ACCA MOCK 4 – COFFEE4U

ACCA – SBL
Strategic Business Leader

December 2023 Mock Exam

Time allowed:

3 hours and 15 minutes including reading, planning and reflective

time.

This question paper is an integrated case study with three tasks for
100 marks and ALL Tasks must be completed.

All Tasks contain Professional Skills marks which are included in the
marks shown above.

Do NOT open this paper until instructed by the supervisor.

You must NOT write in your answer booklet until instructed by the
supervisor.
This question paper must not be removed from the examination
hall.

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SBL: STRATEGIC BUSINESS LEADER

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ACCA

December 2023 SBL – Mock 4

Background Information

This case study relates to three tasks.

Coffee4U (C4U) is a chain of retail coffee shops based in Zeeland, a developed country.
You are a consultant advising the Board of Directors of ‘Coffee4U’ (C4U).
You oversee a team of junior consultants who have prepared some background information about
issues relevant to C4U.
You have been retained to advise the Directors on the implementation of strategy, following their
successful acquisition of a chain of retail coffee shops.
It is currently December 20X3.
The following exhibits provide information relevant to the case study:
Extracts from staff interviews – comments from staff about changes post acquisition
Project management team meeting - discussion on future plans and strategies
Supplier information – breakdown of potential suppliers for e-business technology
Board meeting minutes – discussion on risk management and risk appetite
The pre-seen information, which you have already used to familiarise yourself with C4U and the
industry in which it operates, should also be available.
The above information should be used to answer each task.

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Exhibits

Exhibit 1

EXTRACTS FROM STAFF INTERVIEWS (OCTOBER 20X3)

Staff were asked the question “how do you feel about the way the business has changed, since it
became C4U?”
“I like the way that I’m totally accountable for what happens in my store. I have one boss, at Head
Office – the Operations Manager – and I know what my targets are. I chat to my manager every
day, and I can try new things. I feel empowered, which is very different from before. This business
is driven by the people on the ‘front line’, not some faceless manager in Head Office in a different
country.” – Outlet manager
“Under the Stuckbars system we had a standard procedure for everything that we did: how to
make a cappuccino; how to clean the floor; what to say to a customer. Now, we have quite
general guidelines from the senior management and pretty much do whatever we want. I feel like
a human, rather than a machine, but it’s a bit scary having to decide so much for myself. I worked
in another C4U outlet, last week, and it felt like a different business.” – Barista
“I’m not too happy that we no longer have regular departmental planning meetings. The Board
seem quite secretive about what they do. Lots of decisions are made behind closed doors, in the
boardroom. And it’s quite driven by the Finance function. I know we must make a profit, but I
really think that Sam Lee has too much power. Hopefully, when things settle down, that might
change.” – Manager, Head Office function (I said I’d keep this confidential, but it wasn’t Finance)
“I actually burned my old Stuckbars uniforms, after the takeover. I used to hate them so much. It
was like being at school. Do you know, I was once sent home for wearing ‘the wrong socks’! I
remember the email arriving, in January. Actually, it’s still pinned to the notice board in the
staffroom: “You can wear anything you like, as long as it’s black.” I much prefer things this way –
you can be an individual.” – Shift Supervisor
“I love the ‘fast food Friday’ thing*. You know, when the senior managers buy pizza or burgers for
everyone in their department. We all sit for an hour, every Friday lunchtime, talking about what
happened that week. It makes it feel more like we’re a team.” – Procurement manager
*Apparently, every Head Office function does this. In the outlets, they have a ‘scrum’ at the end
of each shift – fifteen minutes talking about their day (with coffee and cakes).
“Marco Regazzoni’s first job, while he was at University, was as a Barista**. That’s how he paid for
his education. It’s great to know that the people at the top have a real understanding of what we
do.” – Barista
** This isn’t true, by the way. Several people told me this, so I checked with Marco’s PA. He
worked in a record store. Nobody seems to know where this rumour started, but I have a feeling
it might have come from the PR Function.

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Exhibit 2

PROJECT MANAGEMENT TEAM MEETING – E-business opportunities

Finance Director:
A huge amount of work over the last year went into updating our customer’s database
management system, which will be in place in 20X4 and allow us to communicate more effectively
with customers.
I consider that further investment in information technology is a key to our growth in the coming
years, in our drive to streamline our business and to educate and communicate more effectively
with our stakeholders.
We are planning to launch a re-designed website in 20X4 and are looking for new opportunities to
use e-business technologies more effectively in key business areas for C4U such as online sales,
digital marketing and social media.
Marketing Director:
I am not sure; all of our stores have regular interface with our customers and their feedback via
our customer feedback forms are a key source of information for our future planning. We have
lots of information in C4U, do we really need anymore?
Sometimes less is more – We just need to listen to our customers’ feedback, not confuse
ourselves with yet more ‘big data’ that none of us really understand. This seems like an
unnecessary expense and risks confusing us more than helping us.
Finance Director:
I disagree. We must make better use of technology. In our marketplace, one of our biggest
challenges is customer retention. Using the information that we can obtain from this technology
could play a very important part in retention, engagement and understanding customer needs.
This is the way our industry is heading – most of our main rivals already use digital marketing and
have mobile apps and the like.
We are being left behind and will look outdated very soon unless action is taken.
ZVC are also going to want to see some significant growth sooner rather than later – venture
capitalists are all about taking risks for maximum return. We need to show them that we have
plans to grow this business and earn them good returns. There are always risks involved in every
course of action but we need to take a risk on this in order to expand, it’s what ZVC will expect
and demand from us.
HR Director:
But we have very limited experience in this area. Our staff do not have the skills or experience to
engage in data analytics and social media marketing. I feel like we should prioritise the in-store
customer experience and friendly service rather than the rather ‘un-human’ and un-personal
digital platforms. After all, a database can’t make our customers an ethical and delicious cup of
coffee can it!
Finance Director:
I agree we lack the internal skills in this area, but feel this is an area we must explore more and
take advantage of. We should consider using an external supplier to develop our presence in
some key areas e.g. – social media and digital marketing.
In the longer term we may be able to bring development in-house but this isn’t realistic in the
near future.

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Exhibit 3

POTENTIAL SUPPLIERS FOR E-BUSINESS TECHNOLOGY – INFORMATION FROM FINANCE

DIRECTOR
We have identified two potential candidates for the supply of this new technology to enable an
expansion of our e-business with a greater use of customer data and digital marketing.
The first (Company A) is a well-established company whose product provides sophisticated testing
facilities and costs $0.7m. The software that supports the product is written in a conventional
programming language. The solution is widely used, but it is relatively inflexible and it has an out-
of-date user interface. A has been trading profitably for 20 years and currently has an annual
turnover of $96m. A has a strong client portfolio, good references and will provide us with a
standalone system that we can control.
The second (Company B) is a relatively new company (formed three years ago) whose product is
more expensive ($0.8m) but it offers significant advantages in high volume performance and
stress testing. It has a modular software design that allows it to be easily maintained and
upgraded. It is written in a relatively new powerful programming language and it also has an
attractive and contemporary user interface. B currently has a turnover of $2.4m per year. B would
manage and run the interface for us and would require a contract giving them access to the data.
Some C4U executives are concerned about purchasing from such a young, relatively small
company, although externally commissioned credit reports show that B is a profitable, liquid and
lightly geared company. Despite their brief history however, they have been implicated in data
breaches regarding the collection and use of personal information. This information was allegedly
obtained from customers via a quiz on a social media website asking where customers lived, what
their preferences were, what social media pages they liked etc. which was then used to analyse
their characteristics and personality traits. It is alleged that this information was later sold for use
in marketing campaigns, contravening GDPR requirements. There is no evidence to suggest that
these claims have been proved.
Recently, a workshop that considered the extent to which e-business technologies could boost
C4U turnovers took place and one of my team put together some figures regarding these
suppliers (see below)
Figure 1: Expected returns for three demand and supplier combinations.

Supplier IF significant IF marginal

revenue increase revenue increase
A $1m per annum $0.2m per annum
B $1.3m per annum $0.1m per annum

Demand in the industry is currently affected by global economic uncertainty and it is increasingly
difficult to predict. We were asked to estimate how e-business technologies might impact on
demand and thus C4U revenue in the next six years.
We eventually came up with the following figures, although it was relatively hard to get everyone
to agree and debate at the workshop became a little heated’.
• Significant revenue increase for six years: probability p = 0.4
• Marginal revenue increase for six years: probability p = 0.4
• Significant revenue increase for three years, followed by marginal revenue increase for
three years: probability p = 0.2

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Exhibit 4

EXTRACT FROM BOARD MEETING MINUTES, NOVEMBER 20X3

Risk management
CEO: I realised that, since forming The C4U, we haven’t discussed risk management at a Board
meeting. Now the initial excitement has died down, maybe we should start to think about it.
I have my own views, but I would prefer to go around the table hearing from each of you. Then, at
our next meeting, we can start to develop a risk management strategy.
So, what do you think our risk appetite should be, and how do you feel we should manage risk?
Chair: I’m a PR specialist, so most of my involvement with discussions of risk management has
been fighting fires that started as a result of companies taking inappropriate, or too much, risk.
I’m not suggesting that we are taking liberties with our accounting policies, but we can see from
the recent past how Stuckbars allowed the risk relating to their tax optimisation strategy to get
completely out of hand. To be honest, if it hadn’t been for their risk management failings, we
wouldn’t be here now.
Jane, what’s your view? You were on the Zeeland Board of Stuckbars.
HR Director: The Stuckbars Board discussed risk management at least two or three times a year,
and any major changes to the risk register were always reported to the Board. To be honest, I
don’t remember tax being mentioned anywhere in the register. Tax management was a corporate
issue, so it didn’t ever get discussed at country level. The specialists in Lotacsaria dealt with all
that stuff.
As far as we are concerned, I think we need to be managing our risks down to a sensible and
acceptable level. What that level is, I’m not really able to say. I wasn’t part of the buy-in team, so I
wasn’t involved in your discussions about expected return. Did you talk about risk, before the bid,
Sam?
Finance Director: Of course, but the discussions really centred around the risks relating to the bid.
We didn’t think any further ahead than whether our bid would succeed or fail. We obviously
talked about our expectations for getting a return on our investment, but I don’t recall a
discussion on risk appetite.
Personally, I’m pretty risk-averse. I like things to be predictable. I like forecasts that I can rely on,
so I’m all in favour of avoiding most of the risks. If I had my way, we’d have a Risk Manager, within
the finance function, to make sure that our business model involves as little risk as possible. If you
remember, I have a proposal to recruit a manager, further down the agenda.
CEO: We may have to defer that until the next meeting, Sam. I think we need to cover the basics
of risk management first, before we look at the organisational implications. Stuart – what’s your
view?
Marketing Director: I think Sam’s view is a little illogical, to be honest. If there’s one thing we are
all clear on, it’s that our strategy and brand are unique and revolutionary. There’s nobody in our
industry doing things the way we do, so that implies that we MUST be taking a significant amount
of business risk.
When it comes to how much risk is appropriate, I’m really in the same position as Jane: I wasn’t
part of the buy-in team, so I don’t know what you felt was the ‘right’ level of risk. However, if
there’s one thing I know about venture capitalists, it’s that they want fast returns. If we’re going
to improve our profitability the way we’re forecasting to, we must be willing to accept a high level
of risk. After all, isn’t there a correlation between risk and return? I think risk is a good thing.

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I’m also not sure why Sam feels that he needs even more staff. He already has a perfectly good
Internal Audit team reporting to him. We need more people being creative and innovative, not
more accountants. Surely Internal Audit can do all the risk management that we need? We have
enough ‘policemen’ at C4U.
CEO: Well, thank you everyone. An interesting and honest exchange of views, as always.
Chair: Excuse me, Marco. Shouldn’t we hear the views of ZVC? They are a major stakeholder, and
I feel that our risk management and governance framework should be based on the expectations
of stakeholders, not just determined by the Executive Directors.
ZVC Representative: Thank you Simone. Stuart is right, to some extent. We always plan for an exit
within five years of making an investment. That means that C4U needs to be generating
significant profits, by that time, so it can be floated or sold.
However, we’re not as aggressive as Stuart seems to suggest, when it comes to risk. While we’re
happy to accept the level of risk inherent in the business model, we also think that much of that
risk can be, and should be, mitigated away. That means a sophisticated risk management
approach, so I agree that we should be looking at recruiting a Risk Manager. Whether it’s
appropriate to put that person within the finance function, I’m not sure.
CEO: That’s very interesting. And thank you, Simone, for reminding us about our responsibilities
to stakeholders. That’s why we have a non-executive on the Board. I think we need a full
discussion of risk appetite and risk management, at the next meeting and we’ll also discuss Sam’s
proposal for recruiting a Risk Manager.

Pre-seen Information

See separate document.

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TASK 1
The Chair of the Board, Simone Walker, has recently addressed a meeting of the key stakeholders
of C4U (including all the staff). In her statement Simone said that C4U aims to be ‘a good
corporate citizen’ and has ‘a coherent strategy to achieve this aim’.
There is a concern, among the Board, that it is not clear how such vague ‘aims’ might be
translated into a ‘coherent strategy’, as they are not confident that such a strategy exists.
The Board have asked you to assist them by writing a report addressing the issues that are of
concern to C4U.
You have been asked to include a section in your report, which:
(a) Advises how C4U’s strategic aim of being ‘a good corporate citizen’ could be translated
into a system of corporate governance and related organisational initiatives. (12 marks)
(b) Discusses how C4U’s strategic aims to ‘meet the financial objectives of its owners and
investors’, ‘deliver a very high standard of customer service’ and be ‘a good corporate
citizen’ might be adapted into appropriate financial and non-financial critical success
factors (CSFs). (6 marks)
Professional skills marks are available for demonstrating commercial acumen skills in
demonstrating awareness of how aims can be operationalised. (4 marks)
The board of C4U has been approached by a representative of ZMC capital, who are the
company's largest shareholders. ZMC has raised some concerns as to whether the forecast figures
for 20X4–20X8 are achievable even if the current strategic plan of focusing on an ethical and
sustainable brand is implemented fully.
(c) Prepare a report for the board that assesses whether the planned performance level can
be achieved and recommends additional strategies that C4U can put in place to reach the
planned performance level. (14 marks)
(Total: 36 marks)

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TASK 2
The Directors believe that one of the critical success factors of the acquisition is to change the
corporate culture and have undertaken interviews to try and obtain the views of staff.
You have been asked to prepare briefing notes, which:
(a) Assesses the current corporate culture of C4U. Outline the problems that existed in
Stuckbar’s culture and the impact that the cultural changes within C4U might have on the
organisation’s success. (12 marks)
Professional skills marks are available for demonstrating scepticism skills in probing the opinions
and assertions made in the interview notes. (4 marks)
Secondly, the projects management team at C4U met recently to discuss future developments for
the company particularly around e-business and utilising customer data to improve performance.
(b) Evaluate the potential suppliers for the investment in e-business technologies.
Recommend, with justification, what actions the Board should take when appointing a
supplier. (10 marks)
Professional skills marks are available for demonstrating analysis skills in assessing and
considering each supplier. (4 marks)
(Total: 30 marks)

TASK 3
At the most recent Board meeting of C4U, there was much discussion of risk and future
developments for C4U. The Directors expressed widely differing opinions, and you have been
asked for your assistance in clarifying the issues discussed.
(a) Draft a report which evaluates the appropriateness of the risk attitudes expressed by the
directors and the actions C4U could take to improve its risk management approach.
(8 marks)
Professional skills marks are available for demonstrating evaluation skills assessing the different
viewpoints that exist within the Board. (4 marks)
Following the most recent Board meeting of C4U, there was clearly concern and conflicting views
amongst the Board members as to the role of the newly proposed Risk Management department
and the potential conflict which may arise with the Internal Audit function.
(b) Prepare briefing notes for the CEO which assesses the role of the risk management
function when compared with an internal audit function, with particular reference to
C4U. (8 marks)
(c) Prepare TWO presentation slides, with accompanying notes for the Board which outline
the governance issues arising from the existing organisational structure and explain
structural changes needed to improve governance in C4U. (10 marks)
Professional skills marks are available for demonstrating communication skills in clarifying and
conveying relevant information to the Board about required changes and why those changes are
needed. (4 marks)
(Total: 34 marks)

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