6csp suggested answers june 2012

7/27/2019 6CSP Suggested Answers June 2012

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Please note that these are not fully-worked model answers, but they

are intended as a guide to the type of answer expected.

The Association of Business Executives

QCF

Corporate Strategy and PlanningSuggested Answers

June 2012

STRUCTURE OF PAPER: Answer ALL FOUR sections

SECTION A: Answer BOTH questions Q1Q2

20 marks20 marks

SECTION B: Answer ONE question EitherQ3 orQ4 20 marks

SECTION C: Answer ONE question EitherQ5 orQ6 20 marks

SECTION D: Answer ONE question EitherQ7 orQ8 20 marks

TOTAL MARKS AVAILABLE FOR THE PAPER 100 marks


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SECTION A

Candidates must answer BOTH questions in this section.

Each question carries 20 marks.

Section A is worth 40% of the total marks available for the paper.

Question 1

Discuss how and why strategic planning issues might differ in each of the following organisationalcontexts:

Q1

(i)

The small business

Here the issues primarily stem from the lack of resources and planningexpertise. As a result strategic planning in the small business will often makeuse of outside consultancy help and may have shorter-term planning horizonsand effective use of resources is essential. Planning is likely to be lessformal. Competitive strategies are likely to be based on personal service andflexibility. Access to finance may be limited and hence growth strategies areoften difficult. 5 marks

Q1

(ii)

The multinational

Here resources and strategic planning expertise are likely to be substantial.Planning horizons in the multinational are likely to be longer and involve more

complex decisions. Effective co-ordination and control of strategies is oftenmore difficult and cultural and political elements of the environment are ofparticular importance. Issues such as standardisation vs. adaptation are likelyto be important in competitive success. 5 marks

Q1

(iii)

Service organisations

Service organisations do not produce physical products, which means thatcustomers often find it difficult to assess and choose between differentservice offerings. As a result competitive strategies often derive from thepeople element of the business. Effective human resource planning and stafftraining are particularly important in the service organisation as is protectingand enhancing corporate image. Controlling the quality of the service productis often difficult and requires effective systems of customer analysis andcontrol. 5 marks

Q1

(iv)

Public sector organisations

These organisations exist to serve the public and are generally not profit-making. They include, for example, government departments and agencies,local authorities, hospitals and the police service. Strategic planning in suchorganisations is substantially influenced by political and regulatory issues.Planning is often very bureaucratic and inflexible and substantial attention

needs to be paid to stakeholder issues. Strategic plans can be difficult toevaluate and control. 5 marks


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Q1 Total Maximum Marks for Question20

marks


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Question 2

END OF SECTION A

MAXIMUM MARKS FOR SECTION A: 40

Q2

(a)

Discuss each of the four elements of Porters Diamond in the context of competitive

advantage in international markets, using examples to support your answer.

Candidates should discuss each of the following elements, using examples toshow how and why each element can form the basis of competitiveadvantage:

Factor conditions

Home market demand conditions

Related and supporting industries

Firm strategy, industry structure and local rivalry12

marks

Q2

(b)

Identify and explain any two key drivers of globalisation.

Any key drivers which are relevant and justified are acceptable but examplesinclude:

Cost advantages: there is the potential for lower costs due to things likeeconomies of scale, access to raw materials and lower labour costs.

Global customers and market convergence: customer needs are nowglobal due to improved communication and travel. Also, there is somedegree of cultural convergence with respect to purchasing behaviour.

Governmental and trade policies: governments increasingly support andwelcome incoming investment and exporting. There has been aliberalisation of international trade through, for example, GATT conventionsand trading blocs.

Global competition: increased global competition means that organisationsmust become increasingly global in their own competitive strategies.

Technology: developments in technology, such as the Internet and socialnetworking, have facilitated global purchasing and communication. Evensmall companies can now market their products on a global basis.

8 marks

Q2 Total Maximum Marks for Question 20marks


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SECTION B

Candidates must answer ONE question in this section.


Section B is worth 20% of the total marks available for the paper.

EITHER Question 3

Many companies objectives are expressed in terms of some measure of profit.

Q3

(a)

Explain why profit maximisation is the dominant performance objective in manycompanies.

A range of reasons may be given, but these examples are amongst the onesmost frequently used to support the pre-eminence of the profit objective:

Ensures effective use of scarce resources

Profits necessary for continued survival/existence

Necessary to satisfy existing investors/shareholders and attract new ones

Necessary for funding future growth

Payment of creditors /staff/tax authorities

Candidates should explain why these reasons can be used to support thepre-eminence of the profit motive. 5 marks

Q3

(b)

Discuss five other areas in which a company might legitimately set objectives forcorporate performance.

Examples of other key areas of corporate performance are:

Company growth: A major objective in many organisations is growth.Growth helps attract investors; it provides motivation and opportunities foremployees; and it helps prevent complacency and stagnation.

Market share: Market share is strongly related to profits and is a goodbenchmark for assessing corporate performance against competitors.Market share performance helps distinguish company performance from

any environmental factors affecting performance.

Corporate stability/survival: Especially in times of economic recession,stability and survival may be key objectives of corporate performance.Sometimes growth or even profits are simply not realistic, and companysurvival then becomes a key objective until the economic environment ismore conducive to growth and profits. Survival objectives can also becomecentral where a company is threatened by unforeseen events such as amajor pollution incident or the threat of nationalisation.

Corporate image/reputation: Many companies have objectives with regardto protecting and sometimes enhancing their image and reputation. This

can be helped by, for example, strong Corporate Social Responsibilitypolicies and strategies including developing ethical approaches to doingbusiness. Marketing and PR activities are also important in preserving and

15marks


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enhancing corporate image and reputation.

Technological and innovation leadership: Achieving technological and

innovation leadership is the key to success in many markets .An exampleis Apple, which in recent years has achieved substantial success based onits lead in many areas of computing and communications technology.


marks


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OR Question 4

END OF SECTION B

MAXIMUM MARKS FOR SECTION B: 20

A mission statement describes the overriding purpose of an organisation, so it needs to be

carefully thought through and written.

Q4

(a)

Identify and justify five key characteristics of an effective mission statement.

The following are five key characteristics of an effective mission statement:

It should be general in content and encompass the organisations reason

for existence

It should be visionary and relatively long term

It should state the key values of the organisation

It should reflect the interests of all the stakeholders in the organisation

It should be such that the organisation has both the intention and thecapability of fulfilling the mission

10marks

Q4

(b)

Discuss five key factors which might influence an organisations mission statement.

The following are five key factors which might affect an organisations missionstatement:

The values of senior management

Stakeholder values and expectations

Legal and regulatory requirements

Wider ethical and social responsibility issues Corporate governance arrangements

10marks


marks


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SECTION C



Section C is worth 20% of the total marks available for the paper.

EITHER Question 5

ABC Engineering recently appointed a new chief executive in an effort to improve the performanceof the company.

After analysing the company, the new chief executive and his senior management team havedeveloped a new corporate strategic plan. The new plan will involve radical changes to the overalldirection and strategies of the company, how it is managed and its operating systems and

procedures.

Q5

(a)

Discuss the likely reasons why the planned changes may be resisted by individuals inthe organisation.

The following are likely to be the main reasons why the planned changes maybe resisted:

Protecting the status quo and vested interests

Fear of having to learn new skills and expertise

Habit/inertia

Fear of redundancy/job losses 8 marks

Q5

(b)

Discuss how this possible resistance to the proposed changes could be reduced.

The following are the main ways to reduce resistance to the plannedchanges:

Involvement of, and communication with, those affected by/involved in the

changes

Explaining the need for/benefits of the changes to those affected/involved

Commitment and support of senior management

Provision of necessary training resources and incentives to implement

changes Use of appropriate change management techniques, e.g. Scheins

Unfreeze-Change-Refreeze, Lewins Force Field Analysis

Use of internal and/or external change agents12

marks


marks


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OR Question 6

Discuss each of the following tools of financial appraisal in the context of evaluating and controlling

strategies:

Q6

(i)

Return on capital employed

Candidates should demonstrate that this technique enables the evaluationand control of strategies by calculating the investment required for eachstrategy and then comparing this with forecast and/or actual profits for thestrategy and expressing this as a percentage. This technique enables therelative profitability of different strategies to be evaluated and controlled.

Limitations include: difficulties in forecasting costs and profits and noconsideration of the time value of money. 5 marks

Q6

(ii)

Discounted cash flow analysis

Candidates should demonstrate they understand that this technique takes intoaccount the time value of money. Specifically, it recognises that the value offuture income flows is normally reduced the further into the future they arereceived. In assessing the financial return of strategies, this technique uses adiscounting factor to reduce the value of future income flows. This enablesfuture projected income flows over the life of a strategy to be progressivelydiscounted and then totalled to arrive at the Net Present Value (NPV) of thestrategy.

This technique is particularly suited to evaluating and controlling strategieswith varied patterns of expenditure and return.

The main limitation of this technique is in forecasting future patterns of incomeflow and in determining the appropriate rate of discount. 5 marks


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END OF SECTION C

MAXIMUM MARKS FOR SECTION C: 20

Q6

(iii)

Cost-benefit analysis

Candidates should demonstrate they understand that this technique of

financial appraisal enables the evaluation and control of strategies not just byconsidering financial profits and costs. This technique takes into account thewider often intangible costs and benefits associated with a particular strategy.For example, a strategy involving the opening of a new factory may benefit alocal community by bringing the prospects of employment whilst at the sametime bringing costs in the form of increased road congestion. Cost-benefitanalysis involves placing a monetary value on all the costs and benefits of aparticular strategy.

The major problem with cost-benefit analysis is the difficulty of identifying andplacing a monetary value on all the different potential costs and benefits ofstrategies. 5 marks

Q6

(iv)

Funds flow analysis

Candidates should demonstrate that they understand that this technique ofevaluating and controlling strategies is based on assessing the profile of thefunds flow associated with a particular strategy. Funds flow analysis assessesboth outgoing and incoming flows of income forecast to be associated with astrategy. The intention is to assess, for example, the net funds flowassociated with a strategy and, hence, what funding is likely to be required,when and from what sources.

The primary intention is to ensure that a strategy can be funded and that itdoes not give rise to cash flow problems.

The limitations of funds flow analysis are associated with the problems offorecasting future patterns of funds flow and the limited focus on cash flowonly. 5 marks


marks


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SECTION D



Section D is worth 20% of the total marks available for the paper.

EITHER Question 7

SWOT analysis is central to the process of corporate strategic planning but is often badly done.

Q7

(a)

Outline the scope of SWOT analysis and explain its importance in the strategic planningprocess.

Scope

Candidates should show they understand that the scope of SWOT analysisincludes an assessment of:

Internal strengths and weaknesses including the assessment of skills and

expertise, products and brands, cash and capital and market position

External opportunities and threats deriving mainly from macro

environmental forces and factors, e.g. Political, Economic, Social/Cultural,

Technological, and Legal, and micro environmental factors, e.g.

competitors, customers and suppliers

Examples of opportunities and threats from PESTL factors

Importance

Overall:

Enables the development of sustainable strategies to ensure the long-term

survival of the organisation

Specifically:

Provides a systematic framework for focussing on and analysing complex

information regarding an organisations internal strengths and weaknesses

and the external opportunities and threats

Enables the assessment of strategic fit and the identification of actionstrategies to achieve/maintain this by matching strengths to opportunities

and by converting weaknesses to strengths and threats to opportunities*

Examples of the importance of SWOT in identifying and/or missing

opportunities and threats and converting weaknesses into strengths or

threats into opportunities

(* N.B. Some candidates may use a diagram to explain this but this is notobligatory.)

10marks


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Q7

(b)

Explain how the planner can improve the effectiveness of the SWOT analysis.

SWOT analysis can be made more effective as follows:

Be objective/use outside consultants

Ensure comparison with competitors

Conduct SWOT analysis on a regular/systematic basis

Use effective and up-to-date information and intelligence

Ensure there is adequate staff training and expertise10

marks


marks


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OR Question 8

END OF SECTION D

MAXIMUM MARKS FOR SECTION D: 20

TOTAL MAXIMUM MARKS: 100

Q8

(a)

Outline the scope of a PESTEL analysis and explain its importance in the strategic

planning process.

Scope

Candidates should show they understand that the scope of PESTEL analysisincludes an assessment of:

Political factors

Economic factors

Social/cultural factors

Technological factors

Environmental factors

Legal factors

Importance

Overall:

This analysis enables the identification of the strategic issues arising fromfactors outside of the control of the organisation, from trends and changesin the environment

Specifically this analysis is important because it helps the planner to:

Identify trends and changes which will require the organisation to respondto opportunities and threats

Identify the range of possible strategies required to respond to these

changes 10marks

Q8

(b)

Explain how the planner can improve the effectiveness of the PESTEL analysis.

PESTEL analysis can be made more effective by:

Being objective/using outside consultants

Conducting it on a regular/systematic basis

Designing effective scanning and forecasting systems

Ensuring there is adequate staff training and expertise

Ensuring PESTEL analysis is incorporated into strategies and plans

10

marks


marks

6csp suggested answers june 2012

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