strategy & leadership strategic level examination …

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STRATEGY & LEADERSHIP

STRATEGIC LEVEL EXAMINATION

APRIL 2021 NOTES: Section A - Answer Question 1; and Section B - Answer any two from Questions 2,3 and 4. Should you provide answers to more questions than required in Section B, only the answers to Questions 2 and 3 will be marked.

TIME ALLOWED: 4 hours, plus 20 minutes to read the paper. EXAMINATION FORMAT: This is an open book examination. Hard copy material may be consulted during this examination, subject to the limitations advised on the Institute’s website. INSTRUCTIONS: During the reading time, candidates are encouraged to use this time to read each Question carefully. Please note, however, candidates will not be prevented from using this time to start typing notes and solutions. Marks for each question are shown. The pass mark required is 50% in total over the whole paper.

You are reminded to pay particular attention to your communication skills, and care must be taken regarding the format and literacy of your solutions. The marking system will take into account the content of your answers and the extent to which answers are supported with relevant legislation, case law or examples, where appropriate. N.B. Please note that the right click function has been disabled during your examination. Should you wish to copy and paste, please use the following shortcuts: Copy (Ctrl + C) and Paste (Ctrl + V).

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SECTION A – Answer Question 1 (Compulsory) Question 1 Case Study TFL International Ltd (TFLI) was founded in 1983 by Mr. Harry Dunne. Its head office and main facility is near Wexford town, and about eight kilometres from Rosslare ferry port. Mr. Dunne had worked as a truck driver in the UK for several years, and then for a transport firm in Co. Waterford, before he started the business. The firm has been very successful and is now one of the largest transport and logistics firms in Ireland. He has attributed his success to ‘hard work and not taking no for an answer’. Over the years, a number of outside investors have bought into the business, but the Dunne family still retain 60% of the ownership of the business. Mr. Dunne retired from running the business three years ago and his daughter Ms. Sorcha Dunne became the Managing Director. Ms. Dunne has a range of industrial experience, and as part of the family’s succession planning, she started working in TFLI as ‘Operations Manager’ seven years ago. Of course, she had worked in the business every summer while in school and then university. Ms. Dunne has a degree in computer science and an MBA from UCD. TFLI provides a range of transportation, warehousing and ancillary services for clients 365 days of the year. The firm operates on all major routes within Ireland, Ireland to mainland Europe and Ireland to the UK. It uses the ro-ro ferry routes from Rosslare and Dublin ports to link to the UK and to mainland Europe and uses both direct sailings to France (Cherbourg and Roscoff) and the UK “landbridge” to access the mainland. The firm has rolling reservations for its trucks on over 25 sailings a week out of and into Ireland. TFLI provides tractors and trailers; or just tractors where clients use their own trailers. The firm also offers groupage services to SMEs for part loads. TFLI owns 340 tractors and 980 trailers. The tractors have a median age of four years. The majority of the trailers are designed to carry containers, are temperature-controlled trailers or are “curtainsiders”. The firm also has a small number of step frame trailers and flat trailers. TFLI made a decision in 2008 to acquire only one tractor brand. This enables TFLI to reduce the costs of carrying maintenance stores and training technicians. 260 of its tractors are the DAF CR model while the remaining 80 are the DAF XF model. These were chosen due to their fuel efficiency as fuel can represent 30-35% of TFLI’s costs. (At present, due to the cost of fuel, TFLI requires clients to pay a fuel surcharge.) TFLI has a large warehouse and logistics centre located at its head office and main facility in Wexford. The warehouse is 10,000m2 approximately and includes 12 loading bays and temperature-controlled storage rooms. TFLI also leases a warehouse near Liverpool in England and another one near Cherbourg in France. Both of these are about half the size of the warehouse in Wexford. When Ms. Dunne became operations manager, she began two large projects to modernise the administration of the firm. Firstly, she managed the implementation of a new IT system for the firm. The new IT system integrates customer relationship management, sales processing, accounting along with truck monitoring and load tracking. All of this ‘live’ information allows the firm to manage the truck fleet very efficiently, for example, ensuring that trucks are fully loaded on over 90% of trips. It also enables every client to login into their account and see where their consignment is at any point in time. This service has received a lot of positive feedback, especially from larger clients. The second project involved obtaining recognised quality accreditations, and TFLI now has ISO:14001 certification and ISO:9001 certification. In addition to obtaining the certification, this project enabled Ms. Dunne to reimagine organisational processes and as she has commented, “professionalise the firm’s administration”.

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TFLI employs around 500 staff, although it has laid off 80 staff as demand for transport services dropped significantly during 2020 as a result of the Covid-19 pandemic and Brexit. Employees can be categorised into four main areas: (i) Management and administration. In addition to Ms. Dunne there are five other senior managers

(Operations Manager, Administration Manager, Maintenance Manager, Warehousing Manager, and Driver Relations Manager). There are usually around 30 people in administration, including staff in transport scheduling and management, accounting, sales processing and customer service.

(ii) Drivers. This is the largest group, with usually around 400 drivers, and represents the majority of employees laid off. Many of the drivers are from Eastern Europe and there have been some problems with the level of English of some drivers.

(iii) Technicians. The firm employ fifteen technicians to maintain the fleet of tractors and trailers. TFLI has a contract with DAF Services Ltd to provide road-side assistance for its tractors and trailers anywhere in Ireland, the UK and Europe.

(iv) Warehouse staff. The majority of warehouse staff, around 25, are employed in the firm’s Wexford warehouse, with approximately another twenty staff employed between the firm’s warehouses in France and the UK.

TFLI is very conscious of its cost base and tries to keep strict control of staff costs. The firm pays industry average wages, recognising that the cost of living in Wexford is relatively low. However, employee turnover remains quite high, especially for drivers, who have an average annual wage of €34,000. In general, Ms. Dunne attributes employee turnover to the nature of the work which can be stressful and isolating. TFLI outsources several other non-core activities, including security, human resources, and IT support (although there is always technical IT support on-site in Wexford). Revenue and Profits

2016 2017 2018 2019 2020 € € € € € Revenue 58.3m 60.1m 62.2m 60.7m 53.6m Profits 2.1m 2.4m 2.2m 1.5m (1.3m)

Source of Revenue by Region

2012 2016 2020 Within Ireland 17% 15% 16% Ireland to the UK 41% 37% 29% Ireland to Europe 42% 48% 55%

The focus of TFLI’s marketing and promotion is around its pricing, reliability and its near 50-year history. Its marketing slogan is, “We deliver. On time. Every time.” The majority of TFLI’s revenue derives from annual contracts with clients, where TFLI will provide all of the client’s delivery requirements at an agreed rate per kilometre. This rate is always lower than TFLI’s advertised rates. Due to the very competitive nature of the industry, TFLI must work hard to maintain its client base, and clients are always trying to reduce transportation costs as it is viewed as a non-value adding activity. In Ms. Dunne’s experience, while clients see reliability as important, contract pricing is critical. Approximately, 85% of TFLI’s revenue derives from annual contracts, while the remainder are individual deliveries or short-term contracts. TFLI prices aggressively to win business. It offers a

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premium service – delivery within 24 hours in Ireland and the UK or 48 hours for Europe – and an economy service, which can take up to a week for Europe. Currently, TFLI’s largest clients include several US multinational medical devices and pharmaceutical firms that export from Ireland to the UK and the EU, and a large Irish supermarket chain. TFLI has been able to retain these contracts for the past several years, although it has not gained a major new client since 2018. The firm employs two sales people who maintain relationships with current important clients as well as developing sales prospects. Ms. Dunne also takes part in discussions with large clients, or prospective clients. In most instances, clients book in a delivery using TFLI’s online booking system. The firm also has a small sales processing team that will discuss client requirements if the order is from a new customer or if the delivery is non-routine. TFLI uses its membership of the Irish Road Hauliers Association and events organised by IBEC, ISME and the Irish Exporters Association to maintain market visibility and develop sales prospects. TFLI does not focus on particular client industries, and instead, according to Ms. Dunne, “looks for business wherever we can find it”. TFLI spent a lot of time preparing for Brexit, including investing in training for drivers and for administrators as well as updating its systems for the additional documentation required. The combined impact of Brexit and the Covid-19 pandemic has had a significant impact on demand; however, this has mostly affected TFLI’s non-contract-based revenues. The large clients that represent most of TFLI’s revenue base were generally well prepared for the practical and documentary implications of Brexit. TFLI has had the most difficulty with smaller and once-off customers, some of which did not even have an Economic Operator’s Registration and Identification (EORI) number. Ms. Dunne is concerned about the trend in TFLI’s financial performance, even before the impact of the Covid-19 pandemic and Brexit. She is also interested in whether to refocus the business toward the most profitable customer segments. She has retained you to complete a full strategic analysis of TFL International Ltd as this analysis will inform her plans for the future of the firm. REQUIREMENT: Prepare a report for TFL International Ltd in which you: (a) Critically analyse the strategic position of TFL International Ltd, drawing on your assessment of

the key drivers of change prevailing in the environment, and applying the relevant theories and models; (34 marks)

(b) Assess the key issues facing TFL International Ltd and evaluate the business’s options in dealing with such issues; and

(8 marks) (c) Recommend a strategy to ensure the best way forward for TFL International Ltd and make

recommendations to implement that strategy. (8 marks) (Note: The scenario presented above is not intended to be comprehensive. You are expected to make whatever additional logical assumptions about TFL International Ltd and its environment that will give you sufficient scope to demonstrate a high level of critical thinking, analytical skills and strategic vision, as over 50% of available marks will be allocated to these areas).

(Total: 50 Marks)

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Section B: Answer any two from Questions 2,3 and 4. Question 2

The Irish National Observer Ltd (INO) is Ireland’s longest established newspaper, promoting quality journalism and analysis since 1853. Over the decades, INO has evolved to be relatively bureaucratic and traditional in its culture. The newspaper is strongly unionised. INO has suffered from declining readership for the past several years, as fewer people buy newspapers. It has a news website behind a paywall, but it has not been successful in attracting sufficient users to compensate for the lost revenue from reduced newspaper sales. The news website does not compare favourably with INO’s main rivals either: it is poorly designed and lacks some of the functionality of other news websites.

Livefeed Ltd is an Irish website and Twitter feed for breaking news. It has only been in existence for ten years but is very popular with people under thirty. Livefeed only has five inhouse journalists and relies on a combination of freelance journalists and citizen journalists for much of its content. Livefeed positions its offering as ‘informative, fast moving and entertaining’. The website has free access and revenue is generated from advertising. Livefeed’s founder and CEO, Ms. Cora Roche has commented several times that its success is a result of the drive and flexibility of its staff. INO has agreed to acquire Livefeed in the belief that INO can use Livefeed’s expertise to improve its own digital offering, and to attract younger people to the INO brand. Post-acquisition, Ms. Roche will remain in charge of the Livefeed unit within INO. The acquisition negotiations took less than two weeks, from the first approach by INO to the completion of the acquisition contract.

REQUIREMENT: Prepare a report for the senior management team of Irish National Observer Ltd in which you evaluate the potential difficulties that may face Irish National Observer Ltd in its post-acquisition integration of Livefeed. The report should also advise Irish National Observer Ltd how it can effectively manage Livefeed’s post-acquisition integration.

(Total: 25 Marks)

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Question 3

Aoife McCarthy and Síle Connor have known each other since they were in college together. At the moment, Aoife works as a Training Officer for a pharmaceutical firm in Cork and Síle has worked as an Inspector for the Health and Safety Authority for over ten years. They have decided to set up a business: AS Consulting and Training Ltd. The business will provide training and consulting services to firms in all areas of health and safety. As a result of Aoife’s experience and contacts, the business will target pharmaceutical firms, at least initially. An example of the services the business will provide include health and safety induction training for on-boarding staff, advice on improving health and safety organisational compliance, and co-developing health and safety policies and documentation. Aoife will manage the training activities of the business while Síle will manage the consulting and advisory activities. The management of health and safety practices and policies are critical to firms, and in particular in an industry such as pharmaceuticals. Aoife and Síle are confident that their experience and expertise will be very attractive to clients. The business will initially recruit four staff: an office manager, two staff to provide training alongside Aoife and one other employee to work with Síle advising clients. Apart from the administrator, Aoife and Síle believe the staff will all need to have experience and at least a master’s degree in a relevant area, if they are to be credible. They are currently working on a business plan and have asked you to be the firm’s accountant and business advisor. REQUIREMENT: Write a report to AS Consulting and Training Ltd that critically evaluates the competitive strategies available to the firm. The report should recommend which competitive strategy is most suitable to build a sustainable competitive advantage. [Note: you may use either Porter’s Generic Strategies or Bowman’s Strategy Clock as a basis for your report.]

(Total: 25 Marks)

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Question 4

BGM Engineering Ltd (BGME) is an Irish engineering firm established in 1984. It specialises in the provision of project management, electrical and fire protection services for large construction projects such as factories, data centres and even hospitals. Although its head office is in Ireland, the firm mainly operates in France, Germany and the Netherlands. The sector is dynamic, and innovation is key to being competitive. Mr. Graham Holden was the Head of the Engineering Solutions Department for the firm for seven years before his early retirement in March this year. He was widely respected for his technical expertise and drive. However, during Mr. Holden’s tenure, the firm has lost market share and missed out on a number of large potential contracts. The Managing Director, Mr. Tony McGrath, does not think that this is a coincidence; in his view, the department is simply not as innovative as it was previously. Mr. Aaron Woodcraft has been appointed as the new Head of Engineering Solutions. He was “head-hunted” from a UK rival as Mr. McGrath felt the department needed a new direction. Mr. Woodcraft has worked with a number of large UK engineering firms prior to joining BGME, although this is his first experience in a senior management role. He is currently settling into his new position and has spent some time having both formal meetings and ‘informal chats’ with the 23 members of the department. Mr. Woodcraft has been surprised by the negative culture in the department and the reluctance to engage; he has found it difficult to persuade staff to share their ideas or to provide feedback. A senior management colleague told Mr. Woodcraft over lunch one day that, “Graham was brilliant, but arrogant. He tended not to listen to others as he didn’t trust them.” Mr. Woodcraft has turned to you, a Business Consultant to guide him on how to most effectively lead the department, and to get the best out of its staff. REQUIREMENT: Prepare a report in which you critically assess relevant insights from key leadership theories for Mr. Woodcraft and recommend how he should address the issue of staff engagement and attitude. [Note: you should only use two theories of leadership to address this question.]

(Total: 25 Marks)

END OF PAPER

THE INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS IN IRELAND

STRATEGY & LEADERSHIP STRATEGIC LEVEL APRIL 2021

SOLUTION 1 To: Ms. Sorcha Dunne From: A Student TFL International Ltd. CPA Consultants Wexford Dublin Ireland Ireland Date: 22 April 2021 Subject: Strategic Review of TFL International Ltd. Dear Ms. Dunne Thank you for inviting CPA Consultants to evaluate and report on the Strategic Direction and Options open to TFL International Ltd. at this time. The enclosed report has three parts: (a) Analysis of the strategic position of the business. (b) Assessment of the key issues facing the business and evaluation of the business’s strategic options. (c) Strategic proposals to develop TFL International Ltd. going forward. I am available to discuss the report and to provide any additional information or explanations if you should require them. Yours sincerely, A. Student CPA Consultants (a) Strategic Analysis of Gorges Bank Ireland Ltd.

A number of strategic analysis frameworks are used below in order to better understand the strategic position of TFL International Ltd.:

n PESTEL n Five Forces Model n Resource analysis n SWOT

SUGGESTED SOLUTIONS

The General Environment (PESTEL) 1. Political and Legal Factors

The transport road haulage sector is perceived as a strategic industry in most countries. This is especially so for a country like Ireland, which is so dependent on exporting as an engine of economic growth, the industry connects manufacturing in Ireland to the European marketplace. However, the sector is not highly politicised and there are no specific political policy implications for the industry. That said, issues such as excise duty and VAT on fuel does impact on the industry considerably and the IRHA frequently lobbies for a reduction in the high cost of fuel. Ireland's membership of the EU also allows Irish transport firms easy access to the European market, for example, allowing for cabotage between locations in Europe.

Brexit has had a significant impact on the industry. It remains early in the post Brexit implementation phase and these concerns may alleviate over time. However, a combination of additional paperwork, additional inspections and much longer queuing times has meant that the implementation of Brexit has had a major negative impact on the transportation sector. While this is particularly the case for Ireland to UK transportation services, for those firms that use the UK as a land bridge to EU markets it also has had a big impact. Related, firms have also rerouted some of their trucks so that they make more use of the direct ferry services from Ireland to mainland Europe. Each of these issues has increased the cost base of firms in the sector.

There is of course legislation and regulations that impact on the transport sector, although there are few sectoral specific regulations. An exception to this is tachograph recording equipment for trucks, which is mandatory in the EU. This monitors drivers’ compliance with rules, in particular driving time rules. The tachograph will also record vehicle speed, distance travelled and breaks for drivers. The records must be available for inspection by enforcement officers.

2. Economic Factors

Up until the COVID19 pandemic the Irish economy was performing relatively well, despite the uncertainty surrounding Brexit. In 2020 however, the Irish economy was significantly impacted by the pandemic as well as the ongoing Brexit concerns. Figures indicate that GDP grew by 3.4%, based on strong performance by the multinational sector. However, the domestic sector contracted by 5.4% as result of Covid19 restrictions, especially on consumer spending. The transport sector is estimated to have contracted by 16.7%. In 2021, it is expected that the Irish economy will again be dominated by the trajectory of the pandemic. The success of the vaccine roll out will probably be the most important determinant of economic performance. If the vaccine can be rolled out quickly this is likely to lead to a speedier economic recovery and in particular in the second half of the year. The expectation is that based on an international recovery the Irish economy will grow by around 4% in 2021.

Underlying this however are two other conflicting trends. First of all, there is significant pentup demand as a result of the general closure of the economy for over the past year and once the economy opens up again it is expected that this spending will drive the economy for a period of time. Unfortunately, there is also the probability that unemployment will continue at a high rate and will be a drag on the economy. The current government programmes to support people during the pandemic are likely to be hiding an amount of joblessness as some businesses will decide not to reopen after the pandemic.

3. Social and Cultural

The transport or road haulage sector is fundamentally business to business. Therefore, cultural and societal influences do not tend to have a huge impact on the industry. This is apart from some obvious influences, where for example as populations grow, so too does demand for imports and therefore the demand for transportation increases. An example however of how societal attitudes will have an increasingly important influence on the sector is through the growing demand for a greener economy. Transport is by far the largest source of energyrelated CO2 emissions in Ireland. According to the SEAI, in 2018 transportation was responsible for 40% of total emissions. It is also the sector where CO2 emissions have grown the most since the end of the recession in 2012. The transport sector globally and in Ireland as well, will continue to face increasing pressure to reduce harmful CO2 emissions by developing more energy efficient transportation and by using alternative fuels, including electric.

4. Technology In general, the technology associated with trucks has evolved in the same way that the technology in cars has evolved: power steering, braking systems, GPS tracking, etc. Related to the point above however, in general, tractors still rely on the internal combustion engine and on using diesel as its fuel. In the same way as it has for cars, the pressure to reduce CO2 emissions is pushing the development of electric trucks and even hydrogen fuel cell trucks. At present, the rate of technology evolution favours electric trucks, and it is likely that electric trucks will be the future of transportation. In fact, Volvo have started taking orders for electric trucks and these are likely to be delivered within the next few years. It is likely that over the next decade transportation firms will have to invest heavily in new, energy efficient tractors, especially electric tractors, as pressure continues to come on the industry from both society and from government policy.

Competitive Environment (Porter’s Five Forces Model)

Porter’s Five Forces Model provides an insight into the nature and dynamics of competition in the retail banking sector in Ireland.

1. The Intensity of Rivalry

The road haulage transport sector in Ireland is very fragmented, with lots of firms, none of which have more than 5% market share. Firms must have a reputation for reliability and for on time delivery if they are likely to be taken seriously as a bidder for a contract. However, once they meet these criteria the critical competitive factor is pricing. The key to winning new business, therefore, is having a competitive pricing structure. In addition, while clients in this sector do display some loyalty, it remains the fact that if there is a meaningful price differential, clients will move to a lower priced rival. Lastly, the sector has a high fixed cost base, at least when a contract value is compared to the fixed assets, especially the cost of trucks, that is required to refill the contract. Overall, there is a relatively intense level of rivalry in the road haulage transport sector and this is unlikely to change in the foreseeable future.

2. The Threat of New Entry

The threat of new entry is ameliorated to the extent that there are barriers to entry into the industry. There are no critical barriers to entry in the road haulage transportation industry. While there are requirements in terms of licencing for instance, these are straight forward to obtain once the firm has met the requirements. In can also take a lot of capital to become a major competitor in this sector, but not so for a relatively small firm. The most important barrier to entry is being able to attract clients. As has been mentioned elsewhere, reliability and on time delivery are key criteria in choosing a haulage firm and by definition a new competitor will not have the opportunity to have gained this reputation. However, customer loyalty does tend to be low and new competitors may be able to persuade firms to move to them with aggressive pricing. Similarly, new firms that are using haulage firms for the first time, may also be attracted by the same aggressively low pricing. These initial contracts would provide an opportunity for the transport firm to create a reputation and make subsequent bidding less reliant on aggressive pricing. Overall, the threat of new entrants is medium to high as a result of the relatively low barriers to entry.

3. The Bargaining Power of Buyers

As has been mentioned elsewhere, the buyers of transport road haulage services do not tend to be very loyal. The industry itself is fragmented with a large number of competitors. This enables buyers to choose from a large number of potential suppliers. The haulage service provided is also perceived as generally

undifferentiated. While the service provided by haulage firms is of course important to the buying firms, it is not generally seen as a highly valueadded service and is normally in fact viewed only as a cost. As a consequence, once buyers are reassured that a haulage firm can deliver on time and reliably, buyers tend to focus on pricing rather than other elements of the service. Overall, buyers tend to have a relatively high level of influence and power over transport firms trying to win their business.

4. The Threat of Substitutes

Substitutes provide the same essential service but do so from a different industry. There are no close substitutes readily available for road transport. The closest available substitute would be transportation using the railway system rather than roads. While this is more common in mainland Europe, this form of transportation plays a much smaller role in Ireland and the limited nature of the railway network means that, going forward, it is unlikely to be a realistic substitute.

5. The Bargaining Power of Suppliers

While there are a range of necessary inputs into the road haulage sector, there are perhaps two key inputs: diesel fuel and tractors. As has been previously referred to, the road haulage industry is very fragmented with large numbers of competitors. On the other hand, there are a limited number of fuel distributors and an even more limited number of truck manufacturers. Therefore, everything else being equal, no one haulage firm will be a significant customer of fuel distributors or of truck manufacturers. Related, it is unlikely for road haulage firms buy either fuel or trucks in meaningful volumes. Therefore, suppliers of these two key inputs do tend to have the upper hand when discussing pricing and terms and conditions with haulage firms.

Overall, the underlying determinants of intensity of competition in the road haulage sector indicate that the sector is very competitive. With the exception of substitutes, each to five forces is significant: rivalry is quite intense, there are limited barriers to entry and both suppliers and buyers have significant bargaining power. As a result, the incumbent competitors in their road haulage transport sector face a very competitive environment.

Resources and Competences of TFL International Ltd. Resources may be assessed from a number of perspectives: 1. Physical resources, human resources, financial resources, intangible resources 2. Strategic capabilities: threshold and unique resources and competencies 1. Physical Resources

Due to the nature of the transport sector, physical resources play a key role in the competitive positioning of TFLI. TFLI owns 340 tractors, all of which are manufactured by DAF, a very respected firm. In addition, TFLI owns 980 trailers, which are of various designs, including containers and temperature controlled trailers. TFLI also owns a large warehouse (approximately 10,000m2) with 12 loading bays and temperature controlled storage rooms. TFLI also leases a warehouse near Liverpool in England and another one near Cherbourg in France.

2. Human Resources

TFLI employs around 500 staff although it has furloughed 120 staff due to the consequences of the Covid19 pandemic and Brexit. TFLI have around 30 people in management and administration, fifteen technicians to maintain the fleet of tractors and trailers, 50 warehouse staff and usually around 400 drivers. Many of the drivers are from Eastern Europe and there are some problems with the level of their English. The firm pays industry average wages, and a tractor driver can earn around €34,000pa. However, employee turnover remains quite high, especially for drivers. Ms. Dunne is the firm’s Managing Director and she has a lot of experience with the firm and is highly educated.

3. Financial Resources

TFLI’s revenues increased from 2016 to 2018, from €58.3m to €62.2m, however they fell in 2019 and fell dramatically in 2020 to €53.6m. TFLI’s profits followed the same trend, and has worsened from a profit of €2.1m in 2016 to a loss of €1.3m in 2020. TFLI’s financial results have been deteriorating for the past three years, even before the impact of the Covid19 pandemic and Brexit. TFLI is privately owned, albeit 40% is owned by nonfamily members. Approximately, 85% of TFLI’s revenue derives from annual contracts, while the remainder are individual deliveries or short term contracts. TFLI prices aggressively to win business. The majority of TFLI’s revenues, 55%, are generated in its Ireland to Europe segment.

4. Intangible Resources TFLI has a lot of experience in the transport sector and its brand name is well known. It has operated for almost 50 years, and has a considerable amount of market knowledge, contacts and networks; for example, with ferry companies. TFLI’s staff have accumulated operating knowledge and expertise that helps the firm compete effectively. Lastly, Ms. Dunne is a capable and experienced manager and has the ability to lead TFLI through this difficult period.

5. Unique resources and competencies

The resource based view of the firm, popularised by theorists such as Prahalad and Hamel, and Jay Barney, proposes that firms should identify the resources and capabilities it possesses, particularly those that are superior to rivals, and base their competitive strategy around them. In that context, the relevant unique resources and competencies that TFLI may leverage include:

• Ms. Dunne’s experience and ability • TFLI’s history, market recognition and band name • Very large fleet of tractors and trailers • Accumulated experience in the industry • Modern IT and administrative systems • Good links with Ferry companies and DAF services

SWOT Analysis of TFL International Ltd. A useful analytical summary and decisionmaking tool is a SWOT Analysis. However, the analyses need to be based on research and data, not just management opinion.

(b) Issues and Challenges facing TFL International Ltd.

Porter’s “Generic Strategies” is a model that describes the different competitive approaches that firms may use to compete against their rivals. The model contrasts firms’ strategies based on two characteristics. Firstly, the nature the firm’s target market, and whether this is relatively broad or narrow. Secondly, the basis for the firm’s

Inte

rnal

Strengths •! Ms. Dunne’s experience and ability •! Market recognition and band name •! Effective competitive strategy •! Modern IT and administrative systems •! Very large fleet of tractors and trailers

Weaknesses •! Overall performance is deteriorating, even

before the current crisis •! Relatively high level of staff turnover,

especially drivers •! Reliance on UK market

Ext

ern

al

Opportunities •! Consolidation in the sector as smaller

competitors may not survive the Covid-19 pandemic and Brexit crisis

•! Increasing TFLI’s market share on routes into the EU

•! Increase the number of multinational clients on annual transport contracts

•! Rebound in international trade once the Covid-19 pandemic and Brexit crisis end

Threats •! The economic impact in Ireland of the

Covid-19 pandemic •! The continuing uncertainty resulting from

the implementation of the Brexit agreement

•! Environmental concerns about the impact of transport !! Eg, CO2 emitted

•! Price competition in the transport market •! The cost of inputs, in particular, fuel

Porter’s Generic Strategies

competitive advantage and whether this is based on cost or differentiation. As the diagram above illustrates, this leads to the categorisation of essentially four competitive strategies.

Currently, TFLI is essentially employing an overall cost leadership strategy. TFLI is very conscious of its cost base, and tries to keep strict control of staff costs, paying industry average wages. The firm uses only one tractor brand: DAF. These were chosen due to their fuel efficiency as fuel can represent 3035% of TFLI’s costs. While reliability is a necessary element of competing in the transport sector, pricing is key to winning business for a quite standardised service. TFLI’s ability to manage costs ensures that it can attract clients by pricing contracts very competitively. While this strategy has worked to date, there seems to be a problem with either the strategy or its execution over the past few years; even before the onset of the COVID19 pandemic and the Brexit crisis. The firm will need to investigate why this is the case and may need to adjust its implementation of its strategy to ensure its continued effectiveness.

Ansoff’s Matrix

Ansoff’s matrix describes the different directions a firm may use to grow strategically. The model combines existing and new products and existing and new markets to arrive at four possible productmarket growth options. Depending on the firm’s objectives, resources and competences, each of these alternatives, or a combination of them, represent possible growth directions for the firm.

The transport sector in Ireland is very fragmented with lots of competitors, including many small firms. The current crises in the industry may lead to a shakeup and the possibility of industry consolidation, as it is likely that some smaller competitors will be unable to remain in business. This may give TFLI the opportunity to consolidate their position in the market and to further penetrate the market using their existing resources and competitive strategy. As referred to elsewhere, TFLI perhaps needs to review the implementation of its competitive strategy, and perhaps its marketing and promotion, but there is certainly the possibility of gaining market share in the current context.

TFLI already provides a range of services including transportation in Ireland, to the UK, and to mainland Europe. It also provides a range of trailers depending on the requirements of the client and the nature of the goods to be transported. There is a possibility for the firm to increase the range of services it offers, for example, by organising international transportation outside of the UK and the EU. TFLI could operate as a freightforwarder or as a NVOCC for firms wishing to export to, for example, the United States or China.

An alternative expansion possibility for TFLI is diversification into parcel delivery in the Irish market. The firm already has expertise in organising transportation and logistics and already employs a large number of drivers. Obviously, it will take some time and the development of an attractive marketing proposition to persuade firms to move from their current delivery service provider to one provided by TFLI. However, this is currently an attractive market due to the increased level of online purchasing which leads to increased levels of deliveries in particular to domestic residences.

In the context of the above analysis and the concerns expressed by Ms. Dunne about its performance, the following are the key issues facing TFLI. 1. The transport and logistical sector is effectively in a crisis as a result of the combined impact of both Brexit

and the Covid19 pandemic. In the short term, TFLI’s focus needs to be that it remains in business. 2. The level of TFLI’s performance, in terms of revenue and profitability, has already been deteriorating prior

to the current crisis. The current crisis will almost certainly exacerbate the financial concerns facing the firm.

3. The relative importance of the UK market and routes, as compared to the EU market and routes, seems to have lessened over the last several years. The amount of people and resources that TFLI allocates to the UK may need to be reassessed if these trends continue.

4. The level of staff turnover is a concern especially as the firm pays industry average wages and therefore from a remuneration point of view should be relatively attractive. There may be other concerns or reasons why TFLI’s staff choose to leave their jobs with the firm.

(c) Recommendations for TFL International Ltd. The following are recommendations that TFL International Ltd. may use to address its current concerns and to develop into the future.

1. TFLI should continue to employ a cost leadership competitive strategy. While there are benefits that TFLI

may be able to use to underpin an a differentiation competitive strategy, for example, reliability, the key selling point in the sector remains price. TFLI is better positioned to compete on price using its existing competitive strategy, than try to change to an alternative, differentiated based, competitive strategy. It already has a cost conscious organisational culture and its financial investment appraisal systems are focused on managing costs. The cost leadership competitive strategy has not been as successful in the past few years, and in the current economic circumstances it should still be effective. TLFI needs to complete a review of its competitive strategy implementation to evaluate where it can improve its implementation. TLFI should retain an accounting firm or a management consulting firm to undertake the review. This will facilitate an objective and external evaluation of where the firm needs to improve.

2. Related to the first recommendation, TFLI obtains around 85% of its revenue from annual contracts with

large clients. TLFI should evaluate whether it remains commercially feasible or sensible to provide transport services to SME and ‘onceoff’ customers. TFLI could then concentrate on larger clients and annual contracts. Even though onceoff customers generate revenue for TFLI, it is likely that the marginal revenue these generate does not translate into equivalent operating profit. The cost of managing onceoff transactions is likely to be higher per delivery than the cost per delivery under annual contracts. While the decision to no longer provide onceoff deliveries may reduce revenue, the reduction in costs, though needing to have fewer drivers or administration staff should lead to higher overall profit margins.

3. In the context of the dual pressures of fuel costs and the environmental concerns about the impact of

transport, TFLI should look at the opportunity to use nondiesel fuel tractors, for example, electric. It is likely that this opportunity will not be available for two or three years, however Volvo is one of a number of articulated tractor manufacturers which are close to having electrically powered tractors commercially available. TLFI should research the trends in electrically powered tractors and begin negotiations for the purchase of a number of these. The maintenance and fuel costs should be substantially lower than TLFI’s current fleet, thus reducing the firm’s operating cost base. In addition, using this type of powered tractor could enable TFLI to differentiate it’s service going forward and allow them to charge higher prices to clients who wish to promote themselves as ‘green’.

4. The proportion of TFLI’s revenue that derives from Ireland to UK transport has been reducing for a

number of years. TFLI should review the reason why this is the case. It may be a general trend across the sector, or it may be because TLFI is losing market share in this segment. TLFI needs to then decide whether to recommit to the IrelandUK market and to arrest and turnaround this negative trend. Depending on the outcome of the review, TLFI may be able to identify and target potential clients more effectively, improve its promotional strategies, perhaps by making more use of direct sales techniques, and adjust its pricing, at least for a ‘promotional period’. If the review concludes that it will take a lot of investment in resources and time to return the IrelandUK segment to its historic performance levels, TLFI may be better advised to shift the resources committed to this segment over time staff and lorries to the faster growing European routes.

Solution 1: Indicative Marking Scheme Marks

(a) Application of PESTEL • PESTEL implications should be related to the case scenario • 6 elements x 2 marks; maximum of 10 marks 10 Application of Five Forces Model • Drivers identified by Porter must be used to reach a conclusion for each force • 5 forces x 2 marks 10 Analysis of Resources and Competences • Explain main resources and competences, indicating their importance to competitiveness • Refer to Value Chain analysis 6 Preparation of a SWOT Analysis • Should relate and link strengths to weaknesses, opportunities and threats • Issues in the SWOT should be prioritised, not just listed 5

31 (b) Assessment of issues and options

• Must be logical and clearly relate to previous analysis • Should refer to relevant models (Bowman or Porter, Ansoff...) • Issues and options should be prioritised, not just listed 8

(c) Strategy / Proposals

• Must be logical and clearly relate to previous analysis • Recommendation(s) should be prioritised, not just listed and justified 8

Presentation Marks 3 Total Marks 50

SOLUTION 2 To: Senior Management Team From: A Student Irish National Observer Ltd. CPA Consultants Dublin Dublin Ireland Ireland Date: 22 April 2020 Subject: Integration of Livefeed into INP Introduction An acquisition is when one company acquires most or all of another company's shares to gain control of that company. There are various rationales for a firm to undertake an acquisition, including obtaining resources, market extension and industry consolidation. The main rationale for INO’s acquisition of Livefeed is likely to revolve around the expertise and capabilities of Livefeed in developing and delivering a digital news offering. INO would probably also like to migrate Livefeed’s customers to INO, or at least to its digital offering. The acquisition process is typically described using five steps. Firstly, the acquiring firm must identify a suitable target firm to acquire. Secondly, it must negotiate with the owners of that firm and also complete a due diligence evaluation of the firm being acquired to ensure that it is as described. If these steps go successfully, the acquisition is then concluded through the completion of an acquisition contract. However, the last and fifth step is perhaps the most important and is certainly the most difficult stage in the acquisition process. The acquiring firm, in this case INO, most integrate the acquired firm into its organisation and operations. This can be very complex, as integration can involve many organisational routines, resources and systems: product ranges, distribution channels, accounting and IT systems, HR policies and procedures, marketing and branding approaches, and so on. In the case of INO, it will need to decide how and to what extent it will integrate Livefeed, which from an organisational culture and structure point of view is quite different from INO. This report will discuss the main issues and concerns that may confront INO as it goes through the postacquisition integration of Livefeed and then make recommendations on how to improve the likelihood of a successful integration. PostAcquisition Integration Issues Perhaps the first and critical issue that INO will need to deal with in terms of its acquisition of Livefeed is the challenge of retaining Livefeed’s key staff. To a great extent INO’s rationale for acquiring Livefeed is the expertise and competence of its staff and in particular, the ability of its staff to provide a popular digital offering. INO will want to use this expertise to improve its own digital offering, and to do this INO will need to ensure that key staff remain working for the combined firm. As was explained in the briefing the culture and structure of the two firms are very different and Livefeed is much more entrepreneurial in its approach. It is likely that Livefeed’s staff, in particular its technical staff, are comfortable in this more flexible culture and may find it difficult to adjust to the more traditional and bureaucratic culture of INO. If INO is unable to retain these key staff, the key benefit of the acquisition for INO is removed. It is important that Livefeed’s founder and CEO Ms. Roche stays with the combined firm, as this will persuade other important members of Livefeed staff to also stay. In addition, INO will need to put into place a “welcome package” for key staff to persuade them to make the choice to stay with the combined firm. A second issue that may impact of the postacquisition integration of Livefeed will be the response of staff in INO and in particular the unions that represent staff. There is a strong group of unions in INO, a long established and more traditional firm. The staff unions will want to ensure that the acquisition and integration of Livefeed will not negatively impact on the jobs and terms and conditions of current INO staff. Also, because of the strength of the unions, where individual staff may not be that concerned, the unions will tend to take a more assertive and consequently, problematic approach. In addition to not wanting its members terms and conditions undermined, unions will also not want their relative strength in INO to be challenged by the nonunionised nature of the acquisition. Livefeed seems to be quite a flexible organisation and as it is not unionised, this may be seen by the unions as a threat to their influence. INO management will need to negotiate directly with the unions to ensure that the unions do not actively attempt to undermine the acquisition or its integration.

Related to the issue of the attitude of staff, is the very different organisational cultures that exist in INO and in Livefeed. As mentioned previously, INO is an old business that has evolved a culture and an approach that is quite bureaucratic and traditional. On the other hand, Livefeed is almost the direct opposite, where it is quite new and entrepreneurial, and seems to have a more flexible organisation design. It will be very difficult for the two firms to successfully integrate the two cultures and in particular for the staff of Livefeed to adjust to the more regimented approach of ISO. It is not clear what will be the best approach to achieve a satisfactory outcome, where Livefeed staff feel comfortable in their adopted culture. However as previously mentioned INO need to retain many of these staff and therefore some form of compromise in terms of organisational structure might need to be developed: one that enables the Livefeed staff to retain at least some of their entrepreneurial style. A fourth important issue in the integration of Livefeed will be the reconciliation of the presumably quite different policies, procedures, pay scales and management processes in the two firms. For example, INO will need to discuss and develop pay scales for the different grades that will transfer from Livefeed, bearing in mind that it is never a good idea to have staff doing the same work but on different pay scales. INO will also need to amend HR policies, for example in the area of number of days holidays, number days sick leave, and so on. In a similar manner the organisational systems for Livefeed and the organisation systems for INO also need to be integrated: for example, accounting systems and payroll systems. It can be frequently quite difficult to come to an agreed compromise in terms of adjusting either one or both of the systems and policies of two firms. The need to come to an agreement is particularly important due to the nature of Livefeed compared to that of INO and the need for INO to retain the key staff in Livefeed. Recommendations In some senses, completing an actual acquisition is in fact the easy part. As discussed above there are significant issues involved in this subsequent integration. The effective postacquisition integration process is very complex and very difficult, and many acquisitions do not do this successfully. There are no strategies that will inevitably lead to a more successful postacquisition integration; however, several strategies may be used to improve the probability of a smoother integration of the acquired firm. These include: 1. Ongoing communication to staff 2. Integration teams made up of staff from both firms 3. Team building exercises Senior management both in INO and in Livefeed need to communicate with their staff on an ongoing basis and in an open manner. Research suggests that effective communication is one of the most effective ways of managing organisational change, which is the nature of a postacquisition integration. The objective of the communication strategy is to reassure staff and to ensure that they are aware of changes that will occur as a result of the acquisition. The communication process will also allow staff to make management aware of their concerns and how perhaps they can be addressed. Management in both firms need to communicate in an open manner and inform staff not only of the positives but also of the potential negatives that may result from the acquisition integration, including even perhaps job losses. The forms of communication will differ depending on the message that needs to be communicated. For example, initial meetings may take place, especially “town hall meetings” with an open forum to reassure staff. Then, in particularly those staff and departments that would be directly impacted will need greater levels of communication and even perhaps one to one communication. While communication will obviously not eliminate problems, it should be able to reassure staff and better inform management of staff specific concerns which they can then perhaps more effectively address. A second post acquisition integration strategy that INO should implement is to structure integration teams using staff from both firms. In an acquisition, there is frequently a win lose mentality, and the staff from the acquired firm frequently feel as if they have somehow “lost”. They can then come to resent the acquiring firm and to become less cooperative in the integration process. If the postacquisition integration process is to succeed INO needs to avoid this win lose mentality. Livefeed has a lot of competent and capable people in fact this was the main reason for the acquisition. If INO develops combined integration teams, it signals to everyone that they are valued. It also recognises that Livefeed staff have a lot to contribute to the combined organisation. In the case of Livefeed, this is particularly the case for its IT and social media staff who it seems are better than INO staff in these areas. In fact, Livefeed staff may be best suited to lead these integration teams.

Lastly, going forward, staff from both INO and Livefeed need to work together, and depending on the department, they may have to work very closely together. For example, the IT and social media departments are likely to be merged in the combined firm. This will require the staff moving from being strangers to effective colleagues. INO can facilitate this process by investing in a range of team building exercises and ensuring opportunities for the staff to get to know each other. INO could hire an HR firm that provides this type of service. In addition, INO can organise social events that enable the staff from both firms to mingle, for example, table quizzes or going horse racing. Over time, this should hopefully develop familiarity and the necessary level of trust among staff from both firms. This in turn, will enable a cooperative culture to evolve and to avoid an “us and them” attitude in the combined firm; either due to resentment on the part of Livefeed staff or belligerence on the part of INO staff. Ultimately, INO will want to ensure that a coherent culture evolves, and that staff identify positively with the combined firm. Although the preceding sector section discussed how to best overcome the postacquisition integration issues in terms of postacquisition integration of Livefeed into ION, an important question still needs to be addressed. That is, should ION even try to integrate Livefeed into its organisation and structures? Livefeed is very different in terms of culture, systems and dynamics compared to ION and perhaps it is these that set Livefeed apart and have made it so successful. These characteristics may be lost if Livefeed is fully integrated into ION, and therefore in a sense so too would be the benefits that ION seek to gain from the acquisition. The senior management of ION should carefully consider keeping Livefeed as a separate subsidiary and allowing it to remain independent operationally. ION could still use Livefeed’s expertise and competence in digital media to improve its own digital offering. For example, ION could rotate managers and digital media staff between the two organisations to allow ION staff learn from their Livefeed counterparts. The benefits of not integrating Livefeed need to be evaluated before ION embarks on a full integration process that ultimately may undermine the original reason for the acquisition. Conclusion Firms undertake acquisitions for a variety of reasons, including as ION has done, to obtain competences and expertise. However, the acquisition process and in particular the postacquisition integration process is complex and frequently not successful. ION faces a number of issues if it decides to go ahead with the integration of Livefeed, including retaining Livefeed’s best staff and the attitude of ION’s staff and unions. There are strategies that ION can use to help with the postacquisition integration process, including investing in communications and using integration teams using staff from both firms. If these strategies are deployed, it increases the probability of a successful integration of Livefeed into ION. However, the question remains whether it would be both more strategically useful to ION if Livefeed remained an autonomous subsidiary of ION but one which facilitates the easy flow of information and people between the two firms, thus allowing Livefeed to support an improvement in ION’s digital offering.


Explain the acquisition process and the importance of postacquisition integration • Relate explanation to context of INO 3 Postacquisition integration issues • Retaining Livefeed Ltd.’s best staff 3 • Organisational culture 3 • Union response 3 • Integrating pay scales, holiday entitlements and other people management issues 3 • Leveraging Livefeed Ltd.’s IT and social media competences 3 • Any other relevant point 3 • Any 4 issues x 3 marks 12

Comment on whether INO should even attempt to integrate Livefeed Ltd. 3 Recommendations • Ongoing communication to staff 2 • Integration teams made up of staff from both firms, not only INO 2 • Investment in [re]training and [re]socialisation of staff 2 • Team building exercises made up of staff from both firms 2 • Any other relevant recommendation 2 • Any 3 recommendations x 2 marks 2 6

Conclusion 1 Total Marks 25

SOLUTION 3 To: Ms. McCarthy and Ms. Connor From: A Student AS Consulting and Training Ltd. CPA Consultants Dublin Dublin Ireland Ireland Date: 22 April 2021 Subject: Competitive Strategy Options Introduction A key choice that a firm must make is how to create a competitive advantage: an advantage that a firm has over its competitors, allowing it to generate greater sales or margins and/or retain more customers. There are many opportunities for building competitive advantage, including a firm's product offering, cost structure, distribution network, customer service and support, and so on. A competitive strategy is the method by which a firm achieves a competitive advantage in the market. The firm’s competitive strategy is the combination of competitive actions it chooses to utilise to compete in its market. There are two popular models to generically describe the nature of competitive strategy: Porter’s “Generic Strategies” and Bowman’s “Strategy Clock”. This report will use Porter’s “Generic Strategies” as an analytical framework.

AS Consulting and Training Ltd. (ASCT) is in the process of being established. The firm intends to provide a range of services, initially including health and safety induction training for onboarding staff, advice on improving health and safety organisational compliance, and codeveloping health and safety policies and documentation. ASCT will initially target pharmaceutical firms. This report will critically evaluate the potential competitive strategies that ASCT may employ in the marketplace and then make a recommendation on which competitive strategy is most suitable to create a sustainable competitive advantage for the firm. Overall LowCost Leadership Strategy This strategy seeks to compete based on having the lowest cost base in the industry. It is not the same as “price leader”, although the lowcost leader can outcompete rivals on price due to its lower cost base. The lowcost leadership strategy requires the firm produce a standardised, adequate product, to manage costs aggressively, emphasise productivity and asset utilisation, and crucially to operate with significant volumes to gain economies of scale and market power. There are a number of benefits associated with the lowcost leadership strategy, however ASCT is not in a position to realise these. For example, standardising the services provided helps reduce costs and make operations more straightforward, however it is likely that ASCT’s clients will require a training service or advisory service that is adapted to their needs. A second benefit of the lowcost leadership strategy is related to the scale and to the market power the strategy requires. Again, ASCT will not be in a position to obtain scale, at least not for the foreseeable future, and this effectively rules out this competitive strategy. Even if ASCT were able to use the lowcost leadership strategy, there are a number of issues with its longterm effectiveness. The strategy relies on a standardised, “average”, product or service that is acceptable to a large number of customers. Overtime, customers can easily tire of this and demand products or services more specifically developed with their needs in mind. In other words, a more differentiated offering.

Porter’s Generic Strategies Bowman’s Strategy Clock

Broad Differentiation Strategy This strategy seeks to compete based on offering a superior product or service in ways that are valued by buyers. The key characteristic of broad differentiation is that there are usually several possible dimensions on which to create differentiation: product features, quality, customer service, delivery, product customisation, etc. A key success factor in differentiation is a clear understanding of buyer needs. A differentiator can then create a product or service that meets these needs. A broad differentiation strategy involves considerable investment in both marketing and R&D. The broad differentiation strategy has a number of benefits. In particular, this strategy creates a higher level of buyer loyalty as the product or service is more tailored and relevant to the buyer. The strategy would also enable a firm such as ASCT to charge higher fees due to the specific and customised nature of the service. However, the broad differentiation strategy inevitably creates a relatively high cost base, due to the necessary investment in marketing, R&D, etc. The high costs associated with this strategy again makes it unsuitable for ASCT, which as an SME startup, does not have the resources to develop the scale necessary to compete on a broad basis. Focussed Strategy This strategy seeks to compete based on concentrating on a small segment of the overall market – a “market niche”. The market segment may be defined in terms of a customer segment, lifestyle, geographical territory, etc. Therefore, careful market identification, segmentation and targeting are important to the success of a niche strategy. By carefully selecting a segment and meeting the needs of that segment better than competitors who target more broadly defined segments, firms can gain competitive advantage. In pursuing a focussed strategy, a firm can either use a differentiation or lowcost approach. The focussed differentiation strategy seeks to obtain a premium price from the market for a relatively superior product or service. The objective is to become the “preferred product or service” for this limited group of buyers. In contrast, the niche lowcost competitive strategy involves selling more basic products or services to pricesensitive customers. This strategy relies on cost and pricing as a means of attracting customers in the exact same way as the overall lowcost strategy, albeit to a limited target market. The focus strategy is ideal for an SME startup such as ASCT. If implemented effectively this strategy should allow the firm to charge higher fees and to generate strong customer loyalty by shaping the services to the needs of the pharmaceutical sector. As ASCT will be serving a narrow market segment it should become more quickly aware of changing client requirements and expectations, and be able to respond to these more rapidly. However, ASCT would need to be aware that a focus strategy has limitations. For example, ASCT must have the resources and competences to effectively serve the niche, otherwise rivals will undermine the firm’s competitive position. ASCT will need to be able to deliver a high quality service to the pharmaceutical firms that it is targeting. The service will need to be tailored to the pharma sector and not a “generic service”. ASCT will also need to be sure that there is a sufficiently large and expanding market to generate revenue into the future. A last concern is whether there are firms already specialising in the same niche, as by definition, the market size is limited. Recommendation AS Consulting and Training Ltd. has a clear vision of its service offering and its target market. It intends to provide a range of health and safety related services to the pharmaceutical sector, at least initially. It is important for a business to understand its boundaries; where it will compete and the services it will provide. Therefore, ASCT needs to establish clear limits on its service and geographic boundaries. Based on an analysis of ASCT’s resources and competences and on the relative merits of the competitive strategies available to it, the firm should seek to compete using a focussed differentiation strategy. The owners of ASCT have the necessary expertise and contacts to provide differentiated health and safety service solutions to pharmaceutical clients. The founders’ experience is both varied and complementary. The firm will need to be able to develop and deliver a tailored training and advisory service to develop a differentiated market position. These services are critical in the pharmaceutical sector and clients are likely to be willing to pay a premium for a high quality, effective service. Going forward, to develop and maintain a more sustainable competitive advantage, ASCT will need to develop an indepth understanding of the health and safety requirements of pharmaceutical firms. ASCT needs to ensure that as the health and safety regulations and environment evolves, its training and advisory services remain relevant and timely. ASCT needs to become a learning organisation, evolving as its market and clients’ demands evolve. Clients will not pay a premium for services that do not “add value”, and therefore ASCT must deliver, and be seen to deliver, a high quality, effective service.

Conclusion The provision of health and safety service solutions to pharmaceutical clients seems like an attractive business opportunity. Ms. McCarthy and Ms. Connor have the experience and expertise to effectively provide these services. A focus differentiation strategy should enable the firm to compete, especially with the limited scale and financial resources available to the business at present. The success of a focus differentiation strategy to a great extent depends on how well it is executed. Ms. McCarthy and Ms. Connor will need to ensure that the firm provides the expected level of service and added value to clients.

Solution3 : Indicative Marking Scheme Marks

Explain the importance of a competitive strategy • Relate explanation to context of AS Consulting and Training Ltd. 1

A differentiationbased competitive strategy • Outline the strategy 2 • Three benefits/drawbacks associated with the strategy 3 5 A costbased competitive strategy • Outline the strategy 2 • Three benefits/drawbacks associated with the strategy 3 5 A focusbased competitive strategy • Outline the strategy 2 • Three benefits/drawbacks associated with the strategy 3 5 Recommendation of suitable competitive strategy 8 Conclusion 1 Total Marks 25

SOLUTION 4 To: Mr. Aaron Woodcraft From: A Student BGM Engineering Ltd. CPA Consultants Dublin Dublin Ireland Ireland Date: 22 April 2021 Subject: Effective Leadership Styles and Strategies Introduction While it is clear that leadership is an integral part of the overall process of ‘management’, there is no one understanding of the process and nature of leadership. There are numerous definitions of leadership, however in general, as defined by Richard Daft, “leadership is the ability to influence people toward the attainment of organisational goals.” Every member of an organisation is capable of leadership, however managers, through their positional power, have the best opportunity to effect it. There is no comprehensive set of qualities and characteristics associated with effective leadership, however Kirkpatrick and Locke (1991) identify the following: 1. Integrity 2. Selfconfidence 3. Emotional Maturity 4. Drive, energy and ambition 5. Leadership motivation and comfortable using power BGM Engineering Ltd. (BGME) is an Irish engineering firm that specialises in the provision of project management, electrical and fire protection services for large construction projects. Historically the firm has performed well but there has been a decline more recently. The Managing Director believes that the performance of the firm’s Engineering Solutions Department has been a root cause of the underperformance. He has decided to appoint a new senior manager to the department. Mr. Woodcraft is an experienced engineer and manager. He has worked with a number of large UK engineering firms prior to his appointment to the position of Head of Engineering Solutions. Mr. Woodcraft’s initial impressions of the department are not positive: the department has a negative culture and staff are reluctant to engage or to share their ideas. He feels that the problem, to some extent at least, stems from the leadership style of his predecessor, Mr. Holden. There are a number of leadership theories that may be useful in informing an appropriate leadership style for Mr. Woodcraft’s that would address the issue of staff engagement and attitude. This report will focus on: 1. The [managerial] leadership grid 2. Pathgoal theory 1. The [Managerial] Leadership Grid The [Managerial] Leadership Grid was developed by Blake and Mouton (1964). It tries to identify the categories of behaviour of people in leadership situations, and according to the model, managers can emphasise a combination of two basic behaviours: 1. Concern for people is the degree to which a leader considers team members’ needs, interests and areas of

personal development when deciding how best to accomplish a task. 2. Concern for results is the degree to which a leader emphasises concrete objectives, organisational efficiency

and high productivity when deciding how best to accomplish a task. These basic behaviours in turn create five main categories of leadership style: 1. Impoverished Management Low Results/Low People. These managers are generally ineffective as they have

little interest in creating a motivating environment or developing systems that achieve job targets. 2. Authoritarian managers High Results/Low People. These managers believe that team members are simply a

means to an end. People’s needs are always secondary to productivity. 3. MiddleoftheRoad Management Medium Results/Medium People. These managers tend to compromise so

that they never really address team members’ needs adequately, and they only tend to deliver average levels of performance or output.

4. Country Club Management High People/Low Results. These managers seem to emphasise team members’ needs and feelings under the erroneous assumption that once happy, team members will work hard.

5. Team Management High Production/High People. These managers commit to their organisation's targets and motivate team members but also support and respect the people with whom they work. According to the Blake and Mouton model, this is the most effective leadership style.

It seems likely from the comment by the senior manager and the disengagement of the department’s staff that Mr. Holden probably emphasised the work, and task completion, in his role as the head of Engineering Solutions. Mr. Holden seems to have been quite authoritarian and seems to have only focused on achieving targets. His arrogance and his lack of trust in the ability of others in the department is likely an important reason why the members of the department have become less motivated and unhappy in their roles. Mr. Woodcraft will need to move away from that leadership style as it clearly has not worked as the performance of the department and the negative culture illustrates. Instead, in the terminology of the [Managerial] Leadership Grid, he probably needs to use a more “team management” approach to distance himself from the previous manager. This will involve Mr. Woodcraft still emphasizing the technical and performance elements of the role however he will also involve him becoming more approachable and open to his staff. He would need to be more supportive of his staff and ensure that he listens to their contributions and that they feel comfortable making proposals. The proposals need to be objectively evaluated and that they are implemented if they are suitable. It seems likely that Mr. Holden did not effectively follow up on his department’s suggestions unless he made them. In other words, he needs to ensure that everyone in the department sees that they have the opportunity to contribute meaningfully to its performance. 2. Pathgoal theory PathGoal Theory was developed by House (1971). This theory is a contingency theory of leadership and therefore suggests that organisational circumstances affect the most effective form of leadership. PathGoal Theory states that the effectiveness of a leader depends on the extent to which they address the expectations of subordinates, including: • Helping staff identify and achieve their goals. • Clearing obstacles, thereby improving performance. • Offering appropriate rewards along the way. House described four styles of leadership. • Supportive leadership: This focuses on relationships, and sensitivity to individual team members' needs. This

leadership style is best when tasks are repetitive or stressful. • Directive leadership: This focuses on communicating goals and expectations and assigning clear tasks. This style

works best when projects are unstructured and complex, or when team members are inexperienced. • Participative leadership: Here the focus is on mutual participation. Leaders consult with the team and consider

their ideas and expertise before making a decision. This approach works best when team members are experienced, when the task is complex and challenging.

• Achievementoriented leadership: This focuses on setting challenging goals for the team. The leader has confidence in the team and expects them to perform well. This style works best when team members are unchallenged in their work.

In the context of PathGoal Theory, Mr. Holden is likely to have used a directive approach where he emphasised the task at hand, however at the same time undermined the ability of the department to support him in achieving it. The people working in the department are qualified and experienced and a directive approach will tend to undermine their confidence and over time will likely push them towards disengaging or even leaving the firm. People who are experts in their field want to be able to contribute meaningfully to work and not just to be told what to do. Mr. Woodcraft, again in the terminology of PathGoal Theory, should probably use a combination of supportive leadership and participative leadership. As mentioned, these are qualified and experienced colleagues. A supportive leadership style should create the atmosphere where each staff member in the department feels valued and in turn, this should improve the negative departmental culture over time. At the same time, Mr. Woodcraft will need to also use a more participative leadership style that enables the department’s staff to contribute meaningfully to the department and not to have their proposals ignored. A combination of these two styles should enable Mr. Woodcraft to change the culture in the department and improve its performance and contribution to the firm.

Recommendations It seems likely that the issues in the department in terms of staff engagement and attitude are a result of the leadership style of Mr. Woodcraft’s predecessor. In order to address these issues , Mr. Woodcraft will need to ensure that he utilises a different leadership approach to Mr. Holden. This report has already explained that Mr. Woodcraft should probably use a combination of a team management approach and a supportive and participative approach, as these will lead to a more effective department with a better work culture over time. As part of this process, Mr. Woodcraft we need to do something specific to address the engagement and attitude concerns in the department. One thing that Mr. Woodcraft can do is to communicate clearly to the staff in the department the new expectations that he and the organisation has for them. Staff have reached a point where they no longer contribute proposals or ideas and Mr. Woodcraft needs to communicate that these are now wanted, expected, and will be implemented. When he says this, it is critical that he follows up, by in fact listening to and implementing proposals. In parallel, and as part of improved communications, Mr. Woodcraft will need to build more trusting relationships with staff in the department. Obviously, this will take time as an amount of distrust has likely built up over the past number of years. However once staff see that they are being listened to that their proposals are being implemented, Mr. Woodcraft should slowly create a more trusting atmosphere in the department. Another concern that Mr. Woodcraft needs to address specifically is the morale in the department. This has obviously been damaged and undermined over the past several years and has led to the negative culture. Mr. Woodcraft needs to rebuild morale in the department and create a more positive and collegiate atmosphere. An initial suggestion would involve investing in some team building exercises as well as perhaps organising social events outside of the workplace so that staff can get comfortable with each other again. Conclusion Leadership, or the ability to positively influence colleagues, is a key element of organisational and departmental performance. In the Engineering Solutions Department there has been a concern with the approach and leadership style of the previous manager. This is led to an underperforming department and to a disengaged staff. If Mr. Woodcraft is to improve the performance of the department and to motivate staff, he will need to in employ a more participative and supportive leadership style and a more inclusive team management approach. If he is successful in doing this the performance of the department and the culture in the department should improve considerably.


Explain the importance of effective leadership • Relate explanation to context of BGM Engineering Ltd 2

Critically assess relevant insights from two key leadership theories. Possible leadership theories: • [Managerial] Leadership Grid • Situational theory • Path goal theory… Explain the main elements of the leadership theory 3 Discuss insight from theory relating it to Mr. Woodcraft role as Head of Engineering Solutions 5 16

Recommendations to engagement and attitude • Communicate new expectations 2 • Create more trusting relations with staff 2 • Improve morale, eg through departmental teambuilding exercises 2 • Any other relevant recommendation 2 • Any 3 recommendations x 2 marks 6 Conclusion 1 Total Marks 25

strategy & leadership strategic level examination …

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