Mock Exam B - E3 Exam Kit

9/29/2020 Rogo: E3 Strategic Management: Mock Exam B Result
E3 Strategic Management
Mock Exam B
Overview
Student GLORIA ADWOA OSEI-ANOKYE
Test Date 29-Sep-2020 08:33
Time Taken 0 minutes 13 seconds
Score 0% (0/60)
Question Analysis (select question for more information)
− Question 1

PKP is a large company that manufactures plumbing equipment which it sells (through large retailers) to the
public and to tradesmen.
PKP is split into two main divisions – one which manufactures and sells metal plumbing equipment and the
other which sells plastic plumbing equipment. Each division has different end-consumers, with the more durable
metal equipment favoured by tradesmen and professional plumbers, while the plastic is largely targeted to less
skilled public consumers.
The Board of Directors of PKP is reviewing a number of possible strategies. Which THREE of the following
options represent business level strategies for PKP?
✓ Entering the porcelain plumbing equipment market – such as toilets, sinks and baths.
✓ Selection of a new IT system for inventory management within the plastics division.
✓ A shift to a cost leadership approach for the metal division to ensure it remains competitive.
✓ Negotiations with a major retailer to stock PKP products – both plastic and metal.
✓ Decisions to reduce the selling prices of PKP plastic division products to improve sales volume.
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Available Answers
A shift to a cost leadership approach for the metal division to ensure it remains competitive. (1 Mark)
Negotiations with a major retailer to stock PKP products – both plastic and metal. (1 Mark)
Decisions to reduce the selling prices of PKP plastic division products to improve sales volume. (1 Mark)
https://learn.mykaplan.co.uk/d2l/le/content/104534/viewContent/3190006/View 1/43
− Question 2

EFF plc is a medium-sized company that processes and cans sh, such as sardines and pilchards, in a single large
factory. These goods are then sold through food retailers in several countries.
Currently, EFF purchases its sh supplies from two different companies, who each own eets of trawler ships
that operate near EFF’s factory. EFF buys roughly half of its sh from each supplier and has done so for many
years. EFF has a strong relationship with both suppliers and is given signi cant discounts by both.
Due to the perishable nature of the sh, EFF feels that it cannot easily source supplies of suf cient quality from
other, more remote shing eets, meaning that its current two suppliers represent the only reliable source of
sh for EFF’s operations.
One of EFF’s two suppliers (YTY Ltd) has recently been purchased by CH plc – a large chain of sh restaurants.
CH is planning to expand signi cantly over the next several years and is planning to use YTY to source the
necessary sh. CH has expressed an interest in buying the other of EFF’s suppliers (FATF). The country that EFF
and its suppliers are based in has little anti-competition legislation.
If EFF were to purchase FATF, which of the following effects would be most likely to occur?
EFF would see a rise in the bargaining power of its suppliers.

EFF would enjoy economies of avoiding the market.
EFF would be able to defend against lock out.
EFF would reduce its operating gearing.
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EFF would be able to defend against lock out. (1 Mark)
By purchasing a supplier, EFF would be taking control of its operations, meaning that supplier bargaining
power would drop sharply.
While purchasing a supplier would typically mean that EFF would enjoy economies of avoiding the market
(i.e. costs of negotiation and shopping around), this effect will be minimal in EFF as it simply purchases
around half of its requirements from each supplier and both offer it signi cant discounts.
The major worry for EFF is likely to be lock-out. If CH purchases both of its suppliers in order to provide for
its own restaurants, there is a real risk that there will be insuf cient supplies for both CH and EFF’s needs –
especially as CH grows. If CH owns both suppliers, it will surely supply its own needs in priority to EFF and
EFF could see signi cant shortages
− Question 3

UHH is a medium sized business. It has recently appointed L as senior manager. L believes that customer
satisfaction and retention is key to UHH’s success and so she has suggested that the business adopt a
SERVQUAL approach within the business.
Which THREE of the following are factors that the SERVQUAL approach suggests should be focused on by
the organisation?
✓ Assurance
✓ Security
✓ Empathy
✓ Tangibles
✓ Price
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Assurance (1 Mark)
Empathy (1 Mark)
Tangibles (1 Mark)
The other factors are: reliability and responsiveness

− Question 4

YF plc is a large, successful company that manufactures paint and other decorating materials. Its mission is ‘to
maximise ef ciency of operations to provide a low cost product for the customer’.
YF’s Strategic Director has created a number of objectives based on this, including:
Increase the number of customer service representatives employed by YF’s complaints handling department by
10% per annum for the next three years.
Which of the SMART criteria is NOT being met by the above objective?
It is not measurable.
It is not attainable.
It is not speci c.
It is not relevant.
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It is not relevant. (1 Mark)
The objective is easy to measure (i.e. the headcount in the complaints handling department), it is speci c
(clear and easy to understand) and there is no evidence that it is unattainable. However, it does not match
YF’s mission, which focuses on reduced costs. The Strategic Director’s objective looks to increase overheads
rather than reducing them
− Question 5
PL is a multinational corporation that runs several popular fast food chains. PL has been very successful in its
previous expansion projects into new countries (even those with apparently unattractive markets for PL) and
has a highly experienced management team.
PL is considering using Porter’s Diamond model to assess its entry into country B, a wealthy country where PL’s
brands currently have no presence.
Which TWO of the following are major criticisms of Porter’s Diamond model that are likely to affect PL?
✓ The Diamond model fails to take account of the quality of corporate management within the company and
this may be more important than geographical location for PL.
✓ The Diamond model is only based on developed countries and is therefore unlikely to be appropriate to
country B.
✓ The Diamond model fails to take account of existing competition within the target country (in this case
country B), potentially leading to inaccurate decisions being made.
✓ The Diamond model is based on manufacturers, banks and consultancy rms. It is often seen as being
questionable for service industries such as PL.
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Available Answers
The Diamond model fails to take account of the quality of corporate management within the company
and this may be more important than geographical location for PL. (1 Mark)
The Diamond model is based on manufacturers, banks and consultancy rms. It is often seen as being
questionable for service industries such as PL (1 Mark)
− Question 6

BPL is a training organisation that is listed on a national stock exchange. It has a reputation for providing a
reliable, constantly growing dividend for investors each year.
BPL is currently experiencing a cash ow crisis due to a downturn in the number of students across its market. It
has found itself having to choose between discretionary employee bonuses or paying its expected dividends to
shareholders.
BPL’s managers feel that these cash ow problems are likely to continue for the foreseeable future.
Initial discussions with major shareholders have indicated that they will not accept any less than the full
dividend they had expected to receive. Failure to do so would cause major damage to BPL’s share price and
future ability to raise nance.
BPL’s employees are heavily unionised and have reacted angrily to the idea that they will not receive a bonus.
The union has already complained for several years that BPL was failing to offer its employees as much annual
leave as its rivals.
Which one of the following approaches to resolving competing stakeholder objectives (as popularised by
Cyert and March) is most appropriate for BPL to adopt?
Satis cing
Side payments
Exercise of power
Sequential attention
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Side payments (1 Mark)
Satis cing involves negotiation between the stakeholders to nd a compromise position. This will be unlikely
to work for BPL as shareholders have already shown an unwillingness to take anything less than the full
dividend.
Exercise of power (forcing a decision through) is unlikely to work, as both competing stakeholders are
powerful. Shareholders could simply replace management to get their full dividend. Employees are
unionised and could simply strike.
Sequential attention (paying a full dividend this year and then giving a bonus next year – for example) is also
unlikely to be suitable as the cash ow problem is expected to continue for the foreseeable future Given
− Question 7

RFA is a company that makes and sells chocolate products. The two main ingredients are cocoa and sugar. Both
of these need to be imported from farmers in equatorial countries.
RFA is aware that there is increasing pressure by consumers and governments on its industry to create a
sustainability plan. For RFA this would include offering fair pay to farmers, educating them in sustainable
farming methods and increasing the energy ef ciency of RFA’s production operations.
Which of the following would be major reasons for RFA to create a sustainability plan? Select ALL that apply.
✓ To ensure compliance with existing and future laws.

✓ To improve RFA’s reputation in its industry.
✓ To help RFA reduce costs and improve ef ciency.
✓ To help RFA understand its industry position.
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To ensure compliance with existing and future laws. (1 Mark)
To improve RFA’s reputation in its industry. (1 Mark)
To help RFA reduce costs and improve ef ciency. (1 Mark)
Sustainability may improve RFA’s position, but it would not typically be undertaken in order to help the
company understand its industry position
− Question 8

TSC is a large, multinational supermarket chain. They are currently considering launching stores in country G
for the rst time.
The following statements are taken from an internal TSC report into the expansion into the proposed expansion
into country G, using Porter’s Diamond.
Use the drop down menus to insert the most appropriate term into the following:
‘Country G already contains a number of large supermarket chains that dominate the food market. This would
suggest that are not present in the country.
These existing chains have exclusive agreements with a number of major food growers and manufacturers in
country G, which raises concerns about whether are
present.
We are concerned about the lack of available large retail units in country G. These are not present in suf cient
quantities, suggesting a lack of .’
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1
Available Answers
DEMAND CONDITIONS (1 Mark)
2
Available Answers
RELATED AND SUPPORTING INDUSTRIES (1 Mark)
3
Available Answers
FACTOR CONDITIONS (1 Mark)
1:
The existing supermarket chains dominate the market in country G. This would suggest that there will be
little demand for TSC – existing competitors have already tied up the food sales market in country G.
Organisations are rarely able to operate in isolation. TSC will need to buy food for resale from farmers and
food manufacturing businesses. Failure to secure access to these related and supporting industries will
mean that the expansion into country G may fail.
Finally, the retail units would be a factor condition – the raw materials and/or other inputs needed by the
organisation to operate.
2:
little demand for TSC – existing competitors have already tied up the food sales market in country G.
Organisations are rarely able to operate in isolation. TSC will need to buy food for resale from farmers and
food manufacturing businesses. Failure to secure access to these related and supporting industries will
mean that the expansion into country G may fail.
Finally, the retail units would be a factor condition – the raw materials and/or other inputs needed by the
organisation to operate.
3:
little demand for TSC – existing competitors have already tied up the food sales market in country G
− Question 9

H is an oil company. Two weeks ago, one of its tankers overturned on a busy section of road, injuring several
people. The tanker ruptured and polluted a local river, causing signi cant damage to the local environment.
A report by the local police criticised H for not allowing its drivers more breaks in their schedule. The driver was
found to have worked a ten hour shift and had been exhausted at the time of the accident.
H has therefore released a statement saying that, while the accident was regrettable, it had followed all
applicable laws and had therefore done nothing wrong. However, it stated that as part of its social responsibility
it would begin a review of driver welfare.
According to Carroll, which philosophy has H adopted with regards to its corporate social responsibility?
Reaction
Proaction
Accommodation
Defence
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Defence (1 Mark)
H has admitted very little responsibility for what has happened, focusing on the fact that it is following the
law. If this were all it had done, it would have adopted a ‘reaction’ approach.
However, H has undertaken some action – initiating a review of driver welfare. This is a minimal effort and
may well not lead to any real changes, but suggests that it is trying to do the very least required to maintain
its image. This means that it has reached the ‘defence’ level.
If H had accepted full responsibility and worked with various stakeholders to improve its position it would
have reached ‘accommodation’.
If H had gone beyond industry norms and tried to anticipate ways to actively improve the welfare and safety
of its deliveries beyond current stakeholder expectations it would have been de ned as ‘proaction’
− Question 10

QWE is a charity based in country C. It was founded 100 years ago to help offer veterinary treatment to sick
animals owned by people on low incomes.
QWE’s mission is:
‘To care for the pets of people in need by providing free veterinary service to their sick pets.’
QWE’s managers have been concerned about the nancial viability of the charity going forward by increasing
demands being placed on their services due to a recession in country C. QWE has historically not been very
careful in assessing the nancial position of the pet owners who attend their clinics, but management feel that
this will have to change.
They have therefore recently created a critical success factor for the charity:
‘To ensure that only people who are truly in need are given veterinary service.’
Which of the following best describes the usefulness of the critical success factor created by QWE’s
management?
Excellent – it ties in to QWE’s mission as well as ensuring QWE continues to operate successfully.
Good – it ties in to QWE’s stated mission, but is too vague to be a useful critical success factor – what is
meant by ‘truly in need’?
Weak – it is inconsistent with QWE’s stated mission and is too vague to be a useful critical success factor.
Very weak – it is inconsistent with QWE’s stated mission and it is too vague, as well as lacking any time-
constraint.
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Excellent – it ties in to QWE’s mission as well as ensuring QWE continues to operate successfully. (1
Mark)
Be careful not to get confused between critical success factors (CSFs) and key performance indicators
(KPIs). The CSF stated by management of QWE is consistent with the charity’s mission – which only refers
to helping the animals of those in need. If QWE does not ensure that it is only helping the needier owners, it
i l f f di
− Question 11

FX Ltd is a small company which manufactures DVDs and CDs for music labels. FX’s customers demand
excellent service and very low levels of defective units made by FX.
One of FX’s critical success factors (CSFs) is:
‘To have low levels of defective units.’
Which TWO of the following would be the most appropriate key performance indicators (KPIs) for this CSF?
✓ Reduction in the number of defective units produced to less than 1 per 100,000 units produced by the end
of next year.
✓ Increased expenditure on quality control management by 15% over the next two years.
✓ Increased expenditure on customer complaints handling by 25% over the next year.
✓ Increase customer satisfaction by 7% over the next two years.
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Available Answers
Reduction in the number of defective units produced to less than 1 per 100,000 units produced by the
end of next year. (1 Mark)
Increased expenditure on quality control management by 15% over the next two years. (1 Mark)
Both of the rst options relate to the goal of reducing defective units have time constraints and are speci c
− Question 12

DDE manufactures and sells electrical cable.
Identify which THREE of the following activities would be classi ed as PRIMARY value chain activities within
DDE.
✓ Sourcing and purchasing of metal and plastic needed for the production of wiring.
✓ DDE’s advertising in local trade magazines.
✓ Creation of job speci cations for roles within DDE’s factory to enable the hiring of appropriately skilled
employees.
✓ Dealing with customer complaints relating to faulty wiring provided by DDE.
✓ Conversion of rubber and copper into specialised insulated cable that DDE sells to corporate clients.
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Available Answers
DDE’s advertising in local trade magazines. (1 Mark)
Dealing with customer complaints relating to faulty wiring provided by DDE. (1 Mark)
Conversion of rubber and copper into specialised insulated cable that DDE sells to corporate clients. (1
Mark)
Sourcing and purchasing is procurement – which is a secondary activity. Creation of job speci cations is
human resource management.
− Question 13

O works for BF Ltd; a small company that makes porcelain mugs and teapots. The industry has changed little in
the last fty years and O has worked for BF for around fteen years.
O is currently undertaking a PEST analysis for the company, as he has done each year for several years. O is
aware that there are signs that the market for mugs and teapots is shifting towards new materials, such as glass
and metal. However, O has decided not to include this in the PEST analysis as he has argued that ‘these fashions
come and go – porcelain is always going to be in fashion’.
Which of the following problems is O’s PEST analysis most likely to suffer from?
Bias
Bounded rationality.
Failure to identify all relevant issues.
Issues becoming outdated before the analysis can be used.
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Bias (1 Mark)
Oh l bi d h f ki i hi h i d Thi i ki hi l k
− Question 14

PLF is a school based in a town in country H. Its Board of Governors has recently undertaken a SWOT analysis
to understand its current and future position.
The Board’s analysis has identi ed that the school was performing strongly at language and engineering, with
high pass marks from students in these areas. Unfortunately, PLF’s results in mathematics were extremely
disappointing. The governors are aware that the Government of country H has recently stated that it wishes to
improve the mathematical skills of school children. Any schools found to be underperforming in this area would
be ‘named and shamed’ and could see signi cant cuts to central funding.
PLF wishes to undertake a defensive strategy and immediately look to improve the quality and number of maths
teachers in the school.
Which of the following SWOT positions has PLF found its self within?
Opportunity focusing on weakness.

Threat focusing on weakness.
Opportunity focusing on strength.
Threat focusing on strength.
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Threat focusing on weakness. (1 Mark)
PLF has a weakness internally its poor mathematics faculty This is a problem for the school as continued
− Question 15

FS sells a range of biscuits and cakes through retailers in country H and is considering adopting a ‘market
penetration’ strategy as identi ed within Ansoff’s product market growth matrix.
Which THREE of the following would be appropriate approaches for FS to use to adopt this approach?
✓ Sell its existing range of biscuits to supermarkets in country G.

✓ Increase the selling price of its cakes in order to improve their image in the market and attract more
customers from its rivals.
✓ Radio advertising within country H to increase awareness of its cake and biscuit ranges.
✓ Repackaging of FS cakes to make them more eye-catching on retailer shelves.
✓ The launch of a new range of chocolates through existing retailers in country H.
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Available Answers
Increase the selling price of its cakes in order to improve their image in the market and attract more
customers from its rivals. (1 Mark)
Radio advertising within country H to increase awareness of its cake and biscuit ranges. (1 Mark)
Repackaging of FS cakes to make them more eye-catching on retailer shelves. (1 Mark)
Increased selling price, radio advertising and repacking all involve attempting to sell more of FS’ existing
products to existing customer groups (i.e. shoppers in retail stores). Selling its existing range is an example of
− Question 16

C is a manager at UNN, which operates a small chain of greengrocers. C has only recently been appointed to a
management role in the company, having previously worked as a manager in a fast-food restaurant chain.
The owner of UNN has asked C to undertake a detailed PESTLE analysis for the company.
The owner told C that the greengrocer industry had changed little in the last twenty- ve years. However the
owner also suggested that UNN’s environment was complex given the large number of suppliers and
government regulations that they had to deal with.
Which ONE of the following drawbacks is most likely to arise when C undertakes the proposed PESTLE
analysis?
Bounded rationality may be an issue

There may be bias in the analysis undertaken
The PESTLE analysis may rapidly become out-dated
The analysis may fail to consider internal issues
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Bounded rationality may be an issue (1 Mark)
Bounded rationality refers to the fact that a PESTLE analysis may be incomplete. This is a high risk for C as
he is unused to the industry and, according to the owner, it is a complex market with many things to consider.
There is no evidence in the scenario that C is biased. His lack of time in the industry makes this unlikely.
The industry (according to the owner) has changed little in the last 25 years, so there is no suggestion that
C’s PESTLE analysis will quickly become out-dated.
Finally failure to consider internal issues cannot be considered as a drawback of C’s analysis PESTLE is a
− Question 17
JVH sells at-pack furniture across the world through a large chain of warehouses. It has recently decided to
adopt a Triple Bottom Line (TBL) reporting approach.
Which of the following would JVH be most likely to include under the ‘social justice’ heading of TBL
reporting?
Level of pollution caused by its warehouses.

Payment of a ‘living wage’ to employees in its warehouses.
Level of packaging recycled in its warehouses.
Pro ts earned per warehouse.
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Payment of a ‘living wage’ to employees in its warehouses. (1 Mark)
L l f ll ti d ki ‘ l t’ i t l lit i P t di ti
− Question 18

Which of the following statements regarding Economic Value Added (EVA) is correct?
It is only appropriate for multinational businesses.

EVA adds a notional charge for the cost of capital charge on divisional assets onto divisional pro ts.
Adjustments are made to conventional pro ts to avoid the immediate right-off of value building
expenditure.
EVA uses seven value drivers to maximise future cash ows within the business.
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Adjustments are made to conventional pro ts to avoid the immediate right-off of value building
expenditure. (1 Mark)
EVA allows a business to estimate its true economic pro t after making corrective adjustments to GAAP
accounting. It can be undertaken by any business – though often it is used by businesses that are split into
different divisions.
EVA involves deducting a notional charge for the cost of capital utilised by the division from its pro ts – it
does not add the charge.
− Question 19

P is enacting a major organisational change. P’s management is aware that the company is in nancial dif culties
and the change must be enacted very quickly in order for the business to survive. P has a very large and diverse
workforce.
Which TWO of the following leadership styles (as identi ed by Kotter and Schlesinger) would be most
appropriate for P to adopt?
✓ Education and communication

✓ Negotiation
✓ Power and coercion
✓ Participation
✓ Manipulation and co-optation
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Power and coercion (1 Mark)
Manipulation and co-optation (1 Mark)
The key driver that P will consider when selecting a management style is speed. The change must be enacted
quickly.
Education and communication, negotiation and participation will all take a great deal of time given the size
and diverse nature of the workforce.
Manipulation and co-optation (selective dissemination of information and distortion of the facts) as well as
power and coercion (management exercising their authority and forcing the change through) are much
faster and therefore more likely to be adopted in a crisis
− Question 20

Q is a charitable organisation that undertakes fund raising to help it run a medical research laboratory. The
laboratory is attempting to nd a cure for a rare but serious illness.
In recent months, the government of the country that Q operates in has brought in new legislation that restricts
Q’s fund-raising activities. Q will no longer be able to telephone members of the public to ask for donations, or
collect in town centres (activities which currently raise around 25% of Q’s donations each year). Instead, they
will have to rely on planned events, sponsorship and advertising to raise funds.
The new legislation will allow Q to phase in the changes over several years.
According to Balogun and Hope-Hailey, which of the following types of change is occurring within Q?
Revolution
Reconstruction
Adaptation
Evolution
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Adaptation (1 Mark)
When classifying change, we need to consider its speed and the extent of the change.
The change being enacted by Q appears to be relatively slow (incremental) – they are being given several
years to enact the proposed changes.
The scope of the change appears to be a ‘realignment’. Q is having to change the way it raises a relatively
small proportion of its donations. This does not appear to be a fundamental shift/transformation in Q’s
operations
− Question 21
GEN2 operates a power station in country V. Several institutional investors own the company.
GEN2 has recently undertaken a performance measurement review and has decided to use the balanced sco
They have identi ed four main measures to be used as part of their performance review.
Drag each measure provided onto the relevant category within the balanced scorecard on the diagram belo
Financial
Learning and development
Process
C
Customer
Length of time taken to deal with

power outages
Investment for research into

renewable energy sources
Number of positive service

reviews received online
Return on capital employed
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Financial
Available Answers
Return on capital employed (1 Mark)
Process
Available Answers
Length of time taken to deal with power outages (1 Mark)
Learning and development

Available Answers
Investment for research into renewable energy sources (1 Mark)
Customer
Available Answers
Number of positive service reviews received online (1 Mark)
− Question 22

G has recently joined LLJ Ltd as a machine operator.
On her rst day, G was assigned an existing member of staff as a mentor. One of the rst things her mentor said
was ‘it’s always been a good place to work, but since we were taken over by another company last year, pay and
conditions are getting worse.’
According to the cultural web model (as popularised by Gerry Johnson), which aspect of corporate culture
does this most closely relate to?
Control systems
Routines and rituals
Stories
Paradigm
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Stories (1 Mark)
According to the cultural web, ‘stories’ relate to what people within the organisation talk about/what they
say the organisation’s values are. In this case, the new starter is being told that the company doesn’t care
about employees as much as they did – seemingly re ecting a mood amongst at least some in the business
that the recent takeover was a bad thing. This may be evidence of underlying dissatisfaction that could have
a serious effect on LLJ’s corporate culture.
Organisational structures refer to how the business is organised. While management seems to be viewing
staff as less important, it is not clear in the scenario that the actual reporting structure within LLJ has
changed.
Routines and rituals refers to behaviours or habits of staff – something that is not really identi ed in the
scenario
− Question 23

Ghost in the Machine (GitM) is a provider of anti-virus software. It provides protection from viruses, identity
protection and a Virtual Private Network (VPN). At present, these three services are offered individually, with
users paying a separate subscription for each service they choose.
GitM has noticed a trend for its rivals’ services to be ‘bundled’ together, and offered as one package within
which users can select or de-select options. GitM’s rivals also offer a much wider range of services.
The consultancy group Accenture wrote a report, in 2015, called “Accenture Technology Vision”. This report
highlighted 5 emerging trends, which were shaping the digital landscape for organisations, on which business
leaders should focus when developing digital strategies.
Analyse the above description, and identify which ONE of the trends is evidenced in the business ecosystem
of GitM.
The intelligent enterprise

The Internet of Me
The Platform (r)evolution
Outcome economy
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Available Answers
The Platform (r)evolution (1 Mark)
The consultancy group Accenture wrote a report, in 2015, called “Accenture Technology Vision”. This report
highlighted 5 emerging trends, which were shaping the digital landscape for organisations, on which
business leaders should focus when developing digital strategies:
1. The Internet of Me – users are being placed at the centre of digital experiences through apps and
services being personalised.
2. Outcome economy – organisations have an increased ability to measure the outcomes of the services
that they deliver; customers are more attracted to outcomes than just simply to products, and this is
what organisations should focus on.
3. The Platform (r)evolution – global platforms are becoming easier to establish and cheaper to run.
Developments such as cloud computing and mobile technology offer huge potential for innovation and
quicker delivery of next-generation services The rate of evolution is only going to increase
− Question 24

U is currently launching a new quality control system within its manufacturing operations and is using Lewin’s
three-stage model to manage the introduction of the new processes.
Which THREE of the following activities would U expect to undertake within the ‘change’ stage of the three-
stage model?
✓ Setting up new reporting structures relating to quality control

✓ Training employees in the new quality control systems
✓ Explaining the need for new quality control systems to employees
✓ Publicity of success stories relating to the new quality control system
✓ Creation of new reward systems relating to output quality
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Available Answers
Setting up new reporting structures relating to quality control (1 Mark)
Training employees in the new quality control systems (1 Mark)
Creation of new reward systems relating to output quality (1 Mark)
The change stage refers to the implementation of the new system. This involves the creation of new ways of
working, new reporting structures and new reward systems. Training of employees will also fall into this
stage.
Justi cation of the need for the new system is part of the unfreezing stage – helping to motivate employees
to accept the new system.
Publicity of success stories ensures that staff do not fall back into old habits/ways of working and is
− Question 25

BB is a long-established retailer which specialises in the sale of household electrical appliances from several
different locations. BB is owned by a married couple who both work in the business. All BB’s information
systems are networked and maintained by a team of ve IT staff. BB’s management team access and analyse
stock and sales information on a daily basis.
BB’s information system is seen as being signi cantly ahead of those in use by its rivals, which has enabled BB to
be the rst retailer in its market to operate a Big Data system. This information has enabled BB to gain a
competitive advantage over its rivals.
BB is considering outsourcing its IT function and has located a potential company (used by several of BB’s rivals)
to take over the maintenance and running of its systems. BB would pay the company a low, at fee, followed by
an incremental charge depending on how much work BB asks the company to undertake (i.e. a charge per query
or per investigation BB asks for).
Which THREE of the following statements relating to BB’s proposal are correct?
✓ BB’s operating gearing will likely rise due to the proposals.

✓ BB’s proposed outsourcing will be cheaper than the current in-house department.
✓ BB may nd they are over-reliant on a single supplier.
✓ BB may lose competitive advantage in the market place.
✓ BB’s management will have more time to focus on BB’s core activities.
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BB may nd they are over-reliant on a single supplier. (1 Mark)
BB may lose competitive advantage in the market place. (1 Mark)
BB’s management will have more time to focus on BB’s core activities. (1 Mark)
Operating gearing looks at the proportion of costs that are xed. BB is converting much of its xed IT cost
into a variable cost with the new supplier.
Outsourcing is not always cheaper than keeping IT in house in a busy year the variable charge paid to the
− Question 26

Ms Jackson is CEO of Seahorse, a group of six technology companies that recently merged to form a complete
‘ecosystem’.
In a presentation to the shareholders of Star sh, Ms Jackson explained that in future, measuring shareholder
value may be more dif cult. She asked for the support and patience of shareholders, as Seahorse pursues its
Digital Vision.
In order to successfully manage the ‘move to digital’, the executive leadership team must demonstrate a number
of abilities.
Analyse the above information and identify which of those abilities is being demonstrated by Ms Jackson.
Collaboration
Business Judgement
Inspirational Leadership
In uence External Parties
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In uence External Parties (1 Mark)
In order for an organisation to properly take advantage of a move to digital, or to survive digital disruption
within its industry, the executive leadership team will need to demontrate a number of abilities.
1. Inspirational leadership – digitisation will be an exercise in change management, but probably on a
bigger and quicker scale than the organisation will typically be used to. The leadership team will need to
energise the workforce and inspire con dence that digitisation is the right way forwards and is being carried
out in the right way.
The move to digital will only succeed if those at the top of the organisation take ownership and persuade
others to commit to the change.
2. Competitive edge – not only will the leadership need to motivate others within the organisation to see
the digital transformation as the right strategy; they will also have to persuade people to potentially change
their mindset. The need to adopt an inquisitive attitude, to be prepared to innovate and think outside the
box, to experiment and to learn from failures may not be second nature to some, but is likely to be critical in
transforming successfully to digital.
3. Establishing a strategic direction – this is probably something that the business has done for a long
time, but a digital strategy may require it to be done in a different way. For example, the planning horizon
may need to be shortened, or greater exibility introduced – perhaps a move away from the rational model
discussed in chapter 1 to a more emergent approach, which would enable the business to adapt as time
passes.
4. In uence external parties – for example, providers of nance. Raising capital is likely to be necessary,
but showing how that capital may be applied and the value that will result might be more problematic.
Will investing in cloud technology deliver increased shareholder wealth? If so, how much? And when?
There will be greater uncertainty over outcomes, and the leaders of the business will need to be
persuasive and articulate a compelling value proposition.
5. Collaboration – as has already been mentioned earlier in this text, the organisation will need to see
itself as part of a wider ecosystem if it is to deliver the requisite value. This will require careful thought on
who to collaborate with and how each part of the ecosystem will contribute
− Question 27
PLL is a small rm of accountants. It is currently restructuring its operations and creating departments to deal
with each separate area of its business, such as tax, audit and business planning.
Using the drop down menus, select the most appropriate term from McKinsey’s 7S model to complete the
following:
PLL has decided to put a separate management team in charge of each department, signi cantly altering the
by adding additional levels to the hierarchy. Employees in each department would be
expected to report regularly to these new management teams, which will be a signi cant change to the
that employees use on a day-to-day basis.
PLL is concerned that the new structure will mean that each department is only concerned with maximising its
own pro ts, rather than focusing on the needs of the business as a whole. This would be classi ed as a negative
change to the of the business.
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Structure (1 Mark)
2
Available Answers
Systems (1 Mark)
3
Available Answers
Shared values (1 Mark)
1:
Structure refers to who reports to whom within PLL. Increasing the number of levels of management as part
of the restructuring process would change this.
Systems refer to the daily/common activities and procedures followed by the employees. If the business
expects them to regularly report to the new management teams, this would suggest that the systems will
change as a result of the restructure.
Finally, shared values refer to the core values of the organisation. The focus of staff will shift from looking at
the organisation as a whole to simply focusing on the bene t to their own department. This suggests that
there will be a shift in the shared values of the organisation as a result of the restructure.
2:
Structure refers to who reports to whom within PLL. Increasing the number of levels of management as part
of the restructuring process would change this.
Systems refer to the daily/common activities and procedures followed by the employees. If the business
expects them to regularly report to the new management teams, this would suggest that the systems will
change as a result of the restructure.
Finally, shared values refer to the core values of the organisation. The focus of staff will shift from looking at
the organisation as a whole to simply focusing on the bene t to their own department. This suggests that
there will be a shift in the shared values of the organisation as a result of the restructure.
− Question 28

Anohni is a nancial services provider, specialising in vehicle leasing. It offers its products through an online
platform that allows users to tailor the leasing product to meet their speci c needs.
Anohni encourages car retailers to offer the Anohni platform to their customers, and pays retailers a
commission for any leasing product sale that is linked to a car purchase from that retailer.
Analyse the above information and identify which ONE of the ‘six markets’ Anohni is utilising technology to
target, in its ecosystem:
In uencer market
Internal market
Referral market
Customer market
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Referral market (1 Mark)
A referral (in Payne’s model) is where one organisation directly promotes, and directs purchasers to,
another.
− Question 29

HHH runs a website that lets users monitor their activity levels and food intake in order to help them achieve
their health goals.
HHH records a signi cant amount of information through the user’s smartphone about their exercise, as well as
what foods they have eaten. This is continuously uploaded to the site on an ongoing basis.
This information is shared with the user’s friends who also use the site in order to motivate them to meet the
goals they have set.
HHH has found that the main problem with the data that it collects is the tendency for users to falsify the data
or fail to give complete information. For instance, users rarely log food they have eaten if it is unhealthy, so it
looks as though they are still achieving their goals.
Which of the features of Big Data (as identi ed by Gartner) is missing from HHH’s website?
Veracity
Variety
Volume
Velocity
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Veracity (1 Mark)
HHH gathers a large amount of data (volume) about a wide range of issues (variety) and it gathers it on a
regular basis (velocity).
− Question 30

GGG sells used motor vehicles through a chain of stores across country N. It is currently assessing the potential
use of information technology to develop its business.
Using the drop down menus, select the most appropriate term to complete the following:
GGG has considered linking its purchasing systems to those of its major customers (other second hand car
retailers and government car mobility schemes). This system will speed up
the ordering process as well as reducing errors.
GGG is also aware that there are a large number of second hand car dealers in country N. It has therefore
decided to undertake by creating a website which will allow customers to
browse cars from its own stock, as well as those of its rivals. The website will charge rival customers for the right
to display their vehicles. No such website currently exists in country N.
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Electronic data interchange (1 Mark)
2
Available Answers
Reintermediation (1 Mark)
1:
Reintermediation refers to introducing new steps into the supply chain. The new website will sit between
the customer and the retailers, adding a new step. Note that as no similar website currently exists, this is an
example of reintermediation rather than countermediation.
Linking GGG’s systems to those of major customers is an example of EDI. Note that this is not a CRM
system, which monitors customer activity to try and improve the ongoing working relationship between
GGG and its customers.
2:
Reintermediation refers to introducing new steps into the supply chain. The new website will sit between
the customer and the retailers, adding a new step. Note that as no similar website currently exists, this is an
l f i t di ti th th t di ti
− Question 31
LM is a medium sized tyre manufacturer based in Country Z. It produces low cost tyres using standard rubber,
to be used for the compact car market (which has a historically low margin for car manufacturers). 90% of its
tyres are sold to BC, a global car manufacturer with a plant in Country Z.
Based on the above information, which THREE of the following suggests that BC has high power as a
customer of LM?
✓ The threat of backwards vertical integration by BC.

✓ Products are differentiated.
✓ BC makes up a high proportion of LMs sales.
✓ Brand identity is high for tyres.
✓ Products are price sensitive.
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The threat of backwards vertical integration by BC. (1 Mark)
BC makes up a high proportion of LMs sales. (1 Mark)
Products are price sensitive. (1 Mark)
BC would be able to dominate LM due to the volumes of a standard product needed, the low margin end
− Question 32

YY is a small, highly geared privately owned company that manufactures and sells plastic sheeting. It is currently
based in country H, but is considering expansion of its operations into neighbouring country V.
The market for plastic sheeting in country H is fairly erratic, with highly unpredictable demand. There are
several companies manufacturing plastic sheeting in country H and this is making it dif cult for YY to grow
signi cantly. All of these companies are small, meaning that none (including YY) have a cost advantage over
their rivals, making it dif cult to differentiate in the market.
Country V is an emerging market for plastic sheeting. There are few companies operating in this sector of the
market in country V but the market has grown strongly for the past few years. YY would have to set up a factory
and warehouse function within country V in order to trade there, due to signi cant trade tariffs between
countries H and V. Wages costs are comparable between countries H and V, though the cost of infrastructure
(such as factory rent and rates) are lower in country V.
YY purchases its raw materials from J – a company based in country Q. It will continue to use this as its sole
supplier for its operations in both country H and country V.
Which THREE of the following are the MOST signi cant issues that YY needs to consider when deciding
whether to expand into country V?
✓ Expansion could lead to additional economies of scale which may bene t operations in country H.
✓ It may be dif cult for YY to raise nance to enable expansion into country V.
✓ The creation of facilities in country V is likely to provide access to cheaper labour for YY.
✓ If products can be manufactured more cheaply in country V, YY could use these to undercut rivals in
country H.
✓ YY’s risk may be reduced by diversifying out of country H.
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Expansion could lead to additional economies of scale which may bene t operations in country H. (1
Mark)
It may be dif cult for YY to raise nance to enable expansion into country V. (1 Mark)
YY’s risk may be reduced by diversifying out of country H. (1 Mark)
As YY will still be purchasing its raw materials from J, even after the expansion, it should be able to negotiate
a better price (bulk buy discount) which will allow it to reduce the cost of its operations in country H as well.
This could enable it to more effectively compete with its rivals in country H.
Note that YY is a private company – it may struggle to raise suf cient nance to create entirely new
operations from scratch in country V. This is especially an issue as the company is already highly geared.
− Question 33

H is a change agent (and sales manager) within JKL plc. He has been tasked with introducing a new sales IT
system into the business.
H created a team of sales workers who would be affected by the new system and designed a detailed strategy to
deal with the new IT system, which included extensive training for sales staff, rewards for its successful
implementation and promotion of key staff members to be ‘IT system champions’.
The detailed strategy took around three weeks to develop. When it was presented to the Board of Directors of
JKL, the Finance Director stated that ‘there is no budget for the kind of training and staff rewards that you are
proposing – haven’t you had someone check the proposal nances for you?’
The HR Director also complained that the training procedure being proposed was simply not in line with JKL’s
normal accepted practices.
H was furious with the Board’s response and resigned as change agent going forward.
Which of Kanter’s ‘Power skills of change agents’ was H lacking, leading to the failure of his proposal?
Self-con dence, tempered with humility.

Ability to collaborate effectively.
Ability to work across different business functions.
Ability to develop relationships based on trust.
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Ability to work across different business functions. (1 Mark)
H was able to collaborate – he developed the strategy in line with a number of other sales department
workers However he failed to consider the other business functions that needed to have an input – in
− Question 34

HAN makes electric cars in country G. The electric car market in country G is well established and HAN has
been trading for around ten years.
The market for electric cars in country G is still relatively niche, with HAN estimating that, while the market is
growing at around 2% per annum, it is unlikely to grow signi cantly for the foreseeable future.
HAN has around ve major competitors in the electric car market in country G. All make similar models of car,
so HAN is expanding its product range to include small cars for city commuters and larger cars for families. HAN
roughly matches the prices charged by rivals for its products.
Which of the following stages of the industry life cycle has the electric car market in country G reached?
Growth
Decline
Introduction
Maturity
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Maturity (1 Mark)
The electric car market seems mature. While it is growing, the growth is relatively small and is falling.
Competitors appear established and prices are matched between the manufacturers.
− Question 35

Y sells high quality novelty items and jokes to stores across country H. In recent years, it has been suffering from
a signi cant downturn due to cheaper versions of its products ooding the market from competitors operating
in lower cost foreign countries.
Y lacks signi cant cash reserves after years of dwindling pro ts and its sole owner has stated his opposition to
moving production outside country H.
Y’s market analysis suggests that the market for novelty items is fairly static and it has failed to identify any
alternative market for Y’s products. Y’s workforce is fairly skilled as most items are hand-made in Y’s factory,
but Y does not feel that their skills would easily transfer to alternative products.
Y’s owner would like to release some value from the company, but is unsure how to accomplish this.
Which of the following ways of dealing with decline would be most appropriate for Y?
Turnaround
Divestment
Retrenchment
Liquidation
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Liquidation (1 Mark)
Turnaround involves repositioning Y within the market to gain competitive advantage. In spite of market
analysis, Y has failed to identify any ways of doing this.
Divestment would involve closing or selling part of the business. Y does not appear to be large or
divisionalised, so there is no obvious section of the business to close.
Retrenchment would involve cutting costs – again there is no clear indication how Y could do this
suf ciently to compete with foreign rivals. Note that Y’s owner is unwilling to send production abroad.
− Question 36

MRA manufactures electronic processors, which are used in a wider range of products around the world,
including smartphones and personal computers. It has recently undertaken an analysis of its industry using
Porter’s Five Forces.
Use the drop-down lists to identify the force being referred to in each of the following statements.
MRA’s products are highly innovative and the company has a number of international patents on its products.
This will signi cantly increase the in its industry.
Unusually within its industry, MRA’s skilled employees are highly unionised, which suggests that MRA will be
experiencing high .
As with other processor manufacturers, the variable cost of production of each of MRA’s processor is very low,
but MRA’s xed costs are extremely high. This would suggest that MRA is experiencing high
.
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Barriers to entry (1 Mark)
2
Available Answers
Supplier power (1 Mark)
3
Available Answers
Competitive rivalry (1 Mark)
1:
Innovative, patented products will make it much harder for new businesses to enter MRA’s market and
compete with them effectively – acting as a barrier for entry. Note that it would reduce competitive rivalry
as it makes it more dif cult for rivals to compete with MRA. There would be no obvious reason that
innovation or patents would increase supplier power or increase the risk of substitutes.
Employees within the business are likely to be classi ed as a supplier. A union allows them to act collectively,
meaning that they can increase their power. Again, staff unions would have no clear impact on the other
forces given as options – especially as most of MRA’s industry does not appear to have strong unions
(meaning it is unlikely to be a barrier to entry for the industry).
High xed costs tend to cause a rise in competitive rivalry – this is because in order to make a pro t in this
situation, a large number of units have to be sold. This means that MRA cannot afford to lose customers to
its rivals. This cost structure would not necessarily act as a barrier to entry, or have any impact on supplier
power or substitutes.
2:
compete with them effectively – acting as a barrier for entry. Note that it would reduce competitive rivalry
as it makes it more dif cult for rivals to compete with MRA. There would be no obvious reason that
innovation or patents would increase supplier power or increase the risk of substitutes.
Employees within the business are likely to be classi ed as a supplier. A union allows them to act collectively,
meaning that they can increase their power. Again, staff unions would have no clear impact on the other
forces given as options – especially as most of MRA’s industry does not appear to have strong unions
(meaning it is unlikely to be a barrier to entry for the industry).
High xed costs tend to cause a rise in competitive rivalry – this is because in order to make a pro t in this
situation, a large number of units have to be sold. This means that MRA cannot afford to lose customers to
its rivals. This cost structure would not necessarily act as a barrier to entry, or have any impact on supplier
power or substitutes.
3:
− Question 37

K is the CEO of GFH Ltd – a large company with a sizeable, skilled workforce. She was recently appointed and
quickly developed a new vision for the company. This involves radically changing the operations of the company
and diversifying into new areas.
K has managed to get Board and senior management support for her proposals. As soon as this was achieved
she created a series of targets for the company, which involved new shift patterns for staff, re-training and
closure of two departments.
Staff reacted furiously to the targets, saying that K was ‘trying to destroy a company that she knew nothing
about.’ A union who represented around 45% of the workers threatened immediate strike action.
In the face of overwhelming opposition, K’s plans were cancelled and she left the company shortly after.
Which of the following correctly identi es the step that K failed to undertake in Kotter’s 8-step process of
change leadership model, which led to her failure?
Create a guiding coalition

Developing a change vision
Communicating the vision
Never letting up
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Communicating the vision (1 Mark)
It is crucial that changes are communicated and explained to critical stakeholders to ensure buy-in. While K
convinced senior management and directors, she had made no attempt to explain herself to staff, leading to
− Question 38

Y plc is a manufacturer of high speci cation equipment for gymnasiums and sports centres. A new government
has recently been elected in Y’s country of operation and it has enacted new laws requiring all businesses to
minimise waste and increase recycling. Y is concerned that this will lead to signi cant additional costs within its
business operations.
The government has taken this action due to increasing pressure from residents who are concerned about
‘green’ issues and the impact that pollution is already starting to have on their lives.
Y is currently undertaking a PESTLE analysis of its external environment. Which categories within this
analysis would be affected by the above information?
Select ALL that apply.
✓ Political
✓ Economic
✓ Social
✓ Technological
✓ Legal
✓ Environmental
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Political (1 Mark)
Social (1 Mark)
Legal (1 Mark)
Environmental (1 Mark)
The new government would be classi ed as a political issue as it could (and is) raising a number of new laws
and regulations what can affect Y’s operations.
The fact that the public has elected the new government on a ‘green’ platform would suggest that the issues
relating to the environment being faced by Y is an important issue for residents. This is a social issue that will
affect Y and that it needs to be aware of.
The new laws on recycling and waste are legal issues that the company needs to comply with and which will
affect its operations.
The fact that pollution seems to already be having an impact on residents would suggest that there is an
environmental concern for the organisation.
− Question 39

PM is a discount clothes retailer. It has few low-cost rivals, with the market being dominated by high quality
clothing retailers who charge a relatively high price for their products.
PM’s analysis has suggested that the economy is likely to undergo a signi cant contraction over the coming
months, leading to falling employment and disposable income amongst consumers.
When considering PM’s corporate appraisal, which ONE of the following categories would the economic
contraction be included within?
Weakness
Strength
Opportunity
Threat
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Opportunity (1 Mark)
PM dominates the low-cost end of its market. This means that when the economic downturn hits, it may be
able to signi cantly increase its sales by targeting customers who are no longer able to afford the prices of
the other retailers. The economic contraction is therefore not a threat to the organisation as it is not
expected to have a negative impact.
− Question 40

C is a charity based in country H that raises funds for wildlife preservation projects around the world; this is
done by direct fund raising as well as selling toys through a small chain of stores. It is attempting to create a set
of objectives that allow it to offer good value for money (VFM) by being effective, ef cient and economic.
Which of the following statements is correct?
C has discovered that it has achieved its highest ever level of fund-raising this year with a lower number of
employed fund raisers than last year. This is an example of strong effectiveness.
C has been highly economical as it has been able to spend more on animal preservation projects than last
year.
C has been very ef cient this year as it has reduced the running costs of its shops, while maintaining their
level of sales.
C has improved its effectiveness as it has increased the total amount of income for the charity in the year.
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C has been very ef cient this year as it has reduced the running costs of its shops, while maintaining
their level of sales. (1 Mark)
− Question 41

Which of the following is NOT a valid criticism of Porter’s Diamond model?
It only applies to developed economies

It fails to adequately address the role of multi-national corporations
It has less relevance for service-based businesses
It assumes that the organisation’s home country is highly competitive
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It assumes that the organisation’s home country is highly competitive (1 Mark)
Porter’s model is based on observations from ten developed economies, meaning it is less useful for
emerging economies.
The model fails to adequately address the role of multi-national corporations – there is ample evidence that
an organisation’s diamond may be in uenced by factors outside its home country.
Porter’s analysis focused on manufacturers, banks and management consultancy rms – it is therefore often
argued it is less useful to other service organisations.
It does not assume that the organisation’s home country is highly competitive – though this could be helpful
for a business planning to expand abroad. The level of competition in the home country forms part of the
analysis of strategy structure and rivalry within the diamond
− Question 42

Q is planning on launching a new product codenamed YFG. YFG is a highly innovative product which is unlike
anything that Q has sold in the past.
Q has decided to entrust the launch of YFG (including its marketing, packaging and selling price) to a cross-
functional team, rather than the Marketing Manager as has been the case in the past.
Which THREE of the following options would be possible differences between Q using a cross-functional
team as opposed to a single manager?
✓ A team will bring an improved mixture of skills, abilities and knowledge which will improve the chances of
a successful launch.
✓ A team can collectively review decisions being made about the launch of the YFG, leading to better
control.
✓ Faster decision-making – the team will be able to come to conclusions more rapidly than a manager alone.
✓ A team will tend to make less risky decisions as each member has individual responsibility for the nal
launch of YFG.
✓ Relying on a single manager can avoid ‘groupthink’ where team members agree with decisions simply to t
in with the group.
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A team will bring an improved mixture of skills, abilities and knowledge which will improve the chances
of a successful launch. (1 Mark)
A team can collectively review decisions being made about the launch of the YFG, leading to better
− Question 43

ELL is a company that produces mobile phone handsets. This is a highly competitive market which ELL shares
with many other companies. New handsets with innovative features are launched in the market on a regular
basis.
Due to ELL’s innovative designs, it has a strong reputation in the market and has enjoyed excellent sales,
allowing it to build a sizeable cash balance. ELL’s managers have been with the company or worked in the mobile
phone industry for many years.
In recent years, many of ELL’s rivals have started to focus their research and development in a particular area.
For example:
1. ECK has produced innovative camera designs, which allow its handsets to take superior quality
photographs than its rivals.
2. HDS has focused on the developing high-speed processors for its handsets, allowing the company to attract
customers who want to play games on their mobile phones.
ELL has not adopted this approach and continues to focus on the creation of phones which perform acceptably
in all areas, rather than excelling in one particular feature.
One of ELL’s senior managers has recently read an article praising freewheeling opportunism as a strategic
model. He has suggested that ELL consider moving to this approach.
Which of the following problems with freewheeling opportunism would be the most signi cant for ELL?
Failure to identify changes in the market.

Strategic drift.
Management skill.
Dif culty in raising nance.
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Strategic drift. (1 Mark)
− Question 44

TFG is a children’s book publisher. It is using the Fitzgerald and Moon framework to design its performance
measurement systems.
Using the lists below, match the measure identi ed by TFG to the appropriate dimension of the Fitzgerald
and Moon Building Block model.
1. TFG’s share of the children’s book market.
2. The number of children's books that are available on tablet computers and e-readers.
3. Ensuring TFG has suf cient access to freelance illustrators (who are in short supply).
4. Number of print errors in published books.
KAP454873
Feedback:
TFG’s share of the children’s book market.

Available Answers
Competitiveness (1 Mark)
The number of children's books that are available on tablet computers and e-readers.
Available Answers
Innovation (1 Mark)
Ensuring TFG has suf cient access to freelance illustrators (who are in short supply).
Available Answers
Resource utilisation (1 Mark)
Number of print errors in published books.

Available Answers
Quality issues (1 Mark)
TFG’s share of the children’s book market.:

Note that freelance illustrators are a resource for TFG – it will be important for their success that they are
able to access this for the new books that they print each year.
The number of children's books that are available on tablet computers and e-readers.:
Note that freelance illustrators are a resource for TFG – it will be important for their success that they are
able to access this for the new books that they print each year.
Ensuring TFG has suf cient access to freelance illustrators (who are in short supply).:
− Question 45

MN Ltd is a company which is in a highly competitive industry with three main rivals. Many of its rivals are
considering investing in additional production facilities. However, the market that MN operates in is relatively
small. This means that any one company which invests in new facilities is likely to gain an advantage in the
market. If two companies in the industry invest, then they are likely to break even from their investment. If more
than two invest, all investing companies will lose money on the new production facilities.
Which of the following best describes the situation that MN is currently facing?
The prisoner dilemma.

Real options.
Scenario planning.
The Delphi method.
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The prisoner dilemma. (1 Mark)
MN will be unsure how to react in this case until it knows what the reaction of its rivals will be – by which
point it may be too late to invest. This is a classic example of game theory – of which the prisoner dilemma is
− Question 46

P operates a chain of motor vehicle repair shops. Each store is currently run in a highly autonomous way, with
the manager sourcing and negotiating for raw materials, hiring and ring staff and deciding on pricing
structures. Each shop manager’s only requirement was to hit certain pro t targets.
P’s head of ce has recently decided that the chain is falling behind its rivals. They have decided to centralise the
purchasing function of raw materials, as they feel that this will allow them to access bulk buy discounts. P’s
managers will therefore have to submit a purchase form for approval to head of ce, who will then sign off if the
order is felt to be necessary. Standardised prices will also be set by head of ce.
In addition, P’s shops will be targeted based on customer feedback. Head of ce is concerned that there is wide
variety in the level of customer service provision between stores. They are therefore planning to launch a ‘code
of conduct’ that all employees are expected to follow.
P’s directors have decided to put these new strategic initiatives into operation in six weeks – they feel this is
suf cient time to adequately set up the proposed systems and train staff in what is expected of them.
P’s shop managers have expressed signi cant resistance to the plans; with one manager suggested it amounted
to a ‘power grab by head of ce – they’re trying to change the way we have worked for the last fteen years.’
One of P’s directors has disagreed, stating ‘we’re just changing a few areas which will bene t the whole
company – and we’ve given ourselves plenty of time to implement it effectively’.
From the shop managers’ point of view, what type of change is being implemented by P’s directors?
Evolution
Adaptation
Revolution
Reconstruction
KAP454881
Feedback:
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Revolution (1 Mark)
While P’s directors may see this as a small, slow change, the question asked for this from the shop managers’
perspective. They seem to see this as a fundamental shift in their roles – instead of running the shop as if it
was their own business; they are now seeing a huge loss in power and may feel as though they are now
simply administrators with no real power. This would suggest a transformational change.
− Question 47

JMB is about to embark on a strategy of digital transformation. The company has historically made use of the
Balanced Scorecard model to measure performance, but the CEO is aware that the mix of performance
measures will need to be adapted to measure Digital Traction.
In which THREE of the following areas will metrics be needed to measure digital traction fully?
✓ Data usage
✓ Scale
✓ Size
✓ Active usage
✓ Engagement
KAP653608
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Scale (1 Mark)
Active usage (1 Mark)
Engagement (1 Mark)
To measure the success of a digital transformation strategy, a company needs to measure Scale (the number
of people who are showing an interest in the product or service), Active usage (the frequency with which a
user interacts with the organisation) and Engagement (the degree to which the user has engaged with the
organisation)
− Question 48

NAF is a motorbike manufacturer in a highly competitive market. It makes three different models:
The A – this is an entry level motorbike often used by new drivers due to its stability and low running costs.
NAF tends to nd that drivers who buy the A often go on to purchase more expensive NAF bikes in the
future when they have more experience. It is classi ed as a dog in NAF’s Boston Consulting Group (BCG)
matrix. It earns minimal pro ts for NAF.
The B – this is a heavier bike which requires more experience to drive. The B is classi ed as a cash cow on
NAF’s BCG matrix.
The C – this is a high-speci cation motorbike. Like the B, it has also classi ed as a cash cow.
Which of the following statements relating to NAF’s product portfolio and BCG matrix analysis are correct?
Select ALL that apply.
✓ NAF is likely to be strongly cash-generating based on its product portfolio.

✓ As the BCG classi es the A as a ‘dog’, NAF should divest itself of the product.
✓ NAF’s product portfolio risks entering decline at the same time – money should be invested in
development of new products.
✓ In spite of slow market growth rates, NAF’s cash cows may not be as strongly cash generating as expected
due to the highly competitive nature of the market.
KAP455029
Feedback:
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NAF is likely to be strongly cash-generating based on its product portfolio. (1 Mark)
NAF’s product portfolio risks entering decline at the same time – money should be invested in
development of new products. (1 Mark)
In spite of slow market growth rates, NAF’s cash cows may not be as strongly cash generating as
expected due to the highly competitive nature of the market. (1 Mark)
NAF does have two cash cows, which would suggest that it will be strongly cash generating. It may, however,
earn lower returns than would be suggested by the BCG matrix even cash cows may need defending from
− Question 49

DAE is a college based in country B. It uses the Balanced Scorecard model to ensure that it focuses on a wide
range of perspectives that ensure the overall success of the college.
Using the lists below, match the measure used by DAE to the relevant perspective from the Balanced
Scorecard
1. Ensuring that the college does not run over-budget.
2. Number of new courses being offered.
3. Number of new students applying for a place at DAE.
4. Marks earned by students in DAE courses.
KAP454883
Feedback:
Ensuring that the college does not run over-budget.

Available Answers
Financial (1 Mark)
Number of new courses being offered.

Available Answers
Learning and innovation (1 Mark)
Number of new students applying for a place at DAE.

Available Answers
Customer (1 Mark)
Marks earned by students in DAE courses.

Available Answers
Internal business (1 Mark)
Ensuring that the college does not run over-budget.:

Arguably both student marks and the number of new students applying to DAE could be seen as ‘customer’
measures. However, only the marks earned by students would t ‘internal business’ (which focuses on the
quality and ef ciency of the organisation’s operations). Therefore, the number of new students had to relate
to the customer perspective by process of elimination.
Number of new courses being offered.:

Number of new students applying for a place at DAE.:

Marks earned by students in DAE courses :

− Question 50

T is a legal rm. T’s senior partner is aware that recent customer surveys have identi ed that price is becoming
an increasingly important factor in attracting business.
Unfortunately, T’s employees have long believed that the key to winning custom is developing a strong
professional relationship with each customer. This can involve a signi cant amount of time, which increases the
nal bill to the customer.
Employees have been very resistant to any suggestion that they should reduce the time spent with customers.
According to Senge’s model of the learning organisation, which of the following disciplines is T having
dif culty adopting?
Mental models
Personal learning and growth
Systems thinking
Team learning
KAP580296
Feedback:
Available Answers
Mental models (1 Mark)
Mental models are deeply ingrained assumptions that determine what T’s employees think. In this case they
assume that the quality of the relationship with the customer is the priority – even though this is not actually
the case.
Personal learning and growth suggests that individuals need to be encouraged to acquire new skills and
knowledge.
Systems thinking refers to the need for staff to see a particular problem as part of the wider whole and
d i i l i
− Question 51

L owns a medium-sized business that manufactures and installs double glazed windows and doors for domestic
customers.
Which TWO of the following would be classi ed as direct external triggers for change for L’s business?
✓ New regulations relating to the disposal of waste plastic and glass.

✓ The sole supplier of the plastic used in L’s products has suggested a strategic partnership with L to reduce
wastage.
✓ Exchange rate changes have made it more expensive for L to source its glass from foreign suppliers.
✓ A new manufacturing machine has recently been developed that will reduce the cost and labour
requirement of L’s production processes.
✓ A new rival manufacturer has entered the market and started undercutting L’s prices.
KAP580298
Feedback:
Available Answers
The sole supplier of the plastic used in L’s products has suggested a strategic partnership with L to
reduce wastage. (1 Mark)
A new rival manufacturer has entered the market and started undercutting L’s prices. (1 Mark)
Direct triggers are those that would be identi ed as part of a ve forces analysis. The suggested strategic
partnership would impact on the power of L major plastic supplier – which would be identi ed under ‘power
of suppliers’ in ve forces.
The entry of a new rival would also be identi ed as part of a ve forces analysis – in this case within
‘competitive rivalry’.
− Question 52

TGB is about to embark on a digital transformation. The Board is aware that such a strategy can only be
successful if an appropriate culture is put in place.
Which TWO of the following changes to its culture should the Board focus on as being MOST likely to help
TGB achieve its strategic goals?
✓ A more risk-seeking approach

✓ A more risk-averse approach
✓ A more risk-neutral approach
✓ A longer term view of success
✓ A shorter term view of success
KAP580299
Feedback:
Available Answers
A more risk-seeking approach (1 Mark)
A longer term view of success (1 Mark)
TGB will need to encourage a culture of risk tolerance and acceptance of the value of risk. This means being
prepared to accept failures and looking beyond annual targets towards longer term opportunities to add
value to the organisation
− Question 53

DM is a university based in country T. It is undertaking stakeholder mapping and has identi ed two main
stakeholders.
Use the drop down menus below to select the most appropriate approach that DM should adopt to managing
each stakeholder, based on Mendelow’s matrix.
Students at DM are highly motivated in their studies and are keen to ensure that DM gives them a good
education. However they have no student union and do not act collectively. DM has suggested that a
approach would be most appropriate.
Given the poor state of the local economy, lecturers employed by DM have little prospect of nding alternative
employment and can be relatively easily replaced if necessary. DM believes that the
approach should be adopted for these stakeholders.
KAP455043
Feedback:
1
Available Answers
Keep informed (1 Mark)
2
Available Answers
Keep informed (1 Mark)
1:
Both stakeholders have low power – the students because they don’t act collectively and the lecturers
because they cannot easily change jobs/can be replaced. Both stakeholders are also likely to have high
interest – the students in the education provided by DM and the lecturers because the university affects
their jobs and therefore their livelihoods.
Low power, high interest suggests a keep informed approach as per Mendelow’s matrix.
2:
B th t k h ld h l th t d t b th d ’t t ll ti l d th l t
− Question 54

ELSAT is a manufacturer and retailer of electric cars in country L. This is a relatively new technology, which
involves manufacturing vehicles that do not rely on petrol or diesel and are therefore more environmentally
friendly to run.
In its most recent model of car, ELSAT has started included an ‘autopilot’ function which allows the computers
which are built into the vehicle to take control of the car if it detects danger.
ELSAT has undertaken a detailed SWOT analysis and identi ed a number of issues.
Which TWO of the following options would be classi ed as ‘opportunities’ for ELSAT within its corporate
appraisal?
✓ Potential government grants for further research and development

✓ A signi cant cash balance available for future development
✓ Litigation over accidents caused by autopilot faults
✓ An excellent team of research engineers exists within the business
✓ Projections suggest petrol and diesel prices will rise signi cantly over the next ve years
KAP454898
Feedback:
Available Answers
Potential government grants for further research and development (1 Mark)
Projections suggest petrol and diesel prices will rise signi cantly over the next ve years (1 Mark)
Opportunities are external factors that may be of bene t to an organisation.
ELSAT’s cash balance and their strong research team are internal issues that would form part of its strengths
– not its opportunities.
Litigation over accidents caused by its autopilot function would be classi ed as a threat as it could harm the
company.
Potential government grants are an external issue that could mean extra funding for the company Rising
− Question 55

TTT is a manufacturer of bicycles. It has been run by the same family for many years and uses traditional
methods. The process is labour intensive and TTT therefore requires skilled labourers – many of whom have
been with the business for over twenty years and who have developed close friendships with each other, as well
as strongly held views on how their work should be undertaken.
TTT’s new Production Director wishes to introduce more standardisation into the production processes to
improve production speed.
Which of the following statements relating to TTT’s culture is NOT correct?
TTT’s culture is likely to be a source of resistance to the Production Director’s plans

TTT’s culture refers to the rules that ALL of the organisation’s staff have to follow in their jobs
TTT’s culture is likely to encourage its managers to only make incremental changes in strategy
TTT’s culture may be particularly resistant to attempted change by the new Production Director as he is
new to the business
KAP659685
Feedback:
Available Answers
TTT’s culture refers to the rules that ALL of the organisation’s staff have to follow in their jobs (1 Mark)
TTT has a very strong culture – staff are likely to be set in their ways due to the length of time they have
worked for TTT, as well as having developed a strong set of friendships and a strong business identity as part
of the traditional, skilled, family-run business.
As such, any changes are likely to cause signi cant resistance from staff. This is especially true of changes
suggested by a new manager, who is likely to be seen as an outsider and whose suggestions may well be
resented.
Because of this level of expected resistance, businesses with strong cultures (like TTT) often only implement
incremental changes to avoid causing heavy resistance from staff when they try and enact major changes.
− Question 56

J works as an accountant for a major investment bank. He has recently agreed to his manager’s request to
overstate pro ts for the year. This will enable the bank to raise further money from investors, as well as
ensuring that J receives a large bonus.
Which of CIMA’s fundamental ethical principles is J failing to uphold in the above scenario? Select ALL that
apply.
✓ Objectivity
✓ Integrity
✓ Professional competence and due care
✓ Professional behaviour
✓ Con dentiality
KAP454902
Feedback:
Available Answers
Objectivity (1 Mark)
Integrity (1 Mark)
Professional competence and due care (1 Mark)
Professional behaviour (1 Mark)
By misstating the results J is providing materially false reports, breaching his integrity.
This is due to him obtaining personal bene t from a higher bonus – which breaches his objectivity.
Misstating pro ts would mean that J is not following appropriate technical standards for the production of
the bank’s nancial statements, breaching professional competence and due care.
The action will also breach professional behaviour by bringing the profession into disrepute.
− Question 57

P is a supermarket, which has a cost leadership strategy. P’s CEO has recently designed a new key performance
indicator (KPI) for the business:
‘An average customer’s shopping should be at least 15% cheaper than it would have cost at any of our rivals’
stores.’
Based on the above information, which of the following statements about this KPI is correct?
It is not speci c enough to be a suitable KPI for P.

It is not an achievable target for P to aim for.
It is intangible and therefore cannot easily be measured by P.
It is consistent with P's overall strategy
KAP455036
Feedback:
Available Answers
It is consistent with P's overall strategy (1 Mark)
The KPI could tie in with a cost-leadership strategy (which involves making products at a lower cost than
rivals – potentially enabling the business to undercut their prices).
The KPI is certainly speci c and would be possible to measure It is unclear whether the KPI is achievable –
− Question 58

YYF is a small business which sells double glazing. Its sales staff are targeted on the number of sales they make
each month, with the majority of their income being based on meeting these targets.
YYF also sets targets for its installation staff. These are the employees that t the double glazing once it has
been purchased by the customer. YYF targets these employees on the number of ttings they manage to
complete in a week.
YYF’s managers have expressed concern that the company is developing a negative reputation for ‘pushy’ sales
tactics and poor quality.
Which TWO of the following are legitimate criticisms of YYF’s performance measurement system, as
described above?
✓ Sales and installation staff will be confused as to what they are expected to focus on.
✓ Sales staff are being targeted on things that are outside their control, which will lead to demotivation.
✓ YYF’s targets for installation staff may lead to sub-optimal behaviour.
✓ YYF’s targets are likely to have only short-term bene ts to the company.
KAP454903
Feedback:
Available Answers
YYF’s targets for installation staff may lead to sub-optimal behaviour. (1 Mark)
YYF’s targets are likely to have only short-term bene ts to the company. (1 Mark)
There is no evidence of a confusion of different measures for employees, or that the measures are outside
the control of employees. However, sub-optimal behaviour is certainly starting to occur – with the knock-on
impact these targets have had on YYF’s reputation. This is likely to damage YYF’s returns in the long term –
even if the measures stated will boost short term pro ts
− Question 59

According to Shareholder Value Added (SVA) theory, which of the following value drivers should be
MAXIMISED by an organisation to improve future cash ows?
Cost of capital
Asset investment
Working capital
Life of the project
Taxation
KAP659683
Feedback:
Available Answers
Life of the project (1 Mark)
To grow cash ows for a project:
Cost of capital must be minimised (reducing the cost of borrowing for the project will reduce payments to
banks and shareholders).
Asset investment should be minimised or spread out (as long as this can be done without compromising the
functioning of the project), as this is a major cash outlay.
Working capital represents cash tied up in receivables and inventory. This should be minimised to reduce
the opportunity cost of this capital.
Taxation payments should be minimised through good tax planning.
− Question 60

YYY has decided to adopt the Performance Pyramid model to improve its performance management.
The Strategy Director of YYY wishes to initially focus on external effectiveness improvements to the
organisation.
Which TWO of the following options correctly identify external effectiveness activities within the
Performance Pyramid model, as identi ed by Lynch and Cross?
✓ Productivity
✓ Cycle time
✓ Financial
✓ Quality
✓ Delivery
KAP454909
Feedback:
Available Answers
Quality (1 Mark)
Delivery (1 Mark)
By de nition – quality and delivery are linked to external effectiveness, along with customer satisfaction and
k
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9/29/2020 Rogo: E3 Strategic Management: Mock Exam B Result

Student GLORIA ADWOA OSEI-ANOKYE

Test Date 29-Sep-2020 08:33

Time Taken 0 minutes 13 seconds

Question Analysis (select question for more information)

EFF would see a rise in the bargaining power of its suppliers.

The other factors are: reliability and responsiveness

✓ To ensure compliance with existing and future laws.

QWE’s mission is:

One of FX’s critical success factors (CSFs) is:

‘To have low levels of defective units.’

Opportunity focusing on weakness.

✓ Sell its existing range of biscuits to supermarkets in country G.

Bounded rationality may be an issue

Level of pollution caused by its warehouses.

It is only appropriate for multinational businesses.

✓ Education and communication

Learning and development

Length of time taken to deal with

Investment for research into

Number of positive service

Return on capital employed

Learning and development

The intelligent enterprise

✓ Setting up new reporting structures relating to quality control

✓ BB’s operating gearing will likely rise due to the proposals.

✓ The threat of backwards vertical integration by BC.

Self-con dence, tempered with humility.

Create a guiding coalition

Select ALL that apply.

Which of the following statements is correct?

It only applies to developed economies

Failure to identify changes in the market.

1. TFG’s share of the children’s book market.

4. Number of print errors in published books.

TFG’s share of the children’s book market.

Number of print errors in published books.

TFG’s share of the children’s book market.:

The prisoner dilemma.

✓ NAF is likely to be strongly cash-generating based on its product portfolio.

1. Ensuring that the college does not run over-budget.

2. Number of new courses being offered.

3. Number of new students applying for a place at DAE.

4. Marks earned by students in DAE courses.

Ensuring that the college does not run over-budget.

Number of new courses being offered.

Number of new students applying for a place at DAE.

Marks earned by students in DAE courses.

Ensuring that the college does not run over-budget.:

Number of new courses being offered.:

Number of new students applying for a place at DAE.:

Marks earned by students in DAE courses :

✓ New regulations relating to the disposal of waste plastic and glass.

✓ A more risk-seeking approach

✓ Potential government grants for further research and development

Opportunities are external factors that may be of bene t to an organisation.

Which of the following statements relating to TTT’s culture is NOT correct?

TTT’s culture is likely to be a source of resistance to the Production Director’s plans

It is not speci c enough to be a suitable KPI for P.

To grow cash ows for a project:

Taxation payments should be minimised through good tax planning.

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