MANAGEMENT ACCOUNTING STRATEGY

MAA8X00

ASSESSMENT OPPORTUNITY 1
Scenario Based Question
8 March 2023

Internal Assessor: Dr Adele Oosthuizen

Internal Moderator: Mr Kevin Thomas

INSTRUCTIONS:

• This section of the paper consists of 5 pages, including the cover page.
• Answer all questions on the word template (answer sheet) provided on uLink.
• Silent, non-programmable calculators may be used.
• You are allowed 15 minutes reading time at the start of the scenario-based question.
The purpose of the reading time is to allow you an opportunity to read the paper and to
do answer planning.
• You are also allocated 5 minutes to upload your answers to uLink.
• The objective test questions are loaded separately onto the uLink Assessment
Opportunity One folder.
Scenario Question [25 MARKS]

Background

Toyz Galore (TG) is a listed retailer that operates a chain of toy shops. The company operates in
Northland, a developed country with a strong economy and citizens with a high disposable income
and standard of living.

The company was established in 1992 when its founders opened the first store on the outskirts
of Northland's Central City. TG was listed on Northand's Stock Exchange in 2004. The founders
sold their shares then and are no longer involved in the company. None of the current
shareholders has a significant shareholding, i.e. own more than 20% of the issued shares.

TG aims to offer a wider range of toys compared to other toy retailers. Customers visit TG knowing
that they can choose from the latest and best toys as well as popular classics and not just a limited
selection of the most popular items. The company further concentrates on pricing its toys to match
the lowest prices set by competitors.

The company has the following strategic objectives:

• To offer the broadest range of exciting and desirable toys;

• To consistently grow revenue in line with shareholder expectations;

• To operate our stores efficiently and cost-effectively;

• To provide our customers with an excellent shopping experience. This includes convenient
locations and attractive stores; and

• To act ethically and maintain strong relationships with all stakeholders.

Stores

TG now has 120 stores that employ 6 500 staff. Those shops are spread across Northland. TG's
shops are located in retail parks. Customers find these locations convenient when shopping with
children because they are safe and accessible. The retail space in such parks is also larger and
cheaper per m2 to rent than in shopping malls, where most of TG's competitors operate.

TG wants its stores to be attractive places to visit. Each store is laid out to encourage customers
to browse and make their selections. Stores have various display and play areas to entice families
to visit the store and to promote new toys. These displays are changed regularly, and various play

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Assessment Opportunity 1 Management Accoun�ng Strategy
areas, such as princess castles, slides with ball pits etc., are rotated between stores to maintain
interest. Shop staff are available to direct shoppers to the location of any given product. Staff are
equipped with Wi-Fi-enabled tablets that can assist in checking inventory and product
specifications. The staff are also expected to have the sufficient product knowledge to enable
them to advise customers and to make informed recommendations.

Each store is managed as a profit centre. Shop managers are responsible for achieving the sales
and performance targets that the regional managers at Head Office set. Shop managers have
limited discretion, but it has been noted that the competence and enthusiasm of individual shop
managers can have a significant impact on the performance of their shops

Head office functions

The company's Head Office is in Central City and employs 140 staff. There is on the same premise
as the Head Office and 240 staff. Head office functions include the following:

Buying, The Buying Department is responsible for evaluating new products and
warehousing deciding which ones should be purchased. The buying also department is
and logistics responsible for negotiating bulk discounts with toy manufacturers. The
warehouse is responsible for storing inventory until it is shipped to the various
shops.

Marketing The Marketing Department sets sales and performance targets for each
shop. It is the shop manager's responsibility to achieve those targets.

The Marketing Department uses data from the Finance Department to

provide each manager with a daily report on sales revenue and monthly
reports on revenue and operating profit. The regional managers provide
further oversight and support to store managers. There are five regional
managers, each responsible for overseeing between 22 and 26 shops
within their allotted geographical region.

Property The Property Department's responsibilities include identifying suitable

Management properties, shop layouts, displays and refurbishing.

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Assessment Opportunity 1 Management Accoun�ng Strategy
 Strategic The Executive Board is responsible for providing strategic direction. The
direction and company uses a formal (rational) planning model for setting long-term
oversight objectives and strategies.

You are the senior financial manager at TG's Head Office. Your primary responsibilities relate to
management accounting, and you report to Finance Director. Upon your arrival at the office, you
received the following email from the Finance Director:

From: Finance Director

To: Senior Financial Manager
Subject: Matters arising from the executive board meeting

Hi,

I would like your assistance on the following matters that were discussed at yesterday's executive
board meeting:

1. TG's strategy and strategic planning model

One of the directors recently completed an MBA. He said that Michael Porter defines competitive
strategy as: "The unique position that a company takes over the long-term to achieve a
sustainable competitive advantage". He wants us to explain TG's competitive strategy using this
definition. Would you kindly assist me with this explanation?

He further suggested we adopt an emergent approach to strategic planning. Could you please
explain what an emergent strategy is and whether it could be used with a formal planning
approach? Evaluate the advantages and disadvantages of the approach suggested.

2 Open a store in Southland

It was suggested that we consider a store in South Land. Although Southland is a developing
country, its economy is expected to grow significantly in the next few years, resulting in rising
disposable income for the middle class. To reduce the project's financial risk and operating costs,
we will first look at opening small stores that offer a selected range of more popular toys. We have
identified two top-performing Northland store managers that we want to approach to set up the
store in Southland. They will be offered a promotion but must be willing to relocate to Southland.

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Assessment Opportunity 1 Management Accoun�ng Strategy
Please evaluate this proposal to open a store in Southland against TG's strategy and objectives.
Use Mendelow's matrix to categorise each of the following stakeholders' power and interest over
the decision to open a store in Southland: 1) TG's shareholders, 2) the Northland store managers
identified to open the Southland store.

Thanks for your assistance.

Kind Regards

Finance Director

REQUIRED:

1.1 With reference to Porter's definition of strategy, explain TG's competitive strategy.
(5 marks)

1.2 Explain an emergent strategic planning approach and whether it can be combined with a
formal approach. (3 marks)

1.3 Evaluate the advantages and limitations of implementing an emergent approach to

strategic planning at TG. (6 marks)

2.1 Evaluate this proposal to open a store in Southland against TG's strategy and objectives.
(5 marks)

2.2 Use Mendelow's matrix to categorise each stakeholder's power and interest over the
decision to open a store in Southland: 1) TG's shareholders, 2) the Northland store
managers identified to open the Southland store. (6 marks)

[TOTAL FOR SCENARIO QUESTION = 25 MARKS]

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Assessment Opportunity 1 Management Accoun�ng Strategy