offices
and each office has between ten and twenty full-time trainers.
H’s courses are very expensive. Delegates are senior managers and company
directors. All courses are paid for by employers who are keen to equip their staff
with new skills or to update existing knowledge. Many courses are taught in H’s
offices to small groups of delegates, each of whom has come from a different
company. These courses are advertised on H’s website and some, like “finance for
non-financial managers”, are taught frequently throughout the year. H will also
adapt an existing course or even write a new course from scratch and offer it in-
house for a client company. Trainers often have to travel away from home and stay
in hotels in order to present in-house courses at clients’ offices.
Each course delegate receives a printed copy of the course materials and an
electronic copy on a memory stick. Feedback indicates that delegates like to refer
to the paper copy during the course and then take the electronic copy for ease of
storage and future reference.
Courses are presented using laptops and projectors. Slides are written on an
industry-standard presentation software package. H has provided each trainer with
a laptop and all of the company’s training rooms are equipped with projectors.
Client companies also have projectors that are available for presentations.
Each course has a very specific syllabus and the course materials are written to a
very high standard. A master copy of the material used on each course, including
client-specific “in-house courses” is stored on a PC at H’s head office and updated
copies are backed up to a server at another office. Courses are reviewed regularly
and updated when required. The company- specific courses are held so that they
can be adapted if necessary for other companies or to become a general offering.
‘Image’ is very important and H’s trainers all take great pride in their personal
appearance. They all take care to ensure that they are well dressed. That pride also
extends to being seen to have the latest technology. Many of H’s trainers have
bought themselves tablet computers that they can use instead of their laptops.
There are different operating systems for these machines, but all can run the
software required to edit and present course materials and all of the trainers have
purchased models that can work with standard projectors. The trainers feel that
these tablets look more impressive and that they are lighter to pack when they have
to work away from home on in-house courses. The tablets have also been used to
go online and access H’s systems.
H’s Head of IT is concerned that there could be problems associated with the
trainers using their own tablet computers in this way.
94
Required
Discuss the risks associated with H’s staff using their own equipment (for
example tablets) instead of the laptops provided by H.
95
Lecture 36 - Integrated
Reporting
96
No illustrations
97

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ACCA P3 Workbook Questions! www.mapitaccountancy.

E is a multinational organisation and is one of the largest global producers of chocolate,

(a) Explain the advantages to E of conducting a stakeholder analysis of its

(b) Produce a stakeholder analysis for E’s operations in country F.

Evaluate the benefits to B of implementing a process of systematic environmental

Using appropriate models, discuss how conducting a frequent and thorough

An acquaintance of Mr Z, a management consultant, has suggested that the company

Explain the characteristics of the maturity stage of the industry lifecycle.

Increasingly, electronic component manufacturers are under pressure to manufacture

C’s business model consists of the following stages:

3.The manufacturing department of C then produces the appropriate equipment to the

Describe the essential stages that should be included in a scenario planning

Lecture 8 - Strategic Choice

GHK is a restaurant chain consisting of eight restaurants in an attractive part of a

The owners of GHK commissioned a restaurant consultant to give them an independent

Lecture 9 - Strategic Choice

Discuss how JKL could grow their business by:

(i) Organic Growth

DDD is funded by an exclusive arrangement with a venture capital company. However,

Test Your Knowledge

2. What are the benefits of marginal-cost plus pricing?

3. What are the downsides of marginal-cost plus pricing?

4. When is it appropriate to undertake a strategy of Price Skimming?

5. When is it appropriate to undertake a strategy of Penetration Pricing?

6. What are complementary products?

7. What is price discrimination?

8. What conditions must exist for price discrimination?

If you’ve successfully answered all of the above

None yet - New syllabus area!

DD is a research company operating in the computer hardware industry. It has been

Currently there is no performance measurement system in place within the company. Mr X

(i) Explain the components of the Balanced Scorecard model.

In 2008, Aybe commissioned a review of its organisational structure from a human

The business environment in Asia

Expansion of electronic components business into Asia

EEE is a divisionalised company, based in F, where it is quoted on the stock exchange.

Lecture 16 - IT & Strategy

GHK is a restaurant chain consisting of eight restaurants in an attractive part of a

(ii)Advise how GHK could employ a range of organisational information systems to

The current business model

Project E: Computerised accounting and e-commerce systems

Evaluate the strategic and competitive benefits to AAA of the proposed e-

Distinguish between data mining and data warehousing.

The business of AAA

The staff retention problem

Discuss the three main potential benefits of Knowledge Management to AAA.

(ii)Recommend, with reasons, strategies that B can use to develop relationship

Percentage allocation of marketing budget (2007–2008)

! ! ! 2007" " 2008

Explain, in the context of AEC, how the marketing characteristics of electronic

Lecture 21 - Roll of Process

Project issues and conclusion

Potential process initiatives

The branch rationalisation was a successful project.

Lecture 22 - Lean Systems

Explain the stages involved in implementing a BPR exercise that might be

They consider the inadequacies of the current marketing information system to be so

(i) Explain the circumstances in which it would be appropriate to use

Employees, customers and suppliers

They consider the inadequacies of the current marketing information system to be so

To develop the Heads' motivation

Meeting 2: 16 August attended by MM, RP, IC and TD IC presented a draft design. MM