BUSINESS MANAGEMENT AND STRATEGY

Suggested Answers
Certified Finance and Accounting Professional Examination – Winter 2018

Ans.1 (a) Strategic position of product lines in the strategic clock as suggested by Bowman are
identified and discussed as follows:

Daily wear
In the Bowman’s strategic clock, strategy for this product line is ‘low price strategy’.
The customers perceive that product is offering average benefits (not regarded as
low-quality product) at a low price when compared with similar products being
offered by the competitors in the market. This strategy is likely to be implemented
successfully by the least-cost producer only.

Bridal dresses
In the Bowman’s strategic clock, strategy for this product line is ‘focused
differentiation strategy’. The customers perceive that product is offering above-
average benefits and therefore are ready to pay higher-than-average prices. This
strategy is likely to be implemented successfully when products under this category
are strongly branded as premium products so that high prices can be justified.

Fragrances
Bowman has identified such strategy as is being followed in this case as ‘strategies
that will fail’. The decision to charge high prices may result in customers’ perception
that benefits derived from such products do not justify the prices as they can
purchase products offering more benefits in similar or even low prices. This strategy
is highly unlikely to be successful.

(b) Recommended strategy for each product line in terms of Ansoff’s Matrix with
guidance for implementation is given hereunder:

Daily wear
It is recommended to follow market penetration strategy as demand for this product
line has significant potential for growth in the existing market. This strategy can be
implemented successfully by means of aggressive marketing. FC should seek to sell
more of its current products in its existing markets by persuading existing
customers to buy more, persuading individuals who have not bought the product in
the past to start buying and persuading individuals to switch from buying the
products of competitors.

Bridal dresses
It is recommended to follow product development strategy. This can be achieved by
offering party wear dresses also as competitors are enjoying hefty profits. This
strategy can be implemented successfully by using qualified staff and the existing
brand name that may be extended to new products i.e. party wear dresses.

Fragrances
It is recommended to follow market development strategy since high end targeted
customers have strong brand loyalty to competitors’ products. This strategy can be
implemented successfully by selling products in new geographical markets
(regional, national, etc.) or attracting customers in new market segments (low end
customers) by offering slightly differentiated versions of its existing products or by
making them available through different distribution channels.

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 BUSINESS MANAGEMENT AND STRATEGY
Suggested Answers
Certified Finance and Accounting Professional Examination – Winter 2018

Ans.2 (a) MG may enjoy the following benefits by adopting life cycle costing:

 The potential profitability of Glory Ultimate would be assessed before major

development is carried out and further costs are committed. It may assist
management in deciding whether to introduce new series at all or not.

 It may assist in identifying various types of costs over the life of Ultimate Glory.
Strategies may then be devised to reduce / control these costs.

 It may assist in developing a pricing strategy that would cover the costs and
achieve desired level of profits.

(b) MG might have to incur following costs in each phase of the life cycle of Glory
Ultimate:

(i) Introductory phase

 Manufacturing costs (costs of operations)
 Marketing and advertising costs to raise product awareness
 Costs of setting up and expansion of distribution channels

(ii) Growth phase

 Increased costs of working capital
 Costs of increasing capacity
 Marketing and advertising costs to raise customer base

(iii) Maturity phase

 Costs to maintain manufacturing capacity
 Marketing and product enhancement costs to extend maturity

(iv) Decline phase

 Costs of withdrawals (costs of remaining warranties)
 Discounts to attract customers

(c) MG may adopt any or combination of the following strategies to extend the maturity
phase of Glory Ultimate:

 Differentiate by modifying design, features, packaging, etc. to extend product

life.
 Sell to untapped markets in terms of geographical area, gender, type of
customer, life style etc.
 Revisit pricing strategy by offering discounts or promotional schemes to attract
customers who are happy to purchase ‘old models’ for a lower price and avoid
paying the premium required for the new models.

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 BUSINESS MANAGEMENT AND STRATEGY
Suggested Answers
Certified Finance and Accounting Professional Examination – Winter 2018

Ans.3 (a) The purposes of vision and mission statements are listed below:

 These provide basis for consistent strategic planning decisions.

 These assist in translating management’s intentions and purposes into
corporate objectives.
 Provide a common purpose for all groups and individuals within the
organization.
 Assist in establishing goals for the organization.
 Assist in improving the overall image of an organization among external
stakeholders and public in general.

(b) Vision and mission statements reflect the unique/distinctive identity of an

organization. The uniqueness can be in terms of business philosophy, purpose of
business and capabilities of an organization. APL is a newly registered private
company whereas MEL is a well-established listed company therefore, it is highly
likely that above parameters of unique identity could be different. Hence, I do not
agree with Ms. Shanzeh’s approach of imitating the mission and vision statements
of MEL.

Ans.4 (a) Virtual supply chain consists of electronic communications links between suppliers
and customers in the supply chain. The links may use websites, extranet or
electronic data interchange. Following are the benefits of virtual supply chain:

 It improves information flows with suppliers and customers.

 It results in time and costs savings.
 It reduces the probability of errors that can occur when information is
transferred manually.

(b) (i) E-sourcing

It is the use of electronic methods for finding new suppliers and negotiating
terms for purchase agreements.

E-purchasing
It is the process of making purchases electronically by submitting requests for
quotations to suppliers, receiving quotations from them and placing the order
electronically.

E-payment
It is the use of electronic methods for payments such as electronic invoicing /
self-billing and payment to suppliers by sending electronic instructions to the
bank.

(ii) Examples of data validation checks that would assist the management of AZ
to ensure that data input in e-procurement system is correct are given below:

 To input a transaction for purchase of goods, the system would require a

code number for the supplier (range check). If all supplier codes are in
the range of 2000-3999, input of supplier code outside this range would
be reported as an error.

 Key code numbers can be designed to include a ‘check digit’ (digit check).
This is an additional digit in the code that enables the program to check
the code against an input error.

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 BUSINESS MANAGEMENT AND STRATEGY
Suggested Answers
Certified Finance and Accounting Professional Examination – Winter 2018

Ans.5 (a) SWOT analysis for CE is as follows:

(i) Strengths
 Exclusive road permits.
 Large fleet of state-of-the-art buses.
 Wide area coverage.

(ii) Weaknesses
 Restriction on fixation of fare rates.
 Reliance on GoS for subsidies, tax exemptions and promotion of business.
 Buses often depart late and schedules are cancelled frequently.
 Unprofitable routes.

(iii) Opportunities
 Operate in unexplored markets of other provinces / Start operating intra-
city bus services.
 Abandon non-profitable routes.
 Negotiate with GoS to revise the fares / subsidies.

(iv) Threats
 Introduction of new inter-city train services by GoS.
 Non-preferential treatment from GoS in future.

(b) NFPIs for CE are listed below:

 Number of customer complaints

 Average time to resolve customer complaints
 Customer satisfaction index
 Bus occupancy ratios
 Number of new routes started
 Number of routes closed down
 Number of late departures
 Number of cancelled schedules
 Number of accidents reported
 Percentage of public awareness of CE services by means of annual market
research
 Percentage of market share

Ans.6 (a) An entity may keep in perspective the following basic principles while formulating
its CSR policy:

 Operate in an ethical way. It should have a recognized code of ethical behavior

and ensure that its employees act according to that code.

 Treat employees fairly and with respect. The fair treatment could be assessed
by entity’s adherence to its employment policies such as good working
conditions, provision for training, equal opportunity employer, etc.

 Be a responsible citizen in its community. Responsibility can be shown in the

form of respecting basic human rights (no tolerance of child labor), investing in
local communities (schools, parks, hospitals), etc.

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 BUSINESS MANAGEMENT AND STRATEGY
Suggested Answers
Certified Finance and Accounting Professional Examination – Winter 2018

 Sustain the environment for future generations. This could take the form of
reducing pollution, cutting down the use of non-renewable energy resources,
recycling of waste materials, etc.

(b) Corruption by the government officials of a country may result in the country’s
failure to achieve its economic objectives as follows:

 Scarce resources might be deployed to high profile projects at the expense of

basic infrastructure projects such as hospitals, schools, etc.

 Tax revenue might be spent on individuals/entities delivering less than value

expected to derive from such spending.

 Fair market structures might be compromised resulting in distortion of

competition and discouraging potential investments.

 More efficient companies may lose out and in the long run that might lead to
slower growth in the economy.

 National resources might be placed in the control of small number of individuals

that might lead to concentration of wealth resulting in chaos and social conflicts.

(c) If Faysal proceeds with the management’s advice, he may breach following
fundamental principles of Code of Ethics of ICAP:

Integrity
According to this principle, chartered accountants must be honest and
straightforward in their professional and business dealings. Faysal might breach
this principle by involving in an unethical activity i.e. influencing his brother to gain
favors.

Objectivity
According to this principle, chartered accountants must not compromise their
professional or business judgement because of bias, conflict of interest or undue
influence of others. Faysal might breach this principle by influencing his brother
under the pressure of management.

Professional behavior
According to this principle, chartered accountants are required to comply with
relevant laws and regulations and avoid any action that they know would discredit
the profession. Faysal might breach this principle by knowingly being involved in an
activity that could affect the reputation of the profession.

Ans.7 (a) CF may encounter following barriers if Qureshi develops his own e-business store:

 It might be fairly expensive for CF to establish e-store for selling its product and
taking payments by means of credit card, debit card, etc.

 It might be difficult for CF to sell its products online successfully as footwear

products are difficult to sell by means of catalogues. Businesses selling such
products by internet often have to budget for large amounts of sales returns.

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 BUSINESS MANAGEMENT AND STRATEGY
Suggested Answers
Certified Finance and Accounting Professional Examination – Winter 2018

 It might take time to establish a website and particularly creating awareness

among targeted customers about products being offered by CF. This may
require significant spending on marketing as well.

 A website has to be updated regularly to keep it current and attractive. Qureshi

might not have the requisite skills.

 Continuous availability is must for the success of e-stores. The availability could
be compromised due to poor maintenance, inappropriate hosting and denial of
service attacks, etc.

(b) The following benefits could accrue to CF if it gets associated with an e-intermediary
to sell its products:

 The e-store would be readily available that would give CF an immediate access
to a wide range of customers.

 It would require low initial investment as registration costs are generally

minimal. However, a certain percentage of commission on each sale would
require to be paid to the e-intermediary.

 It would give CF an access to well-established website designed and maintained

by team of experts.

 Qureshi would not require extensive technical skills to manage e-business. The
skills such as regular website updating, continuous availability and marketing
campaigns would be performed by e-intermediary itself.

(c) FC may approach following e-intermediaries in Pakistan:

 Daraz.pk
 Alibaba.com
 Amazon.com
 Yayvo.com

Ans.8 (a) The following factors may hinder an organization from carrying out effective
recruitment and selection:

 Lack of proper job analysis may attract individuals lacking the particular skills
essential for the job.

 Badly designed job advertisement / application form where ideal requirements

are primarily focused on and minimum acceptable requirements are ignored
may deter suitable candidates to apply in the first place.

 Use of inappropriate media for advertising the job may result in lack of
awareness of vacancy among the potential candidates.

 The individuals responsible for making the selection may lack the skills
necessary for successful selection.

 The selection process is not monitored or reviewed regularly thereby

disregarding the improvements essential for effective functioning of the
process.
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 BUSINESS MANAGEMENT AND STRATEGY
Suggested Answers
Certified Finance and Accounting Professional Examination – Winter 2018

(b) (i) The following factors might act as barriers to achievement of objectives of the
training program of SoL:

 It seems that training needs have not been analyzed (i.e. skills expected
from employees and skills they currently possess) as blanket training
program is designed for all teaching staff.

 The selection of trainers may be not be appropriate unless SYF has

previous experience of designing and offering of training to teaching
professionals.

 Training program seems to be inadequately designed. SoL wants teaching

staff to learn too much (100 hours training program) in too little time (30
days).
 Training method might not be suitable as 50 hours are fixed for self-online
learning that might be cumbersome as trainees generally tend to avoid
reading materials for self-learning.

 Trainees might resist learning new skills. They already seem to be low in
motivation as reflected by high staff turnover.

 It seems that management is not committing sufficient resources in terms

of employees’ time and monetary or non-monetary rewards. Trainees
might have to compromise on family and/or other commitments and lack
of incentives might affect their motivation towards training.

(ii) Although new personnel may bring fresh thinking or ideas, I do not agree with
the management’s policy of giving preference to external recruitment. Such
policy could deprive an organization from the benefits of internal promotions.
These benefits are discussed below:

 It is quicker and inexpensive to promote internally as certain costs (i.e.

advertisement, consultants’ fee, interview and selection process) can be
avoided.

 It can be a source of motivation / retention of the key employees who

otherwise may leave the organization for other better opportunities.

 It might be less risky to promote employees internally as management is

in a better position of knowing the strengths and weaknesses of its
existing employees.

 Existing employees are well-conversed with the existing culture and

norms of the organization therefore, management may not have to offer
extensive training in this regard.

(The End)

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