Case 1:

Introduction
The island of Oceania attracts thousands of tourists every year. They come to enjoy the
beaches, the climate and to explore the architecture and history of this ancient island.
Oceania is also an important trading nation in the region and it enjoys close economic links
with neighbouring countries. Oceania has four main airports and until 1997 had two airlines,
one based in the west (OceaniaAir) and one based in the east (Transport Oceania) of the
island. However, in 1997 these two airlines merged into one airline – Oceania National
Airlines (ONA) with the intention of exploiting the booming growth in business and leisure
travel to and from Oceania.

Market sectors
ONA serves two main sectors. The first sector is a network of routes to the major cities of
neighbouring countries. ONA management refer to this as the regional sector. The average
flight time in this sector is one and a half hours and most flights are timed to allow business
people to arrive in time to attend a meeting and then to return to their homes in the evening.
Twenty five major cities are served in the regional sector with, on average, three return
flights per day. There is also significant leisure travel, with many families visiting relatives in
the region. The second sector is what ONA management refer to as the international sector.
This is a network of flights to continental capitals. The average flight time in this sector is four
hours. These flights attract both business and leisure travellers. The leisure travellers are
primarily holiday-makers from the continent. Twenty cities are served in this sector with, on
average, one return flight per day to each city.

Image, service and employment

ONA is the airline of choice for most of the citizens of Oceania. A recent survey suggested
that 90% of people preferred to travel ONA for regional flights and 70% preferred to travel
with ONA for international flights. 85% of the respondents were proud of their airline and felt
that it projected a positive image of Oceania. The company also has an excellent safety
record, with no fatal accident recorded since the merging of the airlines in 1997. The
customer service of ONA has also been recognised by the airline industry itself. In 2005 it
was voted Regional Airline of the Year by the International Passenger Group (IPG) and one
year later the IPG awarded the ONA catering department the prestigious Golden Bowl as
provider of the best airline food in the world. The courtesy and motivation of its employees
(mainly Oceanic residents) is recognised throughout the region. 95% of ONA employees
belong to recognised trade unions. ONA is perceived as an excellent employer. It pays
above industry average salaries, offers excellent benefits (such as free health care) and has
a generous non-contributory pension scheme. In 2004 ONA employed 5400 people, rising to
5600 in 2005 and 5800 in 2006.

Fleet
Fleet details are given in Table 1. Nineteen of the Boeing 737s were originally in the fleet of
OceaniaAir. Boeing 737s are primarily used in the international sector. Twenty-three of the
Airbus A320s were originally part of the Transport Oceania fleet. Airbuses are primarily used
in the regional sector. ONA also used three Embraer RJ145 jets in the regional sector

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Performance
Since 2004 ONA has begun to experience significant competition from ‘no frills’ low-cost
budget airlines, particularly in the international sector. Established continental operators now
each offer, on average, three low fares flights to Oceania every day. ‘No frills’ low-cost
budget airlines are also having some impact on the regional sector. A number of very small
airlines (some with only one aircraft) have been established in some regional capitals and a
few of these are offering low-cost flights to Oceania. A recent survey for ONA showed that its
average international fare was double that of its low-cost competitors. Some of the key
operational statistics for 2006 are summarised in Table 2.

ONA have made a number of operational changes in the last few years. Their website, for
example, now allows passengers to book over the internet and to either have their tickets
posted to them or to pick them up at the airport prior to travelling. Special promotional fares
are also available for customers who book on-line. However, the website does not currently
allow passengers to check-in on-line, a facility provided by some competitors. Furthermore,
as Table 2 shows, a large percentage of sales are still commission sales made through
travel agents. Direct sales are those sales made over the telephone or at the airport itself.
Most leisure travellers pay standard or economy fares and travel in the standard class
section of the plane. Although many business travellers also travel in standard class, some
of them choose to travel business class for which they pay a price premium.

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Case 2 : RAMON SILVA

Ramon Silva is a Spanish property developer, who has made a considerable fortune
from the increasing numbers of Europeans looking to buy new homes and
apartments in the coastal regions of Mediterranean Spain. His frequent contact with
property buyers has made him aware of their need for low cost hotel accommodation
during the lengthy period between finding a property to buy and when they actually
move into their new home. These would-be property owners are looking for
inexpensive hotels in the same locations as tourists looking for cheap holiday
accommodation.

Closer investigation of the market for inexpensive or budget hotel accommodation

has convinced Ramon of the opportunity to offer something really different to his
potential customers. He has the advantage of having no preconceived idea of what
his chain of hotels might look like. The overall picture for the budget hotel industry is
not encouraging with the industry suffering from low growth and consequent
overcapacity. There are two distinct market segments in the budget hotel industry;
firstly, no-star and one-star hotels, whose average price per room is between 30 and
45 euros.

Customers are simply attracted by the low price. The second segment is the service
provided by two-star hotels with an average price of 100 euros a night. These more
expensive hotels attract customers by offering a better sleeping environment than
the no-star and one-star hotels. Customers therefore have to choose between low
prices and getting a poor night’s sleep owing to noise and inferior beds or paying
more for an untroubled night’s sleep. Ramon quickly deduced that a hotel chain that
can offer a better price/quality combination could be a winner. The two-star hotels
typically offer a full range of services including restaurants, bars and lounges, all of
which are costly to operate. The low price budget hotels offer simple overnight
accommodation with cheaply furnished rooms and staffed by part-time receptionists.

Ramon is convinced that considerable cost savings are available through better
room design, construction and furniture and a more effective use of hotel staff. He
feels that through offering hotel franchises under the ‘La Familia Amable’ (‘The
Friendly Family’) group name, he could recruit husband and wife teams to own and
operate them. The couples, with suitable training, could offer most of the services
provided in a two-star
hotel, and create a friendly, family atmosphere – hence the company name. He is
sure he can offer the customer twostar hotel value at budget prices. He is confident
that the value-for-money option he offers would need little marketing promotion to
launch it and achieve rapid growth.

Required:
(a) Provide a brief report showing where his proposed hotel service can add
value to the customer’s experience. – ( communication skills)

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Case 3: Captain Haddock

The Captain Haddock chain of restaurants was founded in 1992 by John Dory. It currently operates
one hundred and thirty restaurants in the country serving high quality fi sh meals. Much of Captain
Haddock’s success has been built on the quality of its food and service. Captain Haddock has a
tradition of recruiting staff directly from schools and universities and providing them with excellent
training in the Captain Haddock academy. The academy ensures that employees are aware of the
‘Captain Haddock way’ and is dedicated to the continuation of the quality service and practices
developed by John Dory when he launched the fi rst restaurant. All management posts are fi lled by
recruiting from within the company, and all members of the Captain Haddock board originally joined
the company as trainees. In 1999 the Prime Minister of the country identifi ed Captain Haddock
academy as an example of high quality in-service training. In 2000, Captain Haddock became one of
the thirty best regarded brands in the country.

In the past few years, the fi nancial performance of Captain Haddock has declined signifi cantly (see
Figure 2) and the company has had diffi culty in meeting its bank covenants. This decline is partly due
to economic recession in the country and partly due to a disastrous diversifi cation into commercial
real estate and currency dealing. The chairman and managing director of the company both resigned
nine months ago as a result of concern over the breaking of banking covenants and shareholder
criticism of the diversifi cation policy. Some of the real estate bought during this period is still owned
by the company. In the last nine months the company has been run by an interim management team,
whilst looking for prospective buyers. At restaurant level, employee performance still remains
relatively good and the public still highly rate the brand. However, at a recent meeting one of the
employee representatives called for a management that can ‘effectively lead employees who are
increasingly demoralised by the decline of the company’.

Shoal plc is currently fi nalising their takeover of the Captain Haddock business. The company is
being bought for a notional $1 on the understanding that $15 million is invested into the company to
meet short-term cash fl ow problems and to improve liquidity. Shoal plc’s assessment is that there is
nothing fundamentally wrong with the company and that the current fi nancial situation is caused by
the failed diversifi cation policy and the cost of fi nancing this. The gross profi t margin in the sector
averages 10%.
Captain Haddock currently buys its fi sh and fi sh products from wholesalers. It is the intention of
Shoal plc to look at sourcing most of the dishes and ingredients from its own companies; specifi cally
ShoalFish, ShoalPro and ShoalFarm. Once the takeover is complete (and this should be within the
next month), Shoal plc intends to implement signifi cant strategic change at Captain Haddock so that
it can return to profi tability as soon as possible. Shoal plc has implemented strategic change at a
number of its acquisitions. The company explicitly recognises that there is no ‘one right way’ to
manage change.

Figure 2:

Captain Haddock wish to quickly turnaround the restaurant and return it to profitability.
Analyse the main elements of strategic change required to achieve this goal.

( Analysis skills)

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 UNIT 4- Commercial Acumen

Case 4

Sam and Annabelle Burns own and manage the firm Hair Care Ltd, based in the United Kingdom. He
bought hair care products, mainly small value items and consumables – scissors, brushes, combs,
hair nets, curlers and hair driers, from manufacturers and resold them to wholesalers and large retail
chemist chains within the United Kingdom, mainly for use in hairdressing salons. The new business
has continued in this direction. The manufacturers are almost entirely non-UK suppliers, many based
in Hong Kong but with manufacturing facilities in mainland China, Taiwan and Malaysia. However
about 30% of the products are sourced in Europe – Italy and Germany predominantly.

The company has met with success very quickly and the initial loans have already been repaid ahead
of schedule. The company now owns the freehold of a large warehouse/distribution centre which is
five times the size of the original depot, leased when the company first started trading five years
ago. Sales turnover, now in excess of £5 million, has increased by more than 50% each .Despite this
apparent rapid growth Hair Care Ltd only accounts for about half of the current market, leaving
some potential for growth. The company is run cost effectively, with minimum staffing.

Sam, as Managing Director is solely concerned with the marketing side of the business. He spends
most of his time in the selling role and in customer care which he rates as a major contributor to the
company's success. Staff rarely leave the company. The staff is almost entirely employed in the
distribution and packaging function, although there are two other sales people apart from Sam, but
they only deal with the smaller buyers. With the continued growth in turnover the number of
employees will have to increase to 30 staff, all non managerial

The success of Hair Care Ltd can be accounted for by a number of factors. Sam is a very good
salesman who is responsible for looking after all the major accounts. He is popular and much of the
business is built on his personal relationship with the key clients. There is a considerable amount of
customer loyalty which is mainly attributable to Sam, and both he and his wife are always accessible
to customers and they go out of their way to provide a first class service.

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The company has been able to manage its purchases wisely. Most of the products, being purchased
abroad, require payment in a foreign currency. Hair Care has been able to benefit from the relative
weakness of the euro as against sterling for its European supplies. Although most of the products
sourced in the Far East are priced in US dollars, the relative strength of that currency has enabled
Hair Care Ltd to negotiate lower purchasing prices. However it is questionable as to how long this
situation concerning foreign exchange can be held.

It also has the sole rights to distribute an Italian hair-dryer which is generally recognized to be the
best on the market. This product strength has enabled the company to build on the customer
loyalty. However, it is inevitable that as demand has increased, existing suppliers have not been able
to keep up with the necessary volumes and Sam has had to look for, and buy from new
manufacturers.

Additionally quite a number of the small firms have even left the market. All this has helped to
contribute to the overall growth rate of Hair Care Ltd..The company has registered a brand name for
its main products which it re-packages, rather than using the individual brands of the original
manufacturers. This has enabled Hair Care Ltd to generate even greater loyalty from its customers
and often to obtain a price premium from these products.

Sam believes that, adding value mainly through branding and the maintenance of customer care
helps to beat the competition. The company has also been able to develop a strong relationship with
the country’s leading retail chemist chain, providing it with good quality, low-cost disposable
products

The company has had to incur increased investment as a result of the large growth in turnover. The
building of the warehouse, the increased stock-holding costs, capital expenditure on items such as
computing systems, fork-lift trucks and automated stock control and retrieval systems could not be
financed out of current earnings, but the company’s bank was only too ready to lend the company
the necessary money considering that the original loan had been repaid ahead of schedule.

All the success which Hair Care Ltd has achieved has not diminished Sam’s appetite for growth. He
now seems to be driven more by seeking power and influence than acquiring wealth. He questions
the ability of the company to continue its current growth in the prevailing environment and
therefore he is looking for ideas which may facilitate corporate expansion. He has asked his
accountant to provide some options for him to consider.

1)As his accountant for Sam, identifying and assessing the strategies which he could consider in
attempting to further the company’s development 10 marks

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Case 5:

Jetstar Airways

Jetstar Airways (Jetstar) is a low-fare airline that is wholly owned by Qantas but
managed and operated independently from it. The organisation started offering
flights in Australia in May 2004, and launched international long-haul flights from
Australia to Asia in November 2006.

In 2012, Jetstar had grown its capacity 14 per cent from 2011, and its revenue had
increased by 18 per cent. Jetstar continued to grow and increase capacity, with
annual domestic capacity growth of 11 per cent and international capacity growth of
close to 9 per cent reported in 2014.

However, Jetstar forecast that this would stabilise, with no capacity growth forecast
in 2015. The organisation has aggressive expansion plans, anticipating that in five
years it will carry more passengers than Qantas as growth in air travel is focused at
the budget end of the market, with business travel being considered a mature
market.

Asia is expected to be the biggest travel market in the world in 10 years, with the
influx of budget airlines into Asia already evident (e.g. Air Asia, Tiger Airways).
Jetstar Airways Asia (Jetstar Asia) has been restructured so that Jetstar has a 49 per
cent stake in the business, with the balance owned by a Singaporean investor.

Jetstar has expanded its capacity in Singapore from where it operates Jetstar Asia,
and in 2012 Jetstar Asia grew its capacity by 38 per cent. However, this slowed to
less than 8 per cent growth by 2014. Jetstar Japan was launched in 2012. By 2014
there were 18 aircraft in the fleet, which operates out of Tokyo and Osaka in Japan,
and the airline had captured more than half of the low-cost carrier market in Japan.

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In 2012, a joint venture with China Eastern Airlines was announced to launch Jetstar
Hong Kong, which was awaiting regulatory approval. Due to difficult conditions in
2014, Jetstar’s international division lost money. However, the domestic division was
profitable.

Case 6

SKYES ENGINEERING

Jerome Sykes is the grandson of the founder of Sykes Engineering Group plc. This company
is now a publicly quoted company with 2,000 employees, and although Jerome, the
Chairman and Managing Director, only owns less than 2% of the equity of the Group he
behaves as if it is his personal possession. His behaviour is becoming increasingly
autocratic, involving himself in all levels of decision-making. This personalised decision-
making has not brought consistency, clarity or rationality to the strategy process. Instead the
company has suffered from confused improvisation, uncertainty and wild swings in corporate
direction. Unfortunately this culture appears to have influenced many managers below Board
level.

The Board of Directors has now been forced into action after extensive media coverage has
criticized the company for a number of accounting irregularities over several years, the
bribing of key foreign customers and sexual and racial harassment. This has inevitably
adversely affected the share price. The key financial institutions who have invested in the
Group are now demanding the removal of Jerome Sykes from office.

Case 7

MEDITERRANEAN COOKING

François, Demetris, José and Giuseppe are a group of students from different Mediterranean
countries, taking their MBA in a large UK city. As part of their course requirements, the group
has to come up with an innovative business idea, research into the feasibility of that idea and
then present their business plan to a panel. After considerable brainstorming they have
come up with the idea of a themed restaurant based around Mediterranean cooking, menus
and service provisionally called ‘Casa del Mediterraneo’ and located in the city centre.

Initial research has revealed suitable premises to rent, but also the severe competition they
will face in a city that is very cosmopolitan and well provided for with restaurants serving
cuisine from many parts of the world. The city has a student population of around 100,000
and this, together with a young working population, means that there is a very vibrant social
life and a real willingness to sample food from different parts of the world.

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Case 8 : RAMON SILVA

Ramon Silva is a Spanish property developer, who has made a considerable fortune
from the increasing numbers of Europeans looking to buy new homes and
apartments in the coastal regions of Mediterranean Spain. His frequent contact with
property buyers has made him aware of their need for low cost hotel accommodation
during the lengthy period between finding a property to buy and when they actually
move into their new home. These would-be property owners are looking for
inexpensive hotels in the same locations as tourists looking for cheap holiday
accommodation.

Closer investigation of the market for inexpensive or budget hotel accommodation

has convinced Ramon of the opportunity to offer something really different to his
potential customers. He has the advantage of having no preconceived idea of what
his chain of hotels might look like. The overall picture for the budget hotel industry is
not encouraging with the industry suffering from low growth and consequent
overcapacity. There are two distinct market segments in the budget hotel industry;
firstly, no-star and one-star hotels, whose average price per room is between 30 and
45 euros.

Customers are simply attracted by the low price. The second segment is the service
provided by two-star hotels with an average price of 100 euros a night. These more
expensive hotels attract customers by offering a better sleeping environment than
the no-star and one-star hotels. Customers therefore have to choose between low
prices and getting a poor night’s sleep owing to noise and inferior beds or paying
more for an untroubled night’s sleep. Ramon quickly deduced that a hotel chain that
can offer a better price/quality combination could be a winner. The two-star hotels
typically offer a full range of services including restaurants, bars and lounges, all of
which are costly to operate. The low price budget hotels offer simple overnight
accommodation with cheaply furnished rooms and staffed by part-time receptionists.

Ramon is convinced that considerable cost savings are available through better
room design, construction and furniture and a more effective use of hotel staff. He
feels that through offering hotel franchises under the ‘La Familia Amable’ (‘The
Friendly Family’) group name, he could recruit husband and wife teams to own and
operate them. The couples, with suitable training, could offer most of the services
provided in a two-star

9
hotel, and create a friendly, family atmosphere – hence the company name. He is
sure he can offer the customer twostar hotel value at budget prices. He is confident
that the value-for-money option he offers would need little marketing promotion to
launch it and achieve rapid growth.

Required:

(a) Provide a brief report showing where his proposed hotel service can add
value to the customer’s experience. – ( communication skills)

Case 9 : SHOAL FARM

ShoalFish

Shoal plc formed ShoalFish in 2002 when it bought three small fi shing fleets and
consolidated them into one fleet. The primary objective of the acquisition was to secure
supplies for ShoalPro. 40% of the fish caught by ShoalFish are currently processed in the
ShoalPro factories. The rest are sold in wholesale fi sh markets. ShoalFish has recorded
modest profi ts since its formation but it is operating in a challenging market-place. The
western oceans where it operates have suffered from many years of over-fishing and the
government has recently introduced quotas in an attempt to conserve fi sh stocks.

ShoalFish has 35 boats and this makes it the sixth largest fleet in the western oceans.
Almost half of the total number of boats operating in the western oceans are individually
owned and independently operated by the boat’s captain. Recent information for ShoalFish
is given in Figure 1.

Commercial Acumen Skills

ShoalPro

ShoalPro was acquired in 1992 when Shoal plc bought the assets of the Trevarez Canning
and Processing Company. Just after the acquisition of the company, the government
declared the area around Trevarez a ‘zone of industrial assistance’. Grants were made
available to develop industry in an attempt to address the economic decline and high
unemployment of the area. ShoalPro benefited from these grants, developing a major fish
processing and canning capability in the area. However, despite this initiative and
investment, unemployment in the area still remains above the average for the country as a
whole.

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ShoalPro’s modern facilities and relatively low costs have made it attractive to many fi shing
companies. The fish received from ShoalFish now accounts for a declining percentage of the
total amount of fish processed and canned in its factories in the Trevarez area. Recent
information for ShoalPro is given in Figure 1.

Analysis Skills :

ShoalFarm

ShoalFarm was acquired in 2004 as a response by Shoal plc to the declining fish stocks in
the western oceans. It owns and operates saltwater fish farms. These are in areas of the
ocean close to land where fi sh are protected from both fishermen and natural prey, such as
sea birds. Fish stocks can be built up quickly and then harvested by the fish farm owner.
Shoal plc originally saw this acquisition as a way of maintaining supply to ShoalPro.

Operating costs at ShoalFarm have been higher than expected and securing areas for new
fish farms has been difficult and has required greater investment than expected. Recent
information for ShoalFarm is given in Figure 1

Evaluation skills :

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Required:

(a) In the context of Shoal plc’s corporate-level strategy, assess the contribution
and performance of ShoalFish, ShoalPro and ShoalFarm.

Your assessment should demonstrate professional skills respectively

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