CA Pakistan SPM CFAP 03 Past Papers

ICAP ATTEMPTWISE
PAST PAPERS
INCLUDING SUGGESTED ANSWERS,
EXAMINER COMMENTS AND MARKING
PLAN
(UPDATED TILL SUMMER-2022 ATTEMPT)
By the Grace of Almighty Allah, I am pleased to present the

attempt-wise past papers of STRATEGY AND PERFORMANCE
MEASUREMENT also known as CFAP-03.
Shaan Rehman
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THE INSTITUTE OF CHARTERED ACCOUNTANTS OF PAKISTAN
Final Examinations Winter 2002
December 13, 2002
BUSINESS MANAGEMENT (MARKS 100)

Module E Paper E-17 (3 hours)
Q.1 (a) The Management of MNC Consumer Pakistan Limited is required to present
their Financial Business Plan to their Regional Management for the years 2003-
2007. List down the various information templates that should be included in
the presentation along with brief comments, where-ever needed. (10)
(b) Explain briefly the following terms:
(i) Vision (02)
(ii) Mission (02)
(iii) Values and Beliefs (02)
Q.2 (a) List the most critical success factors for the design of a strategic management
accountancy system. (04)
(b) Do you agree that one of the success factors should be that the communication
gap between the accountant and decision maker should be eliminated by the
design of the accounting system and the consequent output? Explain with
reasons. (04)
Q.3 Why management should develop an “Ethical Culture” in an organization and what
steps are required to create such culture? (08)
Q.4 In an employee appraisal system, what is actually being appraised? Also explain the
qualitative and quantitative aspects of an employee appraisal system. (08)
Q.5 (a) What should be the process of training in an organization? (05)

(b) As a training manager how would you carry out training needs analysis? (05)
Q.6 The Chief Executive of ABC Oil Company Limited has engaged you as a consultant
to assists in the development of their policy on Health, Safety and Environment. You
are required to draft the policy statement of the Company. (10)
Q.7 (a) What do you understand by “Segmentation” and “Targeting” (04)

(b) Describe briefly benefits of market segmentation (04)
Q.8 What are the reasons for branding and not branding products? (12)
Q.9 What is “Protectionism”? What are the means through which governments provide
protection to the domestic procedures from foreign competition? (08)
Q.10 What are the characteristics of multinational companies and the motives of these
multinationals? (12)
(THE END)
Final Examination Summer 2003
June 05, 2003

Module ‘E’ Paper E-17 (3 hours)
Q.1 The Board of Directors of Synergy Leasing Company Limited, a medium sized public listed
company are concerned about the decline in the profitability of the company during the past
five years. The situation has been specially worsened during the years ended December 31,
2001 and 2002 in view of declining mark-up rates and resultant decline in spreads
witnessed by the leasing industry.
The Company was formed in 1985 and had flourished during the period 1985 to 1995.
Although the Leasing Industry had also grown rapidly over that period, but the profitability
of the company remained above the industry average.
Current Chief Executive of the Company was appointed on July 1, 1996. He had vast
experience of successfully leading Resource Leasing Company Limited, a major leasing
company of the country from 1988 to 1996. Soon after his appointment he made an in-
depth analysis of the company’s operating procedures. He realized that their were serious
flaws in the system of evaluating and approving leasing proposals. The company had
formed policies, which gave many discretionary powers to various levels of Managers.
Leasing proposals above Rs. 100 million were approved by the Board of Directors, whereas
proposals above Rs. 25 million were approved by the Chief Executive. The General
Manager Marketing and the Marketing Managers were authorized to carry out leasing
below these limits subject to their assessments of each case based on specific parameters.
The minimum rate of mark-up was fixed at 16%. The senior field staff including six
Assistant Managers and two Managers were authorised to quote the Mark-up rates to the
clients. He noticed that cases of default have increased over the last five years and the
amount of Provision for Bad Debts had risen from Rs. 9.0 million in 1991 to Rs. 21.0
million in 1995. Moreover since there was no control over the rates of mark-up, the
weighted average IRR had declined from 22% in 1991 to 20.5% in 1996 as against the
decline in industry average from 22.5% in 1991 to 21.5% in 1996.
He therefore decided to implement the following procedures immediately:
q The leasing proposals would have to be approved as under:

• Upto Rs 0.5 million by Marketing Managers
• From 0.5 million to 2.0 million by General Manager Marketing
• Above Rs. 2.0 million by the Managing Director.
q Mark-up rate will be decided by the Chief Executive himself, based on his discussion
with General Manager Marketing.
(2)
Within a short period of time it became evident that the policy has succeeded. In his report
to the Board of Directors he highlighted his successes as under:
- Bad Debts for the year 1996 have been reduced by 7% as compared to 1995.
- Weighted average IRR has increased from 20.5% on June 30, 1996 to 20.8% on
December 31, 1996 and will be increased further as new leases are written.
- Net profit of the company in the second half of 1996 has increased by 6% as
compared to the first half of the year.
However, the staff of the Marketing department was not happy with the change as they felt
that their authority has been diluted. They also objected to the increase in processing time
of lease evaluation and approval, as a result of the above measures.
During 1997, the General Manager Marketing resigned. The company had a policy of
promotion from within the organization as it helped in improving employee motivation. In
line with this policy, the senior of the two Marketing Managers was promoted as head of
the department. However, in view of his relatively limited experience, he was designated as
Chief Manager Marketing. It also resulted in cost saving as the salary of the newly
promoted Chief Manager was far less than that of his predecessor. During the same year,
the Human Resource Manager retired as he reached the age of 60. It was decided that the
post of Human Resource Manager would be abolished. The Chief Executive will himself
control the Human Resource Function as even now most of the policy decisions were being
taken after his approval. In 1997, the company’s profitability improved slightly i.e. by one
percent.
During 1998, the over due lease rentals increased by 16% as one major lessee went
bankrupt. The performance of recovery department was also found to have deteriorated. It
was decided that a legal manager shall be appointed to deal with the increased number of
defaulting lessees. The Legal Manager was appointed on July 1, 1999. On the
recommendation of the Legal Manager, six recovery assistants were sacked as they were
making little contribution towards recovery. The measure was strongly resisted by the
Marketing Manager who was of the opinion that the visits by these recovery assistants
made an invisible but significant contribution towards restraining the lessees from
defaulting.
In the year 2000 the company diversified its operations and entered into the business of
Money Market operations. An Assistant Manager – Trading was hired to carry out the
routine matters, however, in view of the risks involved in this segment of the business, it
was decided that that the Chief Executive will himself supervise the operations. The spreads
in this segment were relatively smaller, however the Chief Executive in one of his periodic
report, supported it in the following words, “Although the spreads are somewhat lower, the
investments are much more secured”.
The year 2001 witnessed a decline in the net profit of the company for the third consecutive
year. In the Annual General Meeting the shareholders were very critical of the company’s
performance. However, their criticism was brushed aside by the Chairman of the Board,
who claimed that it was on account of the declining trend being witnessed in the leasing
industry.
(3)
The year 2002 witnessed a drastic decline in the mark-up rates of all financial institutions as
the State Bank of Pakistan reduced the discount rate substantially. The company’s profits
plunged to their lowest levels. The Chief Executive, in his report to the Board of Directors
made the following remarks “The declining profitability of the company is the result of
emerging trends in the financial sector including leasing. The enormous decline in mark-up
rates, increased competition and rate war among lenders, excessive liquidity and the
emergence of banks in the leasing business have all contributed to this state of affairs. The
Board of Directors was not satisfied with this response.
They have decided to hire you to carry out a critical evaluation and review of the
company’s operations and policies.
Besides the information given above you have been provided the following additional
information.
1998 1999 2000 2001 2002
Weighted average cost of borrowings (%) 18.0 17.5 16.5 16.0 13.0
Weighted average IRR at the time of leasing 21.0 20.5 20.0 19.5 15.0
Weighted average return on investments 19.5 19.5 18.5 18.0 13.8
Overdue lease rentals (Rs. In millions) 175 183 310 465 600
No. of employees 56 52 54 52 53
New appointments 13 11 13 12 12
On investigation, you were able to ascertain that
• Many good lessees with high IRR had resorted to premature termination of their leases.
• The company could not avail the full benefit of reduction of borrowing rate, as it was
mostly committed for a period of three to five years.
• Most of the company’s long-term loans have been obtained from three main banks with
whom the company has a long and cordial relationship since last 15 years.
Required:
(a) As a consultant you are required to write a report in the form of a letter addressed to
the Board of directors, evaluating the key factors responsible for the decline in
company’s profitability in the recent years with specific reference to its policies on
(i) Human Resource Management (05)
(ii) Marketing (06)
(iii) Borrowings (04)
(iv) Diversification Strategy (04)
(b) Describe briefly why, in your opinion, the Chief Executive was unable to repeat the
success story of his previous assignment with Resource Leasing Company Limited.
(08)
Q.2 You have been appointed as a nominee director of a large and profitable company. You find
that while the company has been making enormous profits and paying excellent return to its
share holders, it has not made any contributions to any welfare or charitable projects. You
find this very discomforting and decide to raise the matter of social responsibility of the
company in the next board meeting. You are required to develop your arguments to
convince the board to adopt a policy of making significant contributions to some welfare or
charitable institutions, in future. (08)
(4)
Q.3 (a) Manpower planning is an integral part of corporate strategy. Discuss the importance
and concept of manpower planning as a part of strategic planning process. (07)
(b) Why is succession planning considered a critical part of effective corporate

governance? Discuss. (08)
Q.4 Strategy evaluation can be achieved through measuring organizational performance.
(a) What quantitative criteria would you use to evaluate strategies? (05)
(b) What qualitative aspects would you look at? (05)
Q.5 Pricing decisions are a function of various elements. What are those factors and influences?
(07)
Q.6 Conflict at individual and group level is considered to be inevitable in every organization.
Under what circumstances would you accept conflict and why would you want to avoid it?
Discuss. (07)
Q.7 Describe different stages of Product Life Cycle. Does product life cycle always have an ‘S’
curve? Discuss. (08)
Q.8 What are the strategic planning issues an organization must address before it decides to do
business internationally? (09)
Q.9 Multinational organizations typically compete in domestic and foreign markets on the basis
of competitive advantages. What are these advantages? Give a list briefly explaining each
one of them. (09)
(THE END)
December 04, 2003
Business Management (MARKS 100)

Module E (3 hours)
Q.1 Sportsballs dominate Pakistan’s Sporting Goods export category since the mid-
1970s. Sialkot, the hub of this industry, has over 300 registered exporters out of
which only around 150 own their production facilities. Fewer than 20% of exporters
maintain complete vertical production units and stitcher networks. They export 80%
of the approximately 35 million hand-stitched balls exported every year. Raw
materials such as PVC artificial leather, cloth, rubber latex, and rubber air-bladders,
are typically purchased from local suppliers upon receipt of orders and processed
into ready-cut panels for hand-stitching. These panels are delivered to sub-
contractors, called “makers” who have them stitched by village-based “stitchers”.
Upon return, these stitched balls are inspected to buyer’s order specifications and
packaged for shipment. One ball takes an average of 23-30 days from order to
shipment.
Figure 1- Sportsball Exports from Pakistan*
PRODUCT CATEGORY % UNITS USD VALUE PKR VALUE
# (hand-stitched inflatable balls) -age (million) (million) (million)
1 Professional soccer-balls 3 1.05 6.56 380.48
2 Match-grade soccer-balls 22 7.70 48.13 2,791.54
3 Mass-market soccer-balls 46 16.10 100.63 5,836.54
4 Others, i.e. volleyball, rugby etc. 11 3.85 24.06 1,395.48
5 Promotional balls 18 6.30 39.38 2,284.04
100 35 218.76 12,688.08
*Estimated from consolidated industry figures.
Record Sports Private Limited was formed in 1981. By 2002 it had become a front-
runner in the sporting goods industry, exporting 100% of its products under the logos
of leading world brands. It was recognized by a number of national awards including
the FPCCI Export Trophy. Competitors and customers both agree that Record’s
success was due to its founder’s personal dynamism, his willingness to challenge
traditional business models and his ability to select and groom professionals into
decision-making positions.
By early 2002, Record’s annual revenues stood at just under Rs. 600 million through
an average daily output of about 9,000 units and an annual production capacity of
just over two million units. This had already placed Record among the industry’s top
tier of exporters, in a market characterized by seasonality, low product innovation
and stable global demand. Record’s present client portfolio contained mid-level
regional brands that sold high volumes of the mass-market category, matched by a
healthy mix of match-grade balls. So far, Record had successfully avoided getting
involved in the promotional category, but it was finding it tough to break into the
professional category because of low volumes and highly entrenched competition.
Record was recognized for its consistent quality and customer claims
were within the 2% allowed. In-house reject rates, at almost 8%, were lower than
(2)
the industry average of 10-11% because of selective automation of the quality
inspection function. However, stitching rejects had to be sent back to the maker for
repairs adding days to production time. It was usual practice to commission 10-12%
more than the production order to ensure on-time customer shipments.
Financially, Record showed healthy cash-flows and minimal borrowings against credit
facilities, fixed assets estimated at over 165 million including almost 100,000 square feet of
newly constructed factory floor-space
Figure 2- Production Cost of Typical Sportsball that is under-utilized. Yet, despite its
# Item PKR USD brand new factory outside the city,
A RAW MATERIALS 116.58 2.01
Artificial Leather 34.22 0.59 Record still operated within the
Natural Latex 10.44 0.18 traditional cottage-industry model, which
Lining cloth 13.92 0.24
Rubber bladder 10.44 0.18 helped maintain low overheads and
Accessories 5.80 0.10 indirect labour costs.
Screen Printing 9.86 0.17
Packaging 25.52 0.44
Miscellaneous 6.38 0.11 However, things were beginning to
B CONTRACT LABOUR 37.12 0.64 change. Global brands were pushing for
Maker 7.54 0.13
Stitcher 23.78 0.41 lower prices in all categories of balls.
Screen Printer 5.80 0.10
Forecasts by industry analysts predicted
C FACTORY OVERHEADS 132.24 2.28
Salaries 16.24 0.28 a price compression of 5-8% in the
Utilities 13.34 0.23 coming 3 years due to new production
Communication 24.36 0.42
Facilities Management 8.12 0.14 facilities opening up in China, where
Marketing & Travel 69.60 1.20 local raw materials were cheaper,
Sampling & Testing 0.58 0.01
D TAXES & DUTIES 21.46 0.37
utilities were less costly, worker
Tax @ 5% 14.50 0.25 efficiency was demonstrably higher, and
Surcharges etc @ 2.5% 6.96 0.12
shipment processing and time-to-market
E COST OF SALE 307.40 5.30
F F.O.B. SALE PRICE 362.50 6.25
were faster than in Pakistan.
G PROFIT 55.10 0.95
* USD 1 = PKR 58 Meanwhile, the world was waking up to
labour practice and workplace standards
because of revealing press coverage of sweatshop conditions in many factories in
developing countries producing for major brand names. Bonded child labour in Pakistan’s
carpet industry had already caused a major loss of confidence among buyers who were
abandoning their Pakistani suppliers and moving to other places such as China and India.
The cottage industry model was vulnerable because of its obvious dependence upon home-
based cheap labour where there was no way of monitoring conditions of employment, such
as voluntary adult workers, their human rights such as fair wages, legal working hours,
occupational health & safety and freedom of association. It was quite clear that many
customers who had traditionally ordered sportsballs from Pakistan were considering other
sourcing options.
Record had the resources to double its infrastructure and the coordination capacity to
expand its home-based stitcher workforce accordingly. Moreover, there was opportunity to
diversify into allied product ranges like uniforms, goalie gloves and shin-pads at minimal
investment. But buyers typically required a supplier to first show what it was capable of
before considering any orders. For Record the question was whether buyers would approve
of any new investment in allied product manufacturing by Record and whether its new
products would be able to compete in price and quality.
The challenge for the CEO was how to attract more business and break ahead of the
competition in an environment where volume demand was unlikely to rise beyond the
present level, selling prices were sure to decline, the cost of raw material and overheads
were continuing to grow, more competitive suppliers in other countries were beginning to
look attractive to buyers, and for the first time, workplace standards and workers’ rights
were becoming important in customers’ buying decisions.
(3)
The situation clearly called for a new business strategy. Consider yourself in the position of
the consultant hired to help the CEO decide on the most appropriate action plan.
(a) What is Record’s market share in national sportsballs exports? In the given
context, at whose expense would Record strive to gain market share? Explain
to the CEO the concept of “entry barriers” and how he would create and
sustain competitive advantage by employing it. (05)
(b) Within the market segmentation of product categories, which type of balls
should Record focus on if it has to become most profitable? Why? List for the
CEO all the possible sources of competitor information that can help him
determine exact costs and quality levels of the competition. (05)
(c) What element of the traditional sub-contracted stitching business model poses
the highest risk in terms of managing product quality, turn-around time,
resource optimization and human rights & workplace conditions? Knowing
what you do about managing risk and establishing direct control, what will
you say in response to the CEO’s argument that sub-contracting stitching is
10-15% cheaper than stitching all balls in factory controlled workshops? (06)
(d) If forecasts about 5-8% price compression prove true over the next year,
would Record still be able to retain profitability? Looking at the calculations
for the cost of production, under which cost head do you see most potential
for saving resources? Make a convincing case for the CEO to re-organize the
pricing calculations to create a healthier profit margin. (04)
(e) List the key strategy issues that the CEO must consider when developing a
business strategy for Record. Conduct a quick SWOT analysis of the
situation at Record, keeping in mind the CEO’s aim of breaking ahead of the
competition through innovations and diversification, but mindful of the local
systems, external competition and buyer’s emerging attitudes.
Internal S W
External O T
(10)
Q.2 What is meant by the term “stakeholder”? List or draw a diagram of the possible
stakeholders for a large national publicly listed company. How do these
stakeholders impact business strategies? What must a business do to maintain a
balance between the relative powers and conflicting interests of its stakeholders? (15)
Q.3 Human Resource Management is a strategic approach to acquiring, developing,

managing and motivating an organization’s people. How does it differ from the
traditional “personnel” function? Compare the two approaches to prove which is
more appropriate to modern business. (11)
Q.4 Can the efficiency of an organization be measured in non-financial ways? If yes,

how can this be done? Describe what you understand by “key limiting factor” and
how you would employ it as a technique to measure efficiency? Explain through a
suitable example from the non-profit sector. (11)
(4)
Q.5 Explain the following terms:
(i) Downsizing
(ii) Total Quality Management
(iii) Empowerment (09)
Q.6 In today’s shrinking world many businesses consider the possibility of launching
operations in a new country. Give an example of a company you know of that has
managed to compete successfully in a number of diverse cultures. What are some of
the factors that can be considered as opportunities for global competition in the case
of such a company? Likewise, what factors could be considered threats to global
competition? What would you recommend to a company that wishes to compete
globally? (12)
Q.7 Do you agree that “international business is really a collection of domestic

industries”? Argue for or against the idea, keeping in mind the five factors that
influence strategy for a company competing globally as compared to a national one.
Draw Porter’s “diamond” of determinants of national competitive advantage and
explain each segment briefly. (12)
(THE END)
Final Examinations Summer 2004
June 09, 2004

(3 hours)
Q.1 The Super-tea has been a highly successful company enjoying around 35% market
share in a very competitive market. Rivalry amongst a number of strong players is
witnessed in the industry. They are all pursuing highly aggressive marketing
strategies focusing on cost efficiency, capacity utilization, line extension, broad
based communication programs.
Market share of Super-tea Company has been stagnant for the last several years.
Company’s marketing people blame the stagnant situation to slow growth of the
market. Other members of management team feel that if an effort to increase the
market share is not made, the company might start losing grounds in areas of its
strengths. Competition might start taking share from us.
Managing Director also shares the apprehension and would like to take a more
aggressive approach.
Director Marketing is however, reluctant to take a head-on war with the

competition. He also assesses that increasing market share will also create problem
of capacity expansion within two-three years time meaning thereby, a substantial
investment as well as pressure on our cost and profitability. He, therefore, thinks
that the company should go for “Market Share Maintenance” rather than “Market
Share Expansion” strategy.
How would you assess this situation? Please explain. What should be the decision of
the company and why? (10)
Q.2 ``We believe our first responsibility is to the doctors, nurses and patients, to mothers
and fathers and all others who use our products and services. In meeting their needs
everything we do must be of high quality. We must constantly strive to reduce our
costs in order to maintain reasonable prices. Customers’ orders must be serviced
promptly and accurately. Our suppliers and distributors must have an opportunity to
make a fair profit.
We are responsible to our employees, men and women who work with us
throughout the world. Everyone must be considered as an individual. We must
respect their dignity and recognize their merit. They must have a sense of security in
their jobs. Compensations must be fair and adequate, and working conditions clean,
orderly and safe. We must be mindful of ways to help our employees fulfil their
family responsibilities. Employees must feel free to make suggestions and
complaints. There must be equal opportunity for employment, development and
advancement for those qualified. We must provide competent management and their
actions must be just and ethical.
(2)
We are responsible to the communities in which we live and work and to the world
community as well. We must be good citizens – support good works and charities
and bear our fair share of taxes. We must encourage civic improvements and better
health and education. We must maintain in good order the property we are
privileged to use, protecting the environment and natural resources.
Our final responsibility is to our stockholders. Business must make a sound profit.
We must experiment with new ideas. Research must be carried on, innovative
programs developed and mistakes paid for. New equipment must be purchased, new
facilities provided and new products launched. Reserves must be created to provide
for adverse times. When we operate according to these principles, the stockholders
should realise a fair return.’’
(a) Identify the principal stakeholders addressed in the above mission statement. (02)
(b) What set of core values do you think P & J Corporation, a multinational
corporation in pharmaceutical industry, cherishes and champions, as you see
them reflected in the mission statement. Briefly list. (04)
(c) As head of Strategic Planning for the company, you are assigned to draft a set
of 5 corporate goals in the light of the above statement. (Hint: These goals
should serve to provide direction to the business units and functions in setting
their respective strategic objectives.) (10)
Q.3 (a) What is the essence of a `learning organisation’? Elaborate. (02)

(b) What distinguishing characteristics do you expect to see in a company that
claims to be a learning organisation, with respect to:
• Learning approach to strategy
• Use of information
• Enabling structures
• Inter-company learning (08)
Q.4 (a) A number of laws in force empower the government to regulate the workplace
environment and industrial relations between employees and their employers.
Why is this necessary? What would happen in your view, if these laws were
not there? (05)
(b) Who is responsible for health and safety at the workplace – government,
employers or employees? Provide a detailed, well-reasoned answer. List the
key elements of a workplace Health & Safety programme. How does a good
working environment affect performance? (05)
Q.5 Do you agree that multinational companies with their massive resources and global
reach are “in a position to abuse their power by acting as if they were independent of
local laws and customs”? Explain with examples some of the typical characteristics
of such corporations. What do you think are the motives of multinational companies
when they expand across national and cultural boundaries? Why do you think large
global corporations expand their supply chains to vendors in distant countries? (10)
Q.6 A manufacturer of cosmetics and toiletries introduced a new product to increase

profitability. They developed a tooth paste which cleaned teeth better than any other
brand of toothpaste in the market.
They decided to brand the product as “SHINE”. The pack design featured smiling
white teeth on a butter yellow color background .
(3)
The distribution was done on a large scale in all retail outlets in the city, and the
product placed on a shelf with other tooth pastes. The final retail price decided by
the company was 70% above all other toothpastes, because of the upscale
positioning. Promotion was executed on national T.V. and newspapers. However,
after eight months, it was clear that sales targets were not being met.
You are the marketing consultant of the company and have been asked by the
Director to analyze the situation and state assumptions as to what you think were the
reasons for the poor response?
You are also asked to suggest strategies which would revitalize the brand and ensure
its success. (11)
Q.7 What is a marketing audit? Why is there a need for such an audit? When should it be
carried out? What are the factors studied in a marketing audit? (10)
Q.8 Despite many obvious advantages of going multinational, what are some of the
complexities that companies confront when deciding on overseas expansion? Give
at least five points along with your reasons. What are some of the alternate ways to
enter foreign markets? Give a detailed answer by describing each distinct possibility
with examples where possible. (10)
Q.9 Why is it advisable to integrate HR development activity with a company’s strategic

objectives and organizational culture? Explain by the help of an appropriate
example. What are some of the methods available to organizations for individual
and team development? List at least five methods, and in table form, discuss their
respective advantages and disadvantages. (10)
Q.10 Describe, with real-life example for each of the following Product-Market
Diversification options for growth available to companies.
• Horizontal Integration
• Concentric Diversification
• Conglomerate Diversification (03)
(THE END)
December 09, 2004

(3 hours)
Q.1 (a) What do you understand by the term “Value Chain”? (03)
(b) Can the performance of a business organization be measured in non-financial

ways? If yes, how can this be done? What is meant by a “Socially
Responsible” Business? Give your understanding of the concept of Corporate
Social Responsibility (CSR) supported by at least two examples of companies
you think exhibit CSR Values. (06)
(c) A major international cigarette company is running advertisements about how it

is working to save the environment by planting trees etc. What is your opinion
about the ethical issues arising from situations like this in which companies that
sell a potentially injurious product show their keenness to help society or the
environment? Give your argument on why this is “right” or “wrong”. (07)
Q.2 Excel Chemicals has been operating as a leading fertilizer company in Pakistan for
the last 35 years. At the time of its inception, the company was the sole manufacturer
of fertilizer, and in no time created a monopoly situation by driving out the imported
brands from the market. Over the years, several other companies entered the fertilizer
market by investing heavily in manufacturing facilities. Excel Chemicals saw rapid
loss of its market share in the next two decades to the new entrants. The cost
advantages that it initially enjoyed, owing to its world class manufacturing plant that
was run on near-capacity levels, were also eroded due to ever reducing demand for its
brands, resulting in dwindling profitability. The competitors not only came in with
smaller and more cost-efficient manufacturing facilities, but also brought in
innovative products that were clearly differentiated from Excel’s single standard
product offering. These differentiated offerings catered separately to different crops,
different application timing, and different soil types in different parts of the country.
Today, while Excel Chemicals still enjoys market share leadership, it no longer leads
in terms of profitability. It still makes a decent amount of profit on its operations, and
has an awesome cash flow position.
The Board of Directors is meeting to conduct a marketing strategy review of the

company. They will decide on short-term and long-term marketing strategies to adopt
in order to ensure that the:
• company regains its competitive advantage in the core fertilizer business, and
• pursues other high growth business opportunities, both inside and outside the
agriculture sector
(2)
You, as Head of Strategic Planning, have been asked to present your

recommendations in the meeting. Using the Ansoff Product / Market Matrix
Concept, how would you make recommendations under the following strategic
growth options:
• Market Penetration
• Market Development
• Product Development
• Diversification (10)
Q.3 (a) Different people in an organisation have different styles of learning, depending
on what type of persons they are. Describe the learning styles best suited to the
following personality types:
(i) Theorists
(ii) Reflectors
(iii) Activists
(iv) Pragmatists (06)
(b) The interview is an extremely popular and effective method of selecting

employees. List and briefly describe the different types of interview used in
selection process. (07)
Q.4 Quality has become an increasingly important factor in determining business

advantage. How does a company that is positioning itself on high quality product
assess its relative quality as perceived by its customers? When customers are not
prepared to pay a premium for increased quality, what should a company do to still
gain a potentially attractive competitive advantage? Give an example to prove your
point. (10)
Q.5 What are the pitfalls in strategic planning that management in an organization should
watch out for or avoid? Identify any five pitfalls. (08)
Q.6 (a) What do you understand by the term Political Risk faced by multinationals?
What are the common manifestations of this risk in everyday business? (04)
(b) The Pakistan automotive industry has recently been the subject of heated
discussions in the media due to the very rapid demand growth for cars
witnessed in the country, and its consequent problems of insufficient supply,
delayed availability, and high prices. The automotive industry represents
sizeable foreign investment in Pakistan. As a safeguard to their ROI, and in
return for the promised technology transfer and increasing extent of local
manufacture (under the Deletion Programmes), the multinational car assemblers
have been protected through trade barriers. Consumers accuse these companies
of charging much higher prices than in the country next door, and complain
about having to suffer long delivery periods against their fully paid orders.
What possible policy measures can the Pakistan government exercise to make
sure that the multinational automotive manufacturers operating in the country:
• Transfer technology and help develop local industry

• Charge competitive prices from local consumers (08)
(3)
Q.7 What do you understand by the Investors in People standard of TQM? Elaborate on
the key areas of performance where an organization needs to perform satisfactorily
for obtaining the standard. (09)
Q.8 Any business deciding to go international broadly has two modes of entry into the
overseas market: through Exporting, or through Overseas production. Describe the
following strategic options available under each of the above options of the above-
noted modes of international business.
• Indirect Exporting
• Direct Exporting
• Licensing
• Joint Venture (08)
Q.9 Do you agree that mature and declining products must be replaced with newer
products? Give an example from your own experience where you have seen this
happen. How does your example relate to the stages of product development?
Describe the Product Development Process in detail. What are the factors that might
hinder this process? (10)
Q.10 Define Benchmarking, and describe the process involved ni this exercise. What are
Internal, Functional and Competitive types of Benchmarking? (04)
(THE END)
June 09, 2005

(3 hours)
Q.1 (a) What do you understand by the terms Acquisition and Merger? Briefly list the
common reasons or justifications cited by the business leaders for doing acquisitions
and mergers. (08)
(b) While expansion and diversification are obvious and desirable growth strategies for
healthy businesses, sometimes companies are also left with no choice but to cease
operations, withdraw from the market and thus abandon a particular business altogether.
Although this might be the best option in a given situation, there are likely to be exit
barriers to doing so.
What do you think could be some of these barriers that keep managers from taking
the abandonment decision? (06)
Q.2. Fillers - the largest global brand in sports & leisure shoes – has been in the news in recent times
for maintaining appalling working conditions in its offshore location factories in Asia. These
factories – termed ‘sweatshops’ – are located in poor countries where government standards for
minimum acceptable working conditions are non-existent, and thus labour exploitation is
commonplace.
On learning about this shocking disparity between working conditions in the US factories and in
those in the 3rd World countries, some Public Action Groups in the US started their protest
against exploitation of labour by this large MNC. Under protest, they called for consumer
boycott of Fillers products. The company had to make amends under pressure, and lost
considerable consumer goodwill in the process.
If you were in charge of managing this ‘goodwill disaster’ for the company, what steps would
you take to rectify the situation, from:
• An HR / Operational Management standpoint, to fix the working conditions and bring

them up to international standards.
• A Public Relations standpoint, to recoup the lost goodwill with the host countries
governments & communities where the factories are located, and in the eyes of
consumers all over the world. (09)
Q.3 Incentive Pay Schemes tie an extra monetary reward for employees with their achievement of
quantifiable performance targets. These incentive plans/schemes are considered to be a useful
means of motivating and directing the efforts of employees towards overall organizational goals.
However, incentive plans are not always successful in real life.
Highlight some common situations where incentive schemes fail to achieve their intended
purpose. (06)
(2)
Q.4 Zodiac Corporation has long been the global leader in the business of photographic equipment,
accessories, supplies and services. The key thrust of its R&D efforts has, for long, been on
development of superior quality photographic films and paper. The advent of digital
photography took Zodiac by surprise. While Zodiac was busy developing the better film, digital
technology eliminated the need for films altogether. The company woke up to the changed
market realities and set about covering lost ground. It has made considerable progress in
adopting digital photographic technology, but has lost initiative and market share to the
pioneers, in the time to catch up.
How would you describe Zodiac’s (previous) orientation to its market? How should companies
prevent their offerings from becoming obsolete in a dynamic market? (07)
Q.5 (a) Not-for-Profit Organisations, like charities, are not driven by the motive to maximise
monetary gains. Do you think such organisations should still pursue the objective to carry
out their activities Economically, Effectively, and Efficiently? (04)
(b) Many companies declare Ethics to be one of their Core Values that govern their business
mission and strategies. Can you think of examples showing how earnest adoption of
ethics as a core value can have a significant impact on the conduct of an organization
towards the following stakeholders:
• Customers
• Employees
• Environment
• Government and other regulatory agencies (08)
Q.6 (a) How would you define the process of Performance Appraisal? What in your opinion
should be the general criteria of integrity and effectiveness based on which the process of
Employees’ Performance Appraisal should be assessed and evaluated? (09)
(b) List and briefly describe at least five ways in which on-the-job training can be imparted to
employees. (05)
Q.7 Consumer goods are often classified under the following heads:
• Convenience Goods
• Shopping Goods
• Speciality Goods
• Unsought Goods
Explain with examples, the above classification. (08)
Q.8 Packaging is a key component of the physical product. The cost of packaging often
comprises a substantial part of the total product cost. What do you think are the important
functions that packaging serves in the effective marketing of a product? (05)
(3)
Q.9 MILEAGE International, a recognized name in the electronics market made a very aggressive
entry into the Asia Pacific markets during 1990s. As compared to its close rivals PRODIGY
and CONSUMER ELECTRIC, Mileage decided to invest in building its own organizations
across these markets to position itself ‘right’ strategically and operationally rather than adopting
a policy of indirect entry into these important markets. In the regional management, all the
positions for Regional Directors, Functional Heads and Product Managers were filled with
expatriates. Furthermore, in the newly established factories, Plant Managers were also called in
from its European factories. Even at the national level, expatriates were placed on key positions
such as Managing Directors, Finance Directors and Plant Managers.
The company during its establishment phase did quite well with these expatriates. Problems,
however, started coming in at operational levels when the business was further expanded and
performance of expatriate managers was seen affected. The company in its Board meeting
decided to adopt a new organizational strategy of gradually replacing expatriates at national
level with locals. As a first step to this strategy a local Director of Human Resources was
selected and appointed and was given the task of preparing a phase wise replacement program
in this connection.
(a) Please trace reasons for placement of expatriates by MILEAGE International in Asia
Pacific on a large scale during its establishment phase. (06)
(b) Why did the company decide to go for a replacement program of expatriates with local
managers? (06)
Q.10 “Real effect of abolition of the quotas against export of textiles and clothing from
developing countries is still to come. With textile, clothing and fibers making up close to
three quarters of Pakistan’s exports, much needs to be done to face the new challenges.”
Key exporters and industry experts comment.
(a) What are quotas and the basic economics/issues of having quotas in international
trade? (05)
(b) Describe any four implications of quota free regime and free trade under WTO
(World Trade Organization) arrangements. (04)
(c) How can Pakistan face the new challenges in textiles and clothing industry? Give
at least four recommendations. (04)
(THE END)
December 08, 2005

(3 hours)
Q.1 (a) Team development process may comprise of the following four successive
stages i.e. forming, storming, norming and performing. What team dynamics do
you expect to see in action, in each of these stages? (04)
(b) List and briefly describe the characteristics of an ideally functioning team. (04)
Q.2 Shahbaz, the Managing Director of a large multinational company was successful in
convincing the Board of Directors to take a decision of making an investment of
Rs.500 million in new machines and technical infrastructure. His plea was that as per
the company’s aggressive marketing plan, existing capacity shall exhaust within 3
years, hence the company will need more capacity to fill market demand. The
business unit where the investment was decided to be made was contributing 70% of
the turnover and profits. Unfortunately, immediately after the new investment,
competition became very aggressive and some new competition also entered into the
market with new competitive advantage. This resulted into price pressure as well as
loss of market share to the multi national company. The company came into severe
problems though they were in a comfortable position before the new investments.
(a) What mistakes did Shahbaz make? Please explain. (06)
(b) What alternative courses of action were available to Shahbaz, which would have
been less risky? (06)
Q.3 Beatles Corporations, a good name in Domestic Appliances business are considering
launching a new product. The product is the result of the R&D efforts of the company
and has several new features expected to give the company a competitive edge. Cost
of the product will definitely be higher than their existing products. Company’s higher
management would like to go for market skimming price strategy with minimum 20%
higher price than the current product. A feedback meeting with the Channel of
Distributors however, confused the Brand Manager, as all of them were insisting to
begin marketing of the new product with initial price equal to existing products and as
customer response grows, increase the price gradually to the desired level.
(a) How would you differentiate between market skimming and penetration pricing
strategies? (04)
(b) Would you recommend the company to go with the suggestions of the
distributors? What are the risks involved? (04)
(c) What would be your decision as the Brand Manager of the new product in
Beatles Corporation? Please explain with reasons. (03)
Q.4 Many multinational companies now believe that streamlining cross company
processes (supplier process improvement programs) is the great frontier for reducing
costs, reducing wastage, enhancing quality and speeding operations. It’s where the
next decade’s productivity wars will be fought.
(2)
(a) Please comment on the above statement. (04)

(b) Give your recommendations for supplier process improvement program for
multinationals investing in Pakistan. (06)
Q.5. Synergy Chemicals are in the business of manufacturing and marketing agrochemicals
mainly fertilizers and have been quite successful. Recently, they started experiencing
a stagnant market share growth and all initiatives including new products, gave them
no positive results. Management team of the company was in a meeting to decide
upon the strategic direction of the company. The Chief Marketing Officer (CMO),
Asim Saleem, while concluding his presentation, finally remarked, “Gentlemen, all
our efforts to improve our competitive position for the last several years have gone to
waste. It is only feasible that we diversify into new business while maintaining our
position in our current business. I mean a new business unit. Our Marketing Research
department has prepared a feasibility report on Fast Moving Consumer Goods which
show a consistent growth pattern. It suggests cartoned milk as an excellent option at
this point in time. This may look different but not difficult as the return of our
investment is well guaranteed.”
The Chief Financial Officer was not very convinced of the idea of Asim Saleem. He
was of the opinion that the company should still focus on intensive growth strategies
rather than jumping on the conclusion of stagnant product life cycle of their existing
business.
Management team was not able to make any decision and adjourned for the next meeting
after two days. The Chairman got an opportunity to count on several options for both the
strategies given by two of his senior managers.
(a) What type of growth strategy is being proposed by the CMO? Evaluate pros and
cons of the strategy. (08)
(b) If the management adopts the CFO’s idea of intensive growth, what are various
options on which they should work? (03)
Q.6 Inter departmental conflict is an important issue in any organization. A number of

methods are used by experts in positively using departmental conflict for integrated
business results.
(a) List down some of the key reasons for inter departmental conflict. (03)
(b) What are various methods to resolve them? (03)
Q.7 The marketing arena is dominated by market leaders, setting the pace of the market
with runners-up challenging the leader. Then we have follower companies, who prefer
to follow taking the lead from the leaders and runner-ups rather than challenging
them. Generally, such companies are defined as HIGH TURNOVER, LOW MARGIN
companies. Low margin is compensated with High Turnover and gives them the
required profits. But then there is another segment of companies, who work on the
principle of LOW TURNOVER, HIGH MARGIN, they are called Niche Marketers.
(a) Who are Niche Marketers and what is meant by Niche Market? (02)
(b) The key idea in nichemanship is specialization. List at least eight specialist roles
available to niche marketers. (08)
(3)
Q.8 (a) Every international affiliate has different relationships with its parent company.
These inter company relationships require different payments to its parent
company. Identify the various types of payments made to the parent company. (05)
(b) An industry is a group of firms that offer a product or class of products that are
close substitutes for each other. Accordingly a company's closest competitors are
those pursuing the same target markets and the same strategy.
The above two statements clearly identify the need for detailed information on
competitors activities to keep ahead in the competition to redefine corporate
strategy and plans based on the new rules devised by the competitors.
List at least eight sources that are available to the company to obtain information
on the competitors' activities. (04)
Q.9 In the wake of industrial accidents like Union Carbide – Bhopal, and environmental
disasters such as Exxon Valdez – Alaska, Oil and chemical companies have become
very sensitive to Safety, Health and Environment (SHE) concerns. Nearly all
companies have made SHE a part of their core values and mission statement, and keep
close track of their performance in these areas. Obviously SHE initiatives command a
sizeable budget and demand time of managers.
DO you agree that besides being a good Corporate Social Responsibility practice,
adopting SHE standards makes any business sense as well? If yes, what in your
opinion could be the bottom line benefits of such policies? (06)
Q.10 Just as physical climate is described by such variables as temperature, humidity, and
precipitation, corporate culture is composed of such factors as friendliness, risk taking,
open communication amongst others. The culture existing within a firm influences the
employees' degree of satisfaction with the job as well as the level and quality of their
performance.
(a) Define Corporate Culture. (02)
(b) List the internal factors that affect the Corporate Culture. (05)
(c) Culture is often viewed in terms of level of participation within the organization.
What do you think are the various benefits derived when the top executives
encourage the process of participation by employees in the decision making
process? (05)
Q.11 “Superior product quality is the key to higher return on Investment of any business.”
Do you agree? Please explain. (05)
(THE END)
June 08, 2006

(3 hours)
Q.1 Keeping in view the fast changing environmental factors, please comment on the
viability of the following statements:
(a) Strategic management is solely a top management job. (03)

(b) Organizations should go for highly challenging goals rather than following
normal growth. (03)
(c) Organizations should pursue only those objectives which match their internal
capabilities. (03)
Q.2 (a) “Strategic vision (core purpose) of an organization should never change.
What can change are operating procedures, cultural norms and business
strategies”. Do you agree with this statement? Kindly explain your view
point and also discuss the various strategic aspects related to the core values
of a company. (06)
(b) Strategic Planning and Control Cycles are meant to go hand-in-hand. What do
you understand by the term control in the context of planning? Why is control
important? (05)
Q.3 Many public sector organizations in Pakistan have recently been privatised or are in
the process of being sold to private entrepreneurial sector. These include banks,
utility companies, large scale manufacturing firms etc. The privatisation process
will be followed by huge changes within the organizations to which the employees
will have to adjust and adapt.
(a) What different types of organizational changes do you see taking place in
these enterprises? (04)
(b) It is expected that the employees may resist the impending change. In what
way do you think change may affect individuals in these organizations,
leading to their resistance? (06)
(c) You are a consultant appointed to facilitate introduction of change in one of

these organzations. What factors would you bear in mind in dealing with
resistance to change with respect to the following:
• Pace
• Manner
• Scope of change (04)
(2)
Q.4 (a) Describe the following branding strategies with real life example from your
observation.
• Family branding
• Brand extension
• Multi-branding (06)
(b) Market Segmentation is based on the recognition of the diverse needs of

potential buyers. From your personal observation, what basis of market
segmentation do you see being used whilst marketing the following:
• soaps
• financial services
• newspapers / publications
Elaborate with at least 2 examples each (06)
Q.5 On January 01, 2004 Sherry was appointed as General Manager, Marketing and
Sales of the consumer products division in Neon International, a company having
its headquarters in Germany. Sherry spent a couple of weeks taking inventory of
the situation. He made the following assessments:
• Sales of consumer division has been stagnant over the last four years which
was around Rs.1.2 billion with the quantitative turn over of 40 million pieces
per annum.
• Market size was estimated at 120 million pieces per annum which means the
company commanded around 33% market share. Research findings have
confirmed that market growth has slowed down in urban market whereas rural
market is growing by 10%.
• The company had a good distribution infrastructure in urban towns whereas
rural market penetration was extremely poor.
• Competitive environment was becoming very aggressive. Local competition
was focusing on the strategy of ‘profit through cost management’ and market
prices (both trade and consumer) remained constant over the last several years
confirming ‘price erosion’ in the industry.
• Price differential between company’s brand and that of competition was as
high as 15%.
• With lower market prices, competitors were able to capture a big chunk of the
rural market.
Sherry concluded that times ahead will be quite difficult and the company has to re-
visit its core as well as operational direction. He therefore decided to discuss the
overall scenario with the Marketing and Sales team before preparing a presentation
for the executive committee of the company.
Some of the key recommendations received from the Marketing and Sales team
were:
• Prices must be brought at par with competition.

• Advertising budget must be increased from 1.5% to at least 5% of the total
turnover.
• Low cost brands should be introduced in the rural market to fight competition.
• Trade margins shall be increased to keep our brand attractive to trade partners.
• Distribution channels shall be pushed to improve distribution efficiency.
(3)
While Sherry was still thinking where to begin for the proposed presentation, news
came from the Regional Headquarters that one of the closest international rivals has
announced entry into Pakistani market and it was quite obvious that their initial
target would be urban markets.
(a) Make an objective assessment of the situation and bring out key threats being
faced by the company. (04)
(b) What should be the new strategic direction that Sherry should propose to the
Executive Committee? (05)
(c) Please suggest key operational strategies that should be immediately adopted
by the company to salvage this situation. (06)
Q.6 What is dumping? Why do countries impose anti-dumping measures? Give some
examples of anti-dumping measures used by countries. (05)
Q.7 In selecting candidates for employment, interviews are often supplemented by

Tests. Briefly describe the different types of tests that are available, and the
advantages and shortcomings of using them. (10)
Q.8 (a) What do you think are some of the reasons for companies to venture outside
their home markets through exporting or making overseas investment? (08)
(b) Many foreign fast-food companies have come to Pakistan by appointing local
franchisees. These franchisees have license to use the franchisor’s brand name
and are supported by the franchisor in all the business processes through
training and transfer of know-how. As a result, the quality of service remains
up to the franchisor’s international standards.
What in your opinion are the likely advantages to the franchisor in such an
arrangement? What are some of the potential pitfalls? (06)
Q.9 Organizations particularly Fast Moving Consumer Goods companies should strike
a balance between push and pull strategies to successfully achieve their sales and
distribution goals. Those who overdo push and do not well balance it with pull,
come into serious problems.
(a) Differentiate between push and pull strategies. (04)
(b) What problems do you think a company might face if they overdo push
and do not balance it with the desired level of consumer pull? (06)
(THE END)
December 7, 2006

Module E (3 hours)
Q.1 (a) What do you understand by the concept of Ethical Marketing? (02)
What possible ethical issues do you see in the following areas?
Fixing of prices in collaboration with competitors.

Premium pricing for brands versus unbranded generic products.
Advertising. (06)
(b) Employees are important stakeholders and responsible organizations lay down
appropriate rules/principles to govern their conduct towards the employees. Give
any four examples which you consider important for inclusion in the Code of
Ethics relating to employer and employee relationship. (08)
Q.2 Sterling Corporation is an integrated manufacturing and marketing concern dealing in

industrial chemicals. The company employs a large number of staff which is mainly
engaged in manufacturing, office support services and outdoor sales. The occupational
health and safety record of the company has been quite poor with regular incidents
occurring across the organisation. Typical incidents reported are:
¾ Factory Floor: Inhalation of toxic fumes; cuts & burns in handling machines;
slips and falls due to poor housekeeping.
¾ Office: Ergonomic ailments due to poorly designed furniture; eyesight

impairment due to extended hours of computer work.
¾ Road Travel: Road accidents and resulting injuries.
The management has woken up to the need to improve health and safety performance of
its employees. It wants to champion zero-tolerance for unsafe and unhealthy work
practices and understands that this requires joint ownership of responsibility by
management and employees.
You are assigned to:
Draft a Corporate Health & Safety Policy statement stating the management’s
vision and everyone’s responsibilities. (03)
Recommend some safety measures to be undertaken by the company for the
employees to help reduce accidents. (03)
Suggest some measures, against which to monitor safety performance in the
following three areas:
¾ Factory Floor
¾ Office
¾ Road Travel (06)
(2)
Q.3 Despite the proven advantages of specialisation in terms of gaining comparative

advantage, many countries actively try to avoid specialising their economies. What
might be some of the arguments against pursuit of specialisation? (08)
Q.4 Marketing Research is a powerful tool that helps in improving the quality of marketing
decisions. There are different approaches available to pre-test a marketing idea or
strategy. Some of these pre-testing tools are:
• Motivational Research
• Laboratory Tests
• Ratings Tests
• Test Marketing
• Simulated Store Technique
• Controlled Test Marketing
Describe any four of the above types of pre-tests. (08)
Q.5 (a) What is meant by forecasting and why is it done by business managers? (02)
(b) What may be the most common reasons for failures in forecasting? (03)
Q.6 (a) Why, in your opinion, are properly designed Job Application Forms important and
what is their main purpose? (03)
(b) What are the main objectives of undertaking Performance Appraisal exercises at
regular intervals? (06)
Q.7 Ahmer and Company manufactures and markets motor cycles in Pakistan. It has started
facing severe price competition from some of the new entrants in the industry. Some of
the competitors’ prices are very low according to the company. These new entrants are
mostly local companies which operate with Chinese collaboration. They are attempting
to change the rules of the game by bringing in new model of business focusing on ‘Best
Cost Strategy’. Ahmer, the owner of the company is quite concerned about this
situation. It is putting pressure on both profitability and market share of his company.
He can manage some cost reduction by better negotiation with his existing vendors and
component manufacturers but these do not seem sufficient to fight against the new
competition. He is of the opinion that he cannot compromise on quality to the extent that
it earns his brand a bad name in the market.
(a) Please make a brief assessment of the above situation highlighting the importance
of cost management as an on going activity of organizational strategic fit. (03)
(b) What other options do you think Ahmer has, to fight the new competition? Please
present a case to Ahmer for strategic cost management to make a breakthrough. (08)
Q.8 Research proves that most successful companies have ‘Purpose Beyond Profit’ which
give them better return on investment and shareholder value.
(a) Explain your understanding of the concept of ‘Purpose Beyond Profit’. (03)
(b) Give three examples of purpose beyond profit which a business organization could
have. (03)
(3)
Q.9 Many top executives believe in ‘Constant Re Invention’, as they remark, “the minute
you have developed a new business model, it’s extinct, because somebody is going to
copy it”. Hence, the organizations should develop Sustainable Competitive Advantage
(SCA).
(a) What do you understand by Sustainable Competitive Advantage? Explain. (03)

(b) How can product innovation and technology up gradation result in developing an
SCA? (03)
(c) In the context of product development, list the different types of ‘new products’? (03)
(d) List various sources of ‘new products’. (03)
(e) While bringing a new product in the market, what important marketing
considerations should be taken into account to make it successful? Explain briefly. (03)
Q.10 What are global (multi-national) companies? What are the different threats and
opportunities these companies face? Please explain briefly. (10)
(THE END)
June 7, 2007

(3 hours)
Q.1 (a) What do you understand by the terms Primary Data and Secondary Data? (04)
(b) What are the advantages of using Secondary Data in Market Research? (02)
(c) Give at least four sources in Pakistan from which Secondary Data regarding
business and industry can be obtained. (03)
Q.2 Branding plays a critical role in the marketing of Fast Moving Consumer Goods
(FMCGs) and companies incur substantial expenditures for promotion of their brands.
(a) Explain what is meant by Branding? (03)

(b) Under what conditions do companies pursue aggressive Branding Strategies for
marketing of their FMCGs? (06)
Q.3 GMP Pharmaceuticals Limited is engaged in the manufacture of a wide range of

pharmaceutical products. The company has a highly qualified and skilled professional
cadre of employees whose competence and ability to work in a team-environment are
vital for the manufacture of top quality products. The company has well-defined Rules
of Service and expects strict adherence to these rules by its employees at all levels.
Required:
Describe briefly the various stages of Disciplinary Actions which GMP
Pharmaceuticals may take against employees who violate the rules and regulations of
the company. Identify the situations in which a certain type of Disciplinary Action is
considered to be appropriate. (10)
Q.4 A UK-based group of overseas Pakistani investors intends to make substantial

investment in a new cement project in Pakistan and has engaged you as a consultant to
undertake an industry and competitive analysis on their behalf. The investors have
mentioned that the proposed cement plant of latest EU technology and manufacturing
process is based on most efficient fuel consumption and environment-friendly
parameters and it would be the first plant of its kind in Pakistan. Since fuel efficiency
is a critical success factor for the cement industry, the proposed unit would offset the
advantages accruing to the competitors who had set up their units earlier at
significantly lower capital costs. Moreover, the new cement project would be
completed within an extremely tight implementation period of one year as compared to
the units of the competitors which were set up in 3-4 years and involved higher
financial costs.
The proposed cement unit would involve a significant investment decision with far-
reaching consequences.
Required:
Identify what strategic factors relating to the industry and competitive outlook for
cement industry in Pakistan would you consider in your report to enable your client to
reach a sound investment decision. (12)
(2)
Q.5 (a) What are the distinguishing characteristics of a company which pursues a
Strategy of Globalization? (04)
(b) What are the main advantages of adopting an aggressive Global Strategy? (04)
Q.6 (a) Explain what is Distinctive Competitive Advantage? (03)

(b) What are the factors which contribute towards the creation of Distinctive
Competitive Advantage? (05)
Q.7 The success of even the well-formulated Strategic Plans depends to a considerable
extent on their implementation. What are the factors that make the organizational
environment conducive for successful implementation and achievement of the
objectives conceived in the Strategic Plan? (09)
Q.8 In Pakistan, the Mobile Telephone companies are promoting their products to meet the
various Social Needs of different segments of the market. Identify five types of social
needs that the Mobile Telephone companies are targeting in their promotion
campaigns? (05)
Q.09 In all well-managed organizations, Performance Appraisal is an important Human

Resource Management function. What are the objectives of undertaking Performance
Appraisal exercises at regular intervals? (10)
Q.10 BNG Textile Mills Limited operates an integrated textile mill having spinning,
weaving and finishing facilities. It has a work force of 2,000 employees.
Approximately 90% of the workers are deployed in the spinning, weaving and
finishing departments where the work is of a strenuous and repetitive nature.
In your opinion, what kind of work environment should BNG Textile Mills adopt and
promote to attract and retain a dedicated and stable work force committed to achieve
its business goals? (09)
Q.11 (a) An increasing number of firms have entered into International Contract
Manufacturing arrangements in the past few years. Explain what do you
understand by International Contract Manufacturing arrangement? (03)
(b) List three advantages of entering into such arrangements. (03)
Q.12 At present a significant volume of international trade is facilitated by use of

Documentary Credit. Briefly explain what do you understand by Documentary Credit? (05)
(THE END)
EXAMINERS’ COMMENTS
SUBJECT SESSION
Business Management Summer 2007
General Remarks
The questions in the Paper were quite simple, designed to assess the theoretical and
conceptual knowledge of the candidates. However, the performance of the students was
much below expectations due to lack of comprehension regarding the requirements of the
questions, insufficient preparation and inability to present accurate and relevant answers.
Question-wise comments are given below:
Q.1 This question regarding Primary and Secondary Data was simple and has relevance
in a number of courses in business. Primary Data is data collected specifically for
the purpose of the research study in hand, whereas Secondary Data is information
which has been collected previously for some purpose other than the current
research study. A number of students showed lack of clarity of understanding and
offered vague answers. Invariably, all the replies pertaining to primary and
secondary data were in the context of market research, whereas the collection of
data has application in all fields of study. This Question which carried 9 marks
provided an opportunity to score high marks which was not availed by a number of
the students.
Q.2 The concept of Branding has wide general awareness and is familiar to most of the
people in their role as consumers. Although, a majority of the candidates stated that
branding is used to differentiate a product from those of the competitors, they failed
to elaborate that branding includes identification of a product through its logo,
design, packaging, trade mark or any other symbol.
Part (b) of the Question was not understood by most of the students as the replies
were required from the marketing companies’ viewpoint as to why they pursue
aggressive branding strategies. Aggressive Branding Strategies are pursued by
FMCG companies when the products are readily identifiable by their brands, are
sold through widespread network of distribution channels, provide best value for
money, possess consistency of quality and have strong recurring demand potential
for recovery of promotion expenditures. Instead, a large number of candidates gave
reasons for branding and its marketing importance rather than explaining the
conditions in which FMCG companies pursue aggressive marketing strategies. The
overall performance in this Question could have been better.
Examiners’ Comments on Business Management – Summer 2007
Q.3 This Question on Disciplinary Actions was attempted fairly well by most of the
students. Some of the students discussed, at length, disciplinary problems and their
situations without mentioning appropriate types of disciplinary actions i.e. verbal
warning, written warning, suspension and termination. The sequence of
Disciplinary Action was not followed by a number of the students. The
performance could have been much better if the students had tried to ascertain the
specific requirements of this question, before proceeding with the answer.
Q.4 This Question pertaining to the proposed cement project required identification of
critical success factors relating to the competitive and industry analysis. Instead of
enumerating the critical success factors, students gave their own suggestions and
recommendations and discussed SWOT analysis which was not required. The
relevant critical factors such as, size of the market, anticipated rate of growth in
demand, number of competitors, their rated capacities, analysis of manufacturing
cost structures, marketing of cement as a branded product or as a commodity,
bargaining strength of buyers and traditional distribution channels should have been
identified. Several students merely reproduced the points which were stated in the
question. In certain instances there were 4-5 pages of irrelevant replies resulting in
loss of valuable time. The performance in this question of 12 marks was
unsatisfactory.
Q.5 In this Question regarding characteristics of global companies, the students offered
general explanations of companies engaged in export business and advantages of
global business operations. The key features of global companies i.e. viewing the
world as one market, pursuance of similar manufacturing, marketing and
distribution strategies and close coordination at the global headquarters where the
top management team takes key decisions regarding the operations in each country
were explained by very few students.
Part (b) regarding advantages of adopting aggressive global strategy elicited vague
responses and repetition of points stated in Part (a) of the Question. Very few
students were able to enlist advantages on lines such as, economies of scale in
manufacturing and distribution costs, transfer of manufacturing and marketing
know-how from country-to-country, advantages of availability of important raw
materials and overcoming of trade barriers and quota restrictions.
Q.6 (a) This part related to definition of Distinctive Competitive Advantage and was
answered satisfactorily by most of the students as they were able to mention
correctly that DCA constitutes a combination of all those core business
activities which a firm does particularly well vis-à-vis its competitors.
(b) In part (b), a number of replies showed lack of focus and the answers were
off-the-mark. The factors which contribute towards creation of DCA,
include superior technical expertise and management skills, superior quality
of plant and equipment, sound distribution network, customer care services,
cost advantage and access to high-quality low-cost raw materials. Instead,
some of the students made comparisons of products of different competitors
which was not required.
Page 2 of 4
Q.7 The students were expected to identify the following as essential elements of a
sound implementation framework to achieve the objectives of the strategic plan:
• a properly aligned organization structure to support the proposed strategy,

• realistic budget allocations to the various business units,
• availability of skilled and motivated staff,
• role of leadership and commitment of top management,
• installation of an MIS and Reporting System to monitor the performance on a
continuous basis and initiating timely corrective measures.
Due to problems of comprehension, a number of the candidates described at length

the factors necessary for planning a successful strategy, which was not required.
Consequently, the performance was rather unsatisfactory.
Q.8 In this Question, the Social Needs of mobile telephones were required to be
identified from the customers perspective. Need for friendship, bonding of family
ties by being in contact, establishment of immediate contact in emergencies, instant
access to information of general social interest and expression of status are the
generally accepted social needs. Common errors included describing the marketing
strategies of mobile phone companies and repetition of the same point in different
words. This Question of 5 marks provided an opportunity to score marks, which
was not grasped by a number of students.
Q.9 The Question on Performance Appraisal was attempted by most of the students and
the replies were generally satisfactory. The relevant replies included, evaluation of
employee performance, review of salary and rewards, providing vital information
for transfers and training needs, formulation of career path plans and ascertaining
whether the performance of the employees is aligned with the objectives set forth in
the strategic plan.
The students performed quite well in this question and many of them scored high
marks.
Q.10 It was a simple question about work environment in a large textile mill. Most of the
students were able to answer well as it was a general topic. However, some of the
replies focused wholly on the safety and welfare aspects of the work environment.
They ignored issues such as performance-based wage policy, provision of adequate
labour welfare facilities, a transparent grievance handling policy, training and
rewards for deserving workers etc. The issue of flexible working hours was
mentioned by a number of the students which is not correct as the integrated textile
mills work in shifts with the required complement of work force.
Q.11 In this part the examinees were expected to explain the distinguishing features of an
international contract manufacturing arrangement (ICM). It is an arrangement
whereby a firm in one country enters into a contract with a firm in another country
to manufacture or assemble a product on behalf of the firm which has awarded the
contract, strictly in accordance with the agreed specifications. Instead, many
students got confused and explained in detail, matters relating to licencing,
franchising and payment of royalties.
Page 3 of 4
In Part (b) pertaining to the advantages of ICM, the expected replies were (i) the
firm awarding the contract does not have to make capital investment (ii) lower
production costs in the manufacturing country and (iii) elimination of risks of
expropriation of assets or nationalization. The replies to this part of the question
were generally satisfactory.
Q.12 This Question on Documentary Credit was simple and required a brief and pointed
reply. A majority of the students performed poorly because they were unable to
understand the requirements of the Question. Instead of offering a definition on the
key features of Documentary Credit, attempts were made to describe the procedure
for opening of a letter of credit with its varying features.
(THE END)
Page 4 of 4
December 6, 2007

(3 hours)
Q.1 Super Candy Company Limited is engaged in the manufacture of sweets, candies,
chocolates and bubble gums consumed by children. The Company has achieved
phenomenal growth in the preceding 3-4 years. This growth is attributable to the highly
aggressive marketing and promotional efforts launched by the incoming Marketing
Director who has considerable experience in the confectionary industry. During this
period, the strength of the employees has increased from 250 to 500. It is envisaged to
induct 300 more workers during the next 24 months. The Human Resource
Management functions have been largely neglected and are not capable of addressing
the needs of a large-sized company aspiring to be the “industry leader.”
As the newly appointed General Manager, Human Resources, identify six functions of
HR management which would receive your urgent attention. Give brief reasons for
considering these functions important for the sound planning and development of HR
practices in the company. (12)
Q.2 A large number of business organizations pursue Related and Unrelated

Diversification Strategies to increase their share of the market and also their overall
profitability. Explain what do you understand by the terms “Related Diversification”
and “Unrelated Diversification”? (05)
Q.3 (a) Explain the difference between “strategic objectives” and “financial objectives”. (04)
(b) Give two examples each of strategic and financial objectives of a company
engaged in the manufacture of fast moving consumer goods. (04)
Q.4 Explain what do you understand by Corporate Social Responsibility (CSR)? What are
the essential features of CSR-conscious organizations? (06)
Q.5 Define Product Life Cycle. What characteristics of Sales, Costs, Profits and
Competition are dominant during the different stages of the Product Life Cycle? (10)
Q.6 All progressive organizations have formal Employee Performance Appraisal (EPA)
systems and considerable time and effort is spent periodically in the compilation,
processing and review of the EPA information.
Identify four main reasons for giving EPA function high importance in Human
Resource Management. (08)
(2)
Q.7 Explain the following concepts:
Branded Merchandise
Competitive Advantage
Global Company
Contract Manufacturing (12)
Q.8 (a) It is observed through various empirical studies that employee motivation holds
the key to the success of leading organizations in widely diversified business
situations.
Identify six factors which in your opinion would contribute towards achievement
of high levels of motivation. (06)
(b) Explain the concept of benchmarking. Why do firms undertake benchmarking

exercises? (06)
Q.9 Briefly explain what are the different entry barriers which make it difficult for
prospective new comers to make investment in any particular industry. (06)
Q.10 (a) The last two decades have witnessed significant growth in all spheres of
international business operations and this trend continues to gain further
momentum. In your opinion, what are the advantages which global companies
seek to achieve by pursuing international operations? (09)
(b) Identify any five constraints which in your opinion act as impediments towards
attracting foreign investments in a typical underdeveloped country. (05)
Q.11 Space Age Game Technologies Ltd has developed an entirely new line of electronic
game cube for playing video games for children between the ages of 10-15 years. This
new game cube has been developed after considerable market research and at a very
high initial R&D cost. The company has created awareness of the unique features of
this new product through selective promotion campaigns, including physical
demonstrations at prestigious electronic stores. After careful evaluation of the various
pricing options, the management has decided to launch the new product by pursuing a
“market-skimming strategy.”
(a) Briefly state what is meant by market-skimming strategy.

(b) In your opinion what are the factors which could have contributed to the
management’s decision to select this pricing strategy? (07)
(THE END)
SUBJECT SESSION
Business Management Final Examination - Winter 2007
General
In spite of the viewpoint expressed by most of the examiners that the Paper was rather
easy, the overall results were below expectations. Out of the 1,316 students who appeared
in the examination, only 317 candidates were able to obtain passing grades - 24 per cent.
Lack of ability to precisely comprehend the requirements of the questions, inadequate
preparations and failure to tailor the replies according to the marks assigned to the
individual questions were the shortcomings apparent in a large number of the answer
sheets.
Comments on the individual questions are given below:
Q.1 Specifically, the Question required identification and brief explanation of six
important HR management functions to be addressed by the newly appointed HR
Manager on an urgent footing in a situation in which these have been largely
ignored. The replies should have focused on the basic HR functions of
Recruitment, Training, Preparation of Job Analysis and Descriptions modules,
Review of Compensation Packages, Employee Appraisal Procedures, Health and
Safety Procedures and Development of an HR Information System. A number of
students got confused and discussed matters relating to organization design and
development, delineation of staff and line functions and exit interviews. These
are considered at the strategic level or at a subsequent stage. Approximately, 22
per cent of the students were able to secure passing grades in this 12 mark
Question.
Q.2 Related and Unrelated Diversification strategies are pursued by business firms
after careful consideration of their inherent advantages and disadvantages in
different business scenarios. A number of replies regarding Related
Diversification repeatedly discussed increase in the market share without coming
to the main point i.e. the difference between Related and Unrelated
diversification. While explaining Related Diversification most students either
ignored or made vague references to the critical issues of strategic fits or linkages
with the firm’s existing line of business in the form of sharing of technology, in-
house availability of HR skills, more effective utilization of sales networks,
including common distribution channels and gaining better bargaining leverage
with the existing suppliers. Similarly, the important point that Unrelated
Diversification Strategies are usually pursued when the opportunities in the
existing line of business are saturated was ignored in nearly all the replies.
Page 1 of 5
Examiners’ Comments on Business Management Winter 2007 Examinations
Q.3 The replies to this Question relating to difference between Strategic Objectives
and Financial Objectives were generally satisfactory. The strategic objectives
include sustaining and consolidating competitive advantage in the areas of
technology, H.R. skills, access to distribution channels and insights into
consumer buying behaviour. Financial objectives are the quantifiable targets of
performance pertaining to profitability, market capitalization and financial
strength which a company envisages to achieve within a stated time-frame. In
quite a few replies, the candidates offered explanations of corporate strategy
Q.4 The concept of Corporate Social Responsibility means operating a business in a

manner which fulfils or excels the ethical, legal and commercial expectations of
the stakeholders including the society. Most of the replies were relevant, although
all these points were not covered in quite a number of the answers.
The essential features of CSR-conscious organizations are that these firms pursue
open and transparent business practices conforming to high ethical values, respect
for employees, communities and the environment. They deliver sustainable value
both to the society and the shareholders and contribute towards the economic,
environmental and social aspirations of the communities in which they operate.
Q.5 This Question relating to identification of the various stages of Product Life
Cycle and the distinctive characteristics in each of these stages had an allocation
of ten marks. A significant number of the candidates were able to correctly
identify the introduction, growth, maturity and declining stages of the product life
cycle, along with their relevant characteristics of changes in sales revenue, costs,
profitability and nature of competition. It appears that the candidates were well
prepared for this Question as 78 per cent of the examinees achieved passing
grades.
Q.6 Employee Performance Appraisal is an essential HR function and a considerable

amount of time and effort at different levels is involved in this exercise at regular
intervals. Most of the candidates covered the points adequately and mentioned
that the EPA function is considered to be of significance in all major
organizations as it fulfills the following needs:
• To determine how effectively the employees have performed their duties and
allocate rewards accordingly
• To provide objective feedback and guidance to the employees on their
performance
• To identify employees with potential for promotion
• To review the soundness of the selection procedures
• To determine the training needs for improvement of future performance
Almost 40 per cent of the candidates who attempted this Question obtained
passing marks.
Page 2 of 5
Q.7 In this Question, the candidates were required to explain the concepts of i)
Branded Merchandise ii) Competitive Advantage iii) Global Company and iv)
Contract Manufacturing. The replies have been discussed in the following
paragraphs:
Branded Merchandise A significant number of the candidates stated that

Branded Merchandise refers to the merchandise marketed by a particular firm
and is identifiable by its name, term, sign, symbol or design to differentiate them
from the offerings by the competitors. The important point that the consumers
regard brand as an integral part of the product and branding adds value to the
product was also mentioned by most of the students. However, a number of
candidates wrongly interpreted the concept to mean the availability and display of
the merchandise at the retail outlets at prominent locations at the right time and
therefore lost marks.
Competitive Advantage A number of candidates stated that competitive

advantage accrues to a firm which is in a position to offer consumers tangible
value through lower prices or by way of superior quality of products as compared
to those offered by the competitors. These attributes are considered as valuable by
the consumers and therefore, they purchase the products in preference to those
offered by the competitors. However, some of the students misinterpreted the
concept of competitive advantage and discussed the comparative advantages
available to businesses situated in different countries or geographical locations
and lost easy marks.
Global Company It was mentioned by a number of candidates that a Global

Company operates in several countries through subsidiary companies, branches
and joint ventures. The concept of a truly global company is that it considers the
world as one market and minimizes the importance of national boundaries.
Global companies are able to achieve management, R&D, production, technology
and marketing advantages in costs and reputation which are not available to
purely domestic companies. Only a few students were able to cover these points
adequately.
Contract Manufacturing This concept of Contract Manufacturing was not well

understood by quite a few students who interpreted it to include joint ventures,
licensing and franchising arrangements. In essence, contract manufacturing is an
arrangement in which a company contracts with a manufacturer in a foreign
country to manufacture products according to pre-determined specifications and
on agreed terms and costs. The objectives are to avoid making capital investment
in the foreign country and to obtain the advantages of lower manufacturing costs.
Obviously, there are no fees or royalties involved in contract manufacturing as
was erroneously mentioned by some of the candidates
Page 3 of 5
Q.8 (a) Companies strive to achieve high levels of Employee Motivation by setting
demanding goals for employees, giving clear guidelines for achievement of
these goals and creating an environment in which work skills and decision
making abilities are given recognition. Appropriate financial and non-
financial rewards and establishing transparent linkages between rewards and
performance are also essential for achieving high levels of motivation.
Opportunities for training and enhancing skill levels also contribute towards
enhancement of motivation levels. Most of the candidates were able to
highlight the financial and non- financial and training aspects of motivation.
Some of the candidates explained the concept of Employee Motivation in
the context of Maslow’s Theory of Level of Needs and Herzberg’s Theory
of Hygiene which were not relevant to this Question.
(b) This part of the question regarding Benchmarking was attempted by the
students with emphasis on comparison of processes and functions of an
organization with those of competitors. However, most of the replies did not
mention that collection of vital data of these outsiders constituted an
important element of the benchmarking exercise.
Q.9 The Question regarding Entry Barriers which make it difficult for new comers to
enter a certain type of industry was attempted by nearly all the students. These
Entry Barriers are high capital costs, achievement of break-even level at high
operating capacities, dominant role of distribution channels, differentiated
products and intense competition from firmly-entrenched competitors, their
bargaining strengths and long periods of initial expensive research and gestation.
Most of the candidates were able to identify only 2 or 3 of the entry barriers.
However, some of the candidates incorrectly identified poor profitability,
switching costs, large scale of operations of competitors and government policies
as Entry Barriers. A few candidates discussed Porter’s SWOT analysis which
was not required either.
Q.10 (a) This Question relating to pursuance of international business operations by

Global Companies carried nine precious marks with individual point-wise
allocations. Global companies undertake international operations as
deliberate and carefully considered strategic decisions to achieve the
advantages of spreading of economic and political risks, establishment of
low-cost production facilities at favourable locations and reduction in unit
costs by spreading them over much larger volumes of units manufactured.
International operations can also help to overcome tariff and non-tariff
barriers, obtain advantages of low competition in foreign countries and
acquire insights in the cultures and business practices in foreign countries,
besides establishing contacts with potential customers and linkages with
distribution channels. Although a number of the students were able to
identify some of the aforesaid points, some of them made rather vague
references like increase in profitability, cost reduction and image building,
etc which are applicable to even domestic business operations.
Page 4 of 5
(b) The question required identification of five constraints which act as

impediments towards attracting foreign investment in a typical
underdeveloped country. Specifically, these constraints are poor
infrastructure facilities, lack of education, absence of skilled work force and
uncertain economic and financial policies. Besides, weak and inadequate
legal framework, unstable system of governance, rampant corruption and
absence of generally accepted accounting principles also act as impediment
to attracting foreign investment in underdeveloped countries. Most of the
candidates were able to identify these constraints and accordingly secured
good marks.
Q.11 The question was designed to assess the candidates’ understanding of the concept
of Market Skimming Strategy. Most of the candidates correctly identified that
such a policy aims at charging a substantially higher price at the product’s
launching stage as it perceives that there are a sizeable number of prospective
buyers who are able and willing to pay the high prices because the product has a
high present value for them. However, many of them overlooked the other crucial
point that the prices are reduced gradually to attract the relatively price-sensitive
segments of the market.
In Part (b) of the question, the candidates were required to state the factors which
induced the management of a company, to pursue a Market Skimming Strategy.
A large number of the candidates stated that the management pursued this policy
to recover the substantial R&D expenditures incurred in the development of the
product and also to make quick profits. These are general points and are
applicable in almost all business situations. A more focused answer should have
considered the management’s decision from the following viewpoints:
• Existence of an adequate-sized market which is not price-sensitive and is

willing to buy the game cube at the high price.
• In spite of the high price of the game cube, there is no risk of competitors
entering the market.
• The purchase of game cube at a high price creates an impression of
possession of a superior product and enhanced status symbol among the
buyers.
(THE END)
Page 5 of 5
June 5, 2008

(3 hours)
Q.1 The sponsors of Seaside Resorts Limited (SRL) are considering to set up a major
project on the sea coast at a distance of 85 kilometers east of Karachi. The project
would have facilities of guest houses, swimming pools, golf courses, tennis and squash
courts and scuba diving. It would also have modern facilities of conference rooms and
auditoriums for holding business meetings, training courses, conferences and
symposia.
This first-of-its-kind project in Pakistan would involve substantial capital investment
and also require well-planned physical facilities and selection of state-of-the-art
specialized equipment. A cadre of highly trained and dedicated work force having
diversified skills would be crucial for the successful operations of the project. The
sponsors who were seized with these overwhelming problems were considering
acquiring the services of an expatriate executive to implement this project and operate
it in the initial years. However, the uncertainties associated with the hiring of an
individual on contract basis and entrusting him with such far-reaching authorities and
responsibilities was a source of grave apprehension for the sponsors.
In the meantime, Oriental Resorts Inc, a Thailand-based company with experience of
managing of similar high profile luxury resort projects in several far-eastern countries
has approached SRL and offered to provide guidance and expertise for implementation
and operation of the proposed project under a franchise arrangement.
Explain what is a Franchise Arrangement? Also identify four advantages that would
accrue to SRL by entering into a Franchise Arrangement with Oriental Resorts Inc. (09)
Q.2 East-West Centre of Diabetes (EWCD), a non-profit organization has recently received
substantial donations from a group of overseas Pakistani philanthropists. EWCD has
ambitious plans to develop the institution into an absolutely world-class research and
teaching university-cum-hospital in the country. The Hospital would provide
infrastructure facilities and medical care by a team of highly reputable consultants. It is
envisaged to provide treatment for diabetes which is growing at an alarming rate and
adversely affecting the health of a large segment of the population in all age groups.
The University would also help to produce qualified doctors who would specialize in
the treatment of patients suffering from this highly debilitating disease.
You are required to prepare a Mission Statement for EWCD stating its purpose and
identifying its core values. The Mission Statement should be brief, simple and clearly
highlight the important purpose, intent and aspirations of EWCD. (06)
Q.3 What do you understand by Code of Ethics in the context of a business organization?
State four advantages which in your opinion are important for adopting a Code of
Ethics? (07)
(2)
Q.4 As a Senior Manager in the Human Resources Department of Apex Bank Limited, you
have been entrusted with the task of conducting a Disciplinary Enquiry against
Mr. Hameed Khan, an Assistant Manager in the Bank Square Branch. The Branch
Manager, who is a highly respected senior officer with considerable experience, has
leveled charges of aggressive attitude and gross misbehavior against the Assistant
Manager in dealings with his colleagues. What steps would you take to ensure that the
Disciplinary Enquiry is conducted in a fair and impartial manner and the final outcome
is based on principles of equity? (12)
Q.5 All leading global business organizations possess certain distinctive marketing
capabilities and competitive advantages which set them apart from those companies
whose operations are confined within their limited geographical areas.
Describe five core capabilities which are observed in leading global organizations
regardless of special lines of business. (10)
Q.6 In the current economic scenario, business organizations are under continuous stress to
achieve economies in their production and operating costs. The pressures for cost
reduction emanate from the management as well as the competitors and customers.
Identify eight operational and strategic areas which must be scanned continuously by
an industry leader to achieve cost economies and maintain its competitive advantage. (08)
Q.7 (a) Lazzat Foods Limited is engaged in the business of manufacture of packaged
masalas, jellies and jams. The Company’s sales have been stagnant since the past
two years due to intense competition and aggressive promotion by the
competitors in the domestic market. The Management has proposed to explore
new markets abroad and has suggested that the Company consider participation
in a Trade Fair to be held in Colombo. Give four advantages which are expected
to be achieved by the Company’s participation in the Trade Fair. (04)
(b) State six reasons why companies enter into international alliances. Give two
examples of industries in which international alliances are most common and
identify a logical reason for such an alliance. (08)
Q.8 (a) Narrate important points that should be considered in the decision making
process. (03)
(b) Union Group of Companies has diversified interests in fertilizer, sugar, cement
and steel industries. Each entity operates as a strategic business unit and
executives in the individual companies have powers to take all decisions at the
operational level and only limited decisions at the tactical level. The Group
Management Team which monitors and controls the performance of the different
strategic business units has retained for itself the powers to make all strategic
decisions.
Describe the distinguishing features of decision making process at Operating,
Tactical and Strategic levels. (09)
Q.9 Tameer Construction Company, a UAE-based entity, has ambitious plans to develop
major real estate projects in Pakistan through a subsidiary company. The parent
company’s principal office in Dubai is largely managed by expatriate executives who
are committed to a policy of highly centralized control of the Company’s financial
resources and are reluctant to delegate financial powers to the overseas subsidiary.
As the Chief Executive Officer of the subsidiary, you are required to advise the parent
company of the disadvantages of pursuing a highly centralized financial policy.
Identify four disadvantages of pursuing such a centralized policy. (06)
(3)
Q.10 (a) The governments generally promulgate comprehensive laws for health, safety
and security of the workers. State five objectives which are expected to be
achieved through these laws. (05)
(b) Safety Engineers are convinced that industrial accidents are attributable to
inadequate Human, Environmental and Mechanical/Technical security factors.
How can responsible management effectively reduce the risks of accidents in
each of these categories? (09)
Q.11 What do you understand by transfer pricing in the context of multinational companies.
List two advantages of adopting market-based transfer pricing policies. (04)
(THE END)
BUSINESS MANAGEMENT
Suggested Answer
Final Examinations – Summer 2008
Ans.1 (a) In a Franchise Arrangement, one business entity who is the franchisor grants a license to
another business entity called the franchisee to use the name and brand/trademark of the
franchisor and conduct the business according to the tested processes, methods,
administration and marketing techniques developed by the franchisor.
(b) SRL would be able to gain the following advantages of entering into a franchise
arrangement with Oriental Resorts Inc. :
(i) The franchisee is able to make investment in a proven business format and can
eliminate the risks and difficulties of establishing a completely a new business.
(ii) The franchisee can use a well-known brand name which is promoted aggressively
and has wide customer acceptance.
(iii) The franchisee receives guidance and advice on selection of a suitable project
design and equipment according to the pre-tested specifications of the franchisor.
(iv) The franchisee can concentrate wholly on the day-to-day operations of the business
as the responsibilities of purchasing stocks, staff training, marketing and advertising
are handled by the franchisor.
(v) The franchisee can seek managerial advice and guidance to overcome any problems
which he may encounter in the business.
Ans.2 Mission Statement
EWCD is committed to the development of human capabilities through the sharing of knowledge
and application through service. It seeks to prepare individuals who would be exemplary doctors
and nurses, through excellence in research and education, all dedicated to provide meaningful
contribution to society in the treatment of diabetes.
Ans.3 Code of Ethics provides a guideline to the moral principles or values by which an organization
conducts its business with respect to what is right or wrong.
The Code of Ethics applies both to the organization as well as its employees in all their business
dealings.
The advantages of adopting a formal code of ethics are:

 Provides an explicit guidance to employees so that they know what is expected from them in
terms of ethical behavior.
 Enhances the organisation’s reputation and inspires public confidence.
 Creates an awareness of the organisation’s expectations of proper conduct among all the
stakeholders, including the management.
 Promotes a culture of excellence by demonstrating the organisation’s commitment to ethical
behavior.
Page 1 of 5
BUSINESS MANAGEMENT
Suggested Answer
Ans.4 In order to conduct the Disciplinary Enquiry in a fair and impartial manner, I would adopt the
following steps:
(i) Obtain complete written evidence from the Branch Manager stating the specific nature of
the Assistant Manager’s misconduct, their dates and timings and the names of colleagues
with whom the Assistant Manager was involved in the offensive conduct.
(ii) Make efforts to obtain specific information from the complaints as well as other colleagues
regarding any special circumstances inside the office or outside which may help to explain
the source of the problem.
(iii) Investigate into the Assistant Manager’s personal record to ascertain if there is any evidence
of indiscipline, aggressive behaviour or misconduct in the past.
(iv) Study the Bank’s disciplinary rules bearing in mind the Assistant Manager’s past record and
the nature and intensity of the offence.
(v) Direct the Assistant Manager to give a written reply to the various allegations of aggressive
conduct and misbehaviour offering his explanations to the charges made by the Branch
Manager.
(vi) A meeting would be held with the Assistant Manager in which he would be provided an
opportunity to explain his viewpoint and circumstances leading to the Branch Manager’s
complaint. Structure the enquiry and make noting of the important points to be covered in
the enquiry. The Assistant Manager would be informed of the date, time and place of the
enquiry and the reason why he has to appear for the enquiry.
(vii) Examine similar cases in the past and the nature of punishment meted to the defaulters.
(viii) After hearing of the Assistant Manager’s explanation in an objective, fair and consistent
manner, I would draw my conclusions regarding the nature of the allegations and the
intensity of the misconduct.
(ix) Prepare a comprehensive report on the allegations leveled by the Branch Manager, written
and verbal replies of the Assistant Manager and my findings along with the course of
proposed line of action and rationale for my recommendations.
Ans.5 The core capabilities which are commonly observed in leading global business organizations are:
(i) in-depth knowledge of the organisation’s products, their strengths and special customer
service skills.
(ii) highly developed marketing skills by way of insight of consumer behaviour, market
segments, share of the market and distributions channels.
(iii) capacity for continuous innovation and research which is a prerequisite for maintaining and
consolidating of their global leadership status in a highly competitive business environment.
(iv) creation and retention of a pool of talented and motivated management team and work force
aligned with the strategic objectives of the organization.
(v) financial resourcefulness with the capability to utilize the funds effectively with sound
planning and control structures.
(vi) assessment of the strengths and weaknesses of the competitors in the different territories in
terms of their market share, competitive advantages and anticipated business strategies.
Ans.6 The economies in production and operating costs can be achieved by focusing in the following
Page 2 of 5
BUSINESS MANAGEMENT
Suggested Answer
areas:
(i) exploring alternate sources of cheaper raw materials and components.
(ii) negotiating with existing suppliers of raw materials and components for more favourable
terms.
(iii) relocating facilities to areas which have lower costs.
(iv) improving capacity utilization to achieve economies in costs.
(v) introducing modifications in production designs to reduce costs.
(vi) improving machine and worker efficiencies.
(vii) re-engineering processes to eliminate activities and bring cost reductions.
(viii) hiring contract workers with the objective to reduce labour costs.
(ix) outsourcing processes/ manufacturing of components to low cost suppliers if quality control
measures can be implemented.
(x) adopting efficient inventory management practices such as just-in-time inventory
management techniques.
Ans.7 (a) The expected advantages of participation in the Trade Fair are:
 The Trade Fair can serve as a vehicle for securing orders for the Company’s products.
 The Trade Fair can create awareness of the products among the prospective
customers.
 The participants in the Trade Fair from other countries may show interest in the
products which may lead to sales and joint ventures in these countries.
 The Trade Fair may lead to contacts and opportunities for appointment of agents and
distributors in Sri Lanka.
(b) The reasons for entering into international alliances are:
 To gain access to foreign markets.

 To effectively utilize complementary technologies.
 To co-operate to reduce research costs.
 To minimize risk for any individual participant.
 To take advantages of firms with different skills and abilities.
 To avoid ownership of overseas operations.
Examples of industries in which International Alliances are common:

 Pharmaceutical Industry --- to reduce research costs and use complementary skills.
 Manufacture of computers and electronics --- to utilize complementary manufacturing
facilities and skills.
 Airline Industry ---to share passenger load and utilize available capacity.
Ans.8 (a) The following important points should be considered when one is involved in the decision
making process:
(i) have a clear perspective of the goals to be achieved.
(ii) develop the timeframe for reaching the final decision.
(iii) analyse the nature of the problem in sufficient detail according to the importance of
the final outcome of the decision.
(iv) examine the various available options.
(v) weigh the possible consequences of selecting any one or combination of actions.
Page 3 of 5
BUSINESS MANAGEMENT
Suggested Answer
(b) Operational Level Decisions

 decisions are concerned with day-to-day systems and procedures.
 decisions are more structured and are of a routine nature.
 outcomes of decisions are immediate and of short term nature.
 decisions involve fewer risks.
Tactical Level Decisions

 decisions are concerned with short to medium term objectives.
 decisions are often related with implementation and success of strategic decisions.
 decisions are concerned with overseeing and handling of budgets, personnel,
schedules and resources.
 risks of failure of decisions are moderate.
Strategic Level Decisions

 decisions are concerned with long-term goals and future direction of business.
 decisions are more conceptual and have elements of uncertainty.
 decisions have far-reaching consequences and are therefore of considerable
importance.
 decisions are taken at the highest management and board levels.
Ans.9 The major difficulties expected to be faced by the parent and subsidiary companies in pursuing a
highly centralized financial policy are:
(i) The staff at the parent company would not be fully conversant with the local rules and
regulations in Pakistan.
(ii) The operations of the subsidiary may suffer due to delays in the decisions by the parent
company resulting in higher costs and inefficiencies.
(iii) The executives at the parent company would be overburdened as they would have to take
numerous decisions pertaining to the subsidiary.
(iv) The morale and initiative of the local staff may be affected as they would have to obtain
approvals for decisions which can be taken here readily by responsible officers.
(v) The overall costs would increase considerably due to duplication of work and additional
traveling and incidental costs.
Ans.10 (a) The objectives of promulgating comprehensive laws for the health, safety and security of
the workers are:
(i) To encourage employers and employees to reduce hazards in the work place and to
strengthen the health, safety and security programs.
(ii) To establish minimum safety and health standards, particularly in hazardous
industries such as steel, mining and construction.
(iii) To create an effective framework for enforcement of the regulations.
(iv) To frame procedures for reporting of job related accidents, injuries, illnesses and
deaths.
(v) To prevent employment of child workers.
(vi) To provide special facilities for female workers.
Page 4 of 5
BUSINESS MANAGEMENT
Suggested Answer
(b) Responsible Management can reduce the risks of industrial accidents by adopting the
following measures:
Human Factors:
 Strict compliance with safety rules
 Proper operation of equipment
 Avoid excessive overtime
Environmental Factors:
 Good housekeeping
 Proper ventilation
 Adequate lighting
Mechanical/Technical Factors:
 Safe storage and handling of inflammable materials
 Proper tools and equipment
 Adequate protective equipment or mechanical guards
Ans.11 International transfer pricing is the price at which products or services are transacted between units
of the same company which are located in different countries.
The advantages of market-based transfer pricing are:
(i) The individual units would achieve high level of efficiency as they can negotiate most
favourable market-based prices as if they were independent units.
(ii) The selling unit would make efforts to improve the quality of the products in accordance
with the requirements of the purchasing unit.
(iii) The performance of the individual units can be evaluated more objectively.
(THE END)
Page 5 of 5
SUBJECT SESSION
Business Management Final Examination - Summer 2008
Q.1 The Question on Franchise Arrangement was attempted by almost all the
students. In essence, in a franchise arrangement one business entity who is the
franchisor grants a license to another business entity called the franchisee to use
the name, brand/trade mark of the franchisor and conduct the business in
accordance with tested processes, methods, administrative and marketing
techniques developed by the franchisor. A number of candidates did not identify
the parties as franchisor and franchisee and erroneously illustrated the
arrangement in the context of a partnership.
This part of the question specifically asked for the advantages which would
accrue to the franchisee, viz
investment by the franchisee in a proven business format and therefore
elimination of the risks inherent in establishing a completely new business
access to a well-known brand name which enjoys wide customer acceptance
availability of guidance and advice on selection of project design and
equipment according to pre-tested specifications of the franchisor
responsibilities for purchase of inventories, staff training, marketing and
advertisement are substantially assumed by the franchisor which enables the
franchisee to concentrate on the day-to-day running of the business
availability of sound managerial advice and expert guidance on overcoming
any unforeseen business problems.
A number of the students who did not read the question carefully, mentioned the
advantages from the franchisor’s standpoint and therefore lost valuable marks.
Q.2 This Question pertaining to the preparation of a Mission Statement of a non-

profit organization contained within itself all the vital information and
candidates having an understanding of the concept of a Mission Statement were
able to score satisfactory marks in spite of rather weak grammar and inadequate
vocabulary. Some of the students attempted to explain the purpose and
objectives of a Mission Statement which was not required.
Q.3 Most of the students described the Code of Ethics in a business environment
quite satisfactorily and mentioned that it provides a guideline to the moral
principles and values by which an organization conducts its business with respect
to what is right or wrong. The Code of Ethics applies both to the organization as
well as its employees in all spheres of their business dealings.
Page 1 of 6
Examiners’ Comments on Business Management – Summer 2008 Examination
The replies to the part of the question relating to the advantages of adopting a
Code of Ethics were generally satisfactory as they adequately covered the
following important elements:
provides specific guidance to the employees of their responsibilities in their
ethical conduct and behaviour
enhances the organization’s reputation and inspires confidence among the
public
creates a sense of awareness of the organization’s expectations of appropriate
conduct among all the stakeholders, including the management
promotes a culture of excellence by demonstrating the organization’s
commitment to ethical behaviour
It was observed that some of the students repeated the same point(s) with
variations in emphasis and usage of words.
Q.4 In this question the students were required to identify and explain the necessary
steps to ensure that the Disciplinary Enquiry is conducted in a free and impartial
manner and the final outcome is based on principles of equity. A substantial
number of the students were unable to comprehend the basic requirements of the
question and instead stated the various types of disciplinary actions/punishment
on the premise that the charges against the Assistant Manager have already been
duly established. However, quite a few replies were very well elucidated and
adequately mentioned the following steps:
(i) Obtain complete written evidence from the Branch Manger stating the
specific nature of the Assistant Manager’s misconduct, their dates and
timings and names of the colleagues who had lodged the complaint.
(ii) Acquire insight in the source of the problem from information obtained
from complainants and other colleagues
(iii) Investigate the Assistant Manager’s personal record to ascertain if there
are any evidences of indiscipline or aggressive behaviour in the past.
(iv) Direct the Assistant Manager to give a written reply, offering his
explanations to the charges leveled by the Branch Manager.
(v) Conduct a meeting with the Assistant Manager in which he should be
provided with an opportunity to explain his viewpoint and circumstances
leading to the Branch Manager’s complaint. Structure the enquiry and
make noting of the key points covered in the meeting. The Assistant
Manager should be informed of date, time and place of enquiry and the
reasons why he has to appear for the enquiry.
(vi) After hearing the Assistant Manager’s explanation in an objective, fair
and consistent manner, draw conclusions regarding the nature of the
allegations and intensity of the misconduct.
(vii) Examine similar cases in the past and the nature of punishment awarded
to the defaulters.
Page 2 of 6
(viii) Prepare a comprehensive report on the allegations leveled by the Branch

Manager and the replies of the Assistant Manager and on the basis of the
findings, offer recommendations for the proposed line of action along
with their rationale.
Q.5 In this question, the students were required to describe five core capabilities
which are observed in all leading global business organizations. A number of
students were unable to understand the precise requirements of the question and
offered vague replies pertaining to the advantages of global business
organizations engaged in the manufacturing of fast moving consumer goods.
However, the well-formulated replies were able to mention the following core
capabilities of leading global business organizations:
in-depth knowledge of their products, their strengths and special customer

service skills
developed marketing skills by way of insight of consumer behaviour, market
segments, share of the market and distribution channels
capacity for innovation and research which is necessary for maintaining and
consolidating of global leadership status in a highly competitive business
environment
creation and retention of a pool of talented and motivated management team
and work force aligned with the strategic objectives of the organization
financial resourcefulness with the ability to utilize the funds efficiently with
sound planning and control structures
assessment of strengths and weaknesses of competitors in different territories
by way of their market share, competitive advantages and business strategies.
Q.6 This Question was designed to identify those areas of activities which an
industry leader has to scan continuously to achieve economies in production and
operating costs in order to maintain its competitive advantage. A significant
number of the candidates who scored high marks covered the following
important points:
(i) exploring alternate sources of cheaper raw materials and components

(ii) undertaking negotiations with existing suppliers of raw materials and
components for obtaining more favourable terms
(iii) relocating facilities to those areas which have lower costs
(iv) improving capacity utilization to achieve economies in operating costs
(v) improving worker and machine efficiencies
(vi) re-engineering processes to bring cost reductions
(vii) hiring contract workers with the objective to reduce costs
(viii) outsourcing processes/manufacturing of components to low cost suppliers
(ix) adoption of efficient inventory management practices such as just-in-time
inventory management techniques.
Page 3 of 6
Q.7 (a) This Question was based on international trade fairs and students were
required to describe the advantages which companies expect to obtain by
participation in these fairs. The widely accepted advantages of
participation in international trade fairs are:
(i) trade fairs serve as a vehicle for securing orders for the company’s
products
(ii) trade fairs help to create awareness of the products among
prospective customers
(iii) participants from other countries may show interest in the products
which may lead to sales and joint ventures in these countries
(iv) participation in trade fair would lead to contacts and opportunities
for appointment of agents and distributors in Sri Lanka
A number of students offered other logical reasons and were able to earn
marks.
(b) The replies to the part of the question relating to reasons for entering into
international alliances were quite satisfactory as they covered the key
points such as gaining access to foreign markets, more effective
utilization of complementary facilities, sharing of research costs, business
risks and different skills and abilities. International alliances can also help
to achieve certain important business objectives without seeking
ownership of overseas operations.
The replies to the question regarding examples of industries in which

international alliances were common showed awareness among the
students and pharmaceuticals, airlines and banking sectors were
mentioned in a number of the replies.
Q.8 (a) In this question, students were expected to state the important points to be
considered in the decision making process. The essential elements of the
decision making process are: developing a clear perspective of the goals,
setting time-frame limits for reaching decisions, analyzing the nature of
the problem in sufficient detail commensurate with the significance of
the decision outcome, examination of the different options and weighing
the possible consequences of selecting any one option. Quite a number of
replies covered these points satisfactorily. However, certain students
mentioned decision implementation and monitoring strategies which were
not required.
(b) The answers regarding particular characteristics of decisions at the

operational, tactical and strategic levels were quite satisfactory as they
adequately covered the underlying features of the decision making
process in these different organizational tiers. Those students who scored
high marks mentioned the following points:
• Operational Level Decisions pertain to day-to-day systems and
procedures, are highly structured and of a routine nature. Their impact
is immediate and of a short-term nature and involves relatively fewer
risks.
Page 4 of 6
• Tactical Level Decisions relate to short to medium term objectives,

influence implementation and success of strategic decisions and are
concerned with overseeing, and handling of budgets, personnel
schedules and resources. Risks of failure of decisions at this level are
moderate.
• Strategic Level Decisions are concerned with long-term goals and
future direction of the business, are of a conceptual nature, involve
elements of higher uncertainties with far-reaching consequences and
are taken at the highest management and board levels.
Q.9 Replies to the question regarding difficulties in pursuing a highly centralized

financial policy in a situation where the parent company and the subsidiary are
located in different countries were quite satisfactory. The more ocused replies
listed the typical problems arising in such a situation on the following lines:
(i) Staff at the parent company would not be fully conversant with the local
rules and regulations in the country where the subsidiary is located.
(ii) Delays in decisions by the parent company may hamper the operations of
the subsidiary, resulting in higher costs and inefficiencies.
(iii) Executives at the principal office may be overburdened with numerous
decisions pertaining to the subsidiary.
(iv) Morale and initiative of the staff at the subsidiary may suffer as they would
have to be dependent on even minor decisions on the principal office.
(v) Overall operating costs would be higher owing to duplication of work,
additional travel and other incidental costs.
Q.10 (a) In this question the students were required to identify five objectives which
the governments expect to achieve by promulgation of laws for health,
safety and security of the workers.
Essentially, governments seek to achieve the following objectives i) to

reduce hazards in the workplace by strengthening health, safety and
security programs ii) to establish minimum safety and health standards iii)
to create an effective framework for enforcement of regulations iv) to lay
down procedures for reporting of job related accidents, injuries, illnesses
and deaths v) to prevent employment of child workers and vi) to provide
special facilities for female workers.
Several students could not comprehend the requirements of the question

and offered general replies in the context of welfare and improvement in
the living standards of the citizens. Some students mentioned the
advantages which organizations expect to achieve instead of mentioning
the objectives which the governments expect to achieve.
Page 5 of 6
(b) Responsible management can reduce risks of industrial accidents arising

from Human, Environmental and Mechanical security factors by ensuring
strict compliance with safety rules, avoidance of excessive overtime, good
housekeeping, proper lighting and ventilation, safe storage of inflammable
material, proper tools and equipment and proper protective equipment.
Although some of the aforesaid points were well presented by several

students, there were numerous instances where the same point was
repeated in different words.
Q.11 The replies to this question pertaining to international transfer pricing were
generally satisfactory as a large number of the students rightly stated that it is the
price at which goods and services are transacted between units of the same
company located in different countries.
The part of the question in which the students were required to list the
advantages of pursuing a market-based pricing policy drew rather vague and
irrelevant replies. The appropriate replies should have stated that the individual
units would achieve high levels of efficiency as they would be able to negotiate
most favourable prices. As a result, more objective evaluation of the
performance of the individual units would be possible. Consequently, both the
units would continue to remain motivated to improve their performance.
(THE END)
Page 6 of 6
December 4, 2008

(3 hours)
Q.1 Orient Cement Limited (OCL) aspires to be included in the category of a select group of
progressive companies in the country and is considering a proposal for introducing
significant changes in its labour welfare policies which would offer tangible benefits to
the workers. This would include construction of a housing colony, provision of medical
benefits, subsidized canteen facilities, besides payment of partial fees for dependent
children of the employees.
In your opinion what important benefits would accrue to OCL by introducing welfare–
oriented labour policies? (06)
Q.2 It is widely realized that companies pass through various stages of growth during the
different periods of their existence. State four dominant characteristics which would be
apparent in a company which is in:
(a) the start-up or initial stage of its business;

(b) the rapid and dynamic growth stage of its existing business. (06)
Q.3 Shakeel Ahmed, a competent and hard working young officer, is at the initial stage of
his professional career in a leading insurance company. He has an ambitious goal to
reach senior management position within a period of seven years. He intends to plan his
career path well in advance and pursue a Personal Development Plan (PDP) with a high
degree of zeal and commitment.
(a) What do you understand by Personal Development Plan? (03)

(b) What are the principal advantages of adopting and pursuing a well-formulated
Personal Development Plan? (04)
Q.4 New Age Automobile Company Limited intends to diversify its operations by
establishing a separate division for manufacture of a less-expensive brand of tractors.
The tractors would be used primarily by agriculturists having small farm-holdings. The
Management is contemplating whether to promote personnel from the automobile
division for certain middle-level technical positions in the tractor division and induct
new entry level personnel in the automobile division, or alternatively recruit foremen
level personnel from external sources for the tractor division by advertising for the
positions in the news media.
Narrate and explain briefly the advantages and disadvantages of internal promotion and
transfer of foremen level personnel for the tractor division from the automobile division. (10)
(2)
Q.5 (a) What are the distinctive ingredients of Vision and Mission Statements? (03)
(b) It has been observed that certain companies adopt, with minor modifications and
changes in emphasis, the basic ingredients of Vision and Mission Statements of
the more successful rival companies in an attempt to achieve similar results.
Describe the drawbacks of adopting such an approach in formulation of Vision

and Mission Statements. (04)
Q.6 Corporate and Business Strategies of marketing-focused organizations operating in

different product lines pursue entirely different approaches depending on customer,
competitor and inter-functional orientations. The features of each of the different
types of orientations are:
Customer Orientation: Entire focus on customer e.g. Jeweler boutique selling

expensive designer jewelry to a select niche market.
Competitor Orientation: Emphasis on plans and actions of competitors as only few

competitors dominate the market e.g. branded edible oil.
Inter-functional Marketing is considered to be an all-encompassing

Coordination: company-wide responsibility and all the departments are
geared to contribute towards the marketing efforts e.g. a
shipyard manufacturing ocean-going vessels for major
foreign buyers.
List four characteristics which, in your opinion, would determine the direction of
marketing policies and efforts in each of the above three types of business orientations. (09)
Q.7 (a) Currently, a large number of progressive companies are in the various stages of
adopting policies of Corporate Social Responsibility. Explain what do you
understand by the term Corporate Social Responsibility. (03)
(b) In your opinion what are the major concerns which prevent organizations from
adopting and implementing comprehensive policies of Corporate Social
Responsibility? (05)
Q.8 (a) Governments in developing countries are often concerned that global companies
with substantial financial and technical resources are in a position to exploit the
opportunities in a manner which are detrimental to the interests of the host
countries. It is also feared that the domestic industries which are in the infant
stages of their development may face grave problems due to the highly
aggressive policies of the global companies.
Identify and briefly explain six types of policy decisions which governments in
the developing countries may take to meet the threats from the global companies. (09)
(b) Multinational Enterprises are classified as Ethnocentric, Polycentric and

Geocentric companies depending on the strategies and policies pursued by their
top management.
List the distinguishing characteristics of each of the above types of international

companies. (06)
(3)
Q.9 Paragon Polyester Company Limited (PPCL), a Korean company, is considering a

proposal for a substantial investment to establish a polyester plant in a foreign country.
PPCL has considerable technology and expertise in its particular line of business which
is available in only a few countries. PPCL is examining the pros and cons of setting the
project as a wholly-owned subsidiary company or entering into a joint venture with one
of the local entrepreneurs.
In your opinion, what are the distinctive advantages and disadvantages of undertaking
overseas manufacturing operations through a wholly-owned subsidiary company? (08)
Q.10 Strategists involved in the marketing of Fast Moving Consumer Goods (FMCG) keep a
close watch on the various stages of the Life Cycle of their products and adjust their
strategies accordingly.
List the type of marketing-mix strategies of Products, Pricing, Distribution and Sales
Promotion which should be pursued to meet the requirements of the products which are
in the introduction, growth, maturity and decline stages of their product life cycle. (12)
Q.11 Briefly explain the following:

(a) Business Ethics
(b) Core Competence
(c) Environment Management
(d) Job Description (12)
(THE END)
BUSINESS MANAGEMENT
Final Examinations – Winter 2008
Suggested Answers
Ans.1 The introduction of welfare-oriented labour policies would offer significant benefits to
OCL by way of:
(i) Improvement in goodwill, image and reputation of the Company.
(ii) Increase in efficiency and productivity of the workers.
(iii) More congenial working relationship and better harmony with the workers union.
(iv) Ability to attract and retain competent and more committed work force.
Ans.2 The dominant characteristics of a company which is in the start-up stage of its business
are:
(i) High financial costs.
(ii) Limited cohesiveness in the senior management team.
(iii) Organization’s systems and procedures are not in place.
(iv) Extremely high workload for key personnel with conflicting and multiple priorities.
(v) Resources are not sufficient to meet multiple demands.
(vi) Relationships with suppliers, customers and other stakeholders are in the developing stage.
The dominant characteristics of a company which is witnessing rapid and dynamic growth
of its existing business are:
(i) New markets, products and technology are being introduced.
(ii) Multiple and conflicting demands for allocation of management, technical and financial
resources.
(iii) Rapidly expanding organizational structure.
(iv) Unequal growth in various sectors within the organization.
(v) Shift in power structures as the organization witnesses expansion in business.
(vi) Constant dilemma between doing current work and building support systems for the future.
Ans.3 (a) Personal Development Plan is a plan which outlines the process of improving and
upgrading one’s work skills, knowledge and capabilities in order to enhance its
effectiveness and adaptability. Personal Development Planning is a continuous
process to improve and utilize one’s full potential at each stage of the chosen career
path.
(b) The principal advantages of adopting and pursuing a well-formulated Personal

Development Plan are:
(i) continuous appraisal of the individual’s career path and upgrading of skills.
(ii) acquisition and accumulation of new skills thus minimizing the chances of
the existing skills becoming obsolete or redundant.
(iii) continuous monitoring of progress in one’s career to ensure that it is on the
right path and taking timely corrective measures, if considered necessary.
(iv) creating a sense of achievement and commitment to reach the set targets
within specified time-limits.
Page 1 of 6
BUSINESS MANAGEMENT
Suggested Answers
Ans.4 The advantages of promotion from internal sources, for the tractor division are:
(i) Improvement of Morale – The internal transfers and promotions would provide an
impetus to the morale of the workers. They would feel assured that the company has a
policy to provide opportunities to the existing employees rather than to outsiders.
(ii) Proper Evaluation of Employees - The management is in a better position to evaluate
the performance of existing employees before considering them for higher positions.
The past performance of existing employees is a better guide to their skills, competency
levels and commitment as compared to interviews with outsiders.
(iii) More effective team work - Since the existing employees know the middle and senior
level managers, they would be motivated to put in their maximum efforts leading to
more effective team work.
(iv) Cost-effective - Internal transfer from within the organization is less costly than
recruitment from external sources.
The disadvantages of transfer and promotion from the automobile division are:
(i) Absence of Fresh Ideas - Transfer from internal sources prevents introduction of fresh
blood and new ideas which are essential for innovations.
(ii) Biases and Personal Preferences of Managers- The managers may not necessarily
promote deserving employees strictly on merit because of their personal likes and
dislikes for certain individuals.
(iii) Limitations on the number of employees to be transferred –Since the transfer has to be
made from within the organization, the number of individuals who are eligible to apply
would be restricted. The individuals outside the organization who are more talented
would not be given an opportunity to serve the organization.
(iv) Rather than being motivated to work hard, employees may become complacent because
of their assured promotion and seniority.
Ans.5 (a) Vision and Mission Statements are manifestations of the unique identities of an
organization. They are enduring statements containing:
business philosophy
unique purpose
goals of business
The above are inter-twined with the competitive advantages which distinguishes it and sets
it apart from others.
(b) The drawbacks of adopting Vision and Mission Statements of more successful rival
companies, with certain changes and modifications, are as follows:
(i) Vision and Mission Statement of a firm is inextricably inter-linked with its
management philosophy, purpose of business and distinctive capabilities which
cannot be replicated in their entirety by other firms.
(ii) The imitated version of a Vision and Mission Statement cannot be an enduring or
permanent feature and frequent lapses or deviations in actual performance are
bound to create resentment and suspicion among the internal and external
stakeholders.
Page 2 of 6
BUSINESS MANAGEMENT
Suggested Answers
Ans.6 The determinants of competitive policies and efforts in the different categories of business
are :
Customer orientation
Customer commitment.
Creation of customer value.
Understanding of customer needs and objectives.
Measure customer satisfaction.
After-sales service.
Competitor orientation
Sales force shares competitors’ information among themselves.
Individual organizations respond rapidly to competitors actions.
Senior managers frequently discuss competitors’ strategies and tactics.
Keen to seize opportunities for competitive advantage.
Constant struggle to achieve market leader status.
Inter-functional coordination
Inter-functional calls on customers.
Technical, procurement, customer and market information is shared closely among
different functions/departments.
Close integration among different functions and departments in implementation of
strategy.
Functions are geared towards creation and satisfaction of individual customer needs.
Resources are shared frequently among the various business units.
Ans.7 (a) Corporate Social Responsibility involves an organization’s obligation to provide benefits
to society in ways that protect and improve the welfare of the society, along with
pursuance of the organization’s own business interests.
(b) The major concerns which prevent organizations from adopting and implementing
comprehensive policies of CSR are:
(i) Concerns that they may adopt a comprehensive CSR policy while their competitors
may not do so with the result that they may incur costs which may place them at a
competitive disadvantage.
(ii) Organizations may not feel a sense of commitment and urgency to address to the
various issues which are of a societal nature.
(iii) There are no accepted standards on CSR issues.
(iv) At times it may be difficult to identify the stakeholders and the audience for the
CSR reports which may be ambiguous and could undermine the quality of the
reports.
(v) Belief that efforts of the traditional philanthropists are sufficient to take care of the
social needs of the society.
(vi) Reporting on the entire scope of a company’s impact upon the society and the
environment is a complex exercise which is beyond an individual organization’s
capabilities and scope of activities.
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Ans.8 (a) The Governments in developing countries may take the following policy decisions to
protect their interests in the face of threats from global companies:
(i) Impose quotas which would prescribe limits on the quantities and values of raw
materials that the global company may import from its affiliated/parent companies.
(ii) An import tariff structure may be imposed which may make the imported goods
expensive and enable the domestic manufacturers to compete in the local market.
(iii) The government may place restrictions on the ability of global companies to
acquire domestic companies, especially those which are engaged in business of a
sensitive nature such as defense, utilities, etc.
(iv) The government may impose restrictions on the maximum per cent of shares that a
global company can hold in a domestic business entity.
(v) Legal standards of safety and quality of imported goods may be imposed to prevent
global companies from importing goods which are considered to be of a sub-
standard or inferior quality.
(vi) Impose stringent conditions of deletion programs.
(vii) Stipulate that a certain proportion of the local personnel should be hired by the
global company.
(b) Ethnocentric oriented companies follow policies that are primarily home-grown and the
management assumes that the practices which work in the headquarters or in the home
country are most suitable and should be adopted and pursued in all their international
operations.
Polycentric oriented companies follow the philosophy that the organization located in
the host country should be staffed by local individuals to the maximum extent as they are
expected to understand more closely their culture, work ethics and markets. Consequently,
subsidiaries in various countries operate under the directions of locals and are controlled
by the parent company through well-conceived financial reporting systems.
Geocentric orientation is an approach in which the management considers that a world-

wide focus, both at the headquarters and also in the host countries, offers optimal
advantages. The best people, regardless of their home or host country origin, should be
used to solve company problems. Major issues of headquarters and subsidiaries, such as
raising of funds, building of plants, research and development are viewed in the entire
global perspective.
Ans.9 The advantages and disadvantages of undertaking overseas manufacturing operations through a
wholly-owned subsidiary company are:
Advantages
(i) The Korean company would not have to share its profits with any other entity.
(ii) The Korean company would not have to share its technology and know-how with any
foreign entity.
(iii) The Korean company would not have communication problems which are frequently
experienced in joint venture operations.
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(iv) The overseas manufacturing operations of the Korean company would be fully integrated
and aligned with its overall international operations.
Disadvantages
(i) The substantial amount of investment may prevent or discourage the Korean company
from undertaking wholly-owned overseas manufacturing operations.
(ii) The risks of nationalization and losses are much greater in the event the host government
introduces major changes in its policies towards foreign investments.
(iii) It may be difficult to recruit suitable high-level technical and management personnel in
the host country in the absence of benefits of equity ownership.
(iv) The wholly-owned subsidiary may not be able to avail the benefits of the overseas
partner’s valuable knowledge and expertise of the domestic conditions, local markets and
distribution channels etc.
Ans.10 The marketing-mix strategies in different stages of Product Life Cycle should be pursued on the
following lines:
Stages
Marketing-mix
Introduction Growth Maturity Decline
Product Basic Product Product Diversification Phasing out of
extension, after- of products weak products
sales service and
warranties
Price Unit cost, plus Price to Price to meet Reduce price

penetrate market competition
Distribution Build selected Build intensive Strengthen Eliminate

distribution distribution distribution unprofitable
channels channels network outlets
Sales Promotion Heavy sales Reduce effort Increase efforts Reduce cost to
promotion due to increase to promote brand minimum level
in consumer
demand
Ans.11 (a) Business Ethics refers to the code of moral principles and values which are applied by
individuals and organizations in their dealings in the commercial world. Business ethics
provide guidelines for acceptable behaviour by organizations in their strategy
formulation and day-to-day operations.
(b) Core Competence is the key ability or strength that an organization has acquired which
differentiates it from others, gives it competitive advantage and contributes to its long-
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term success. Core competence accrues due to its favourable location, access to superior
quality raw materials, unique capabilities of equipment, acumen of management, skills
and competence of workers and marketing insight . Core competence is valuable, rare
and difficult for competitors to imitate.
(c) Environment Management is a systematic approach to minimize the damage caused by

an organization to the environment in which it operates. Environment management has
assumed considerable importance because all the stakeholders expect organizations to be
responsible for the preservation of the environment and management are increasingly
being held responsible and liable for their organization’s environmental performance.
Environment management involves reducing pollution/waste and consumption of natural
resources in judicious manner.
(d) Job Description is a structured and factual statement of a job’s functions and objectives.
It defines the boundaries of the job-holder’s authority and responsibility and includes the
job title, department, job site, and reporting channels.
(THE END)
Page 6 of 6
June 4, 2009

(3 hours)
Q.1 Pan Pacific Steel Mills Limited was established in 1960 to manufacture steel products
such as iron bars, wire rods, girders and steel sheets. In 2006, a team of professional
management assumed charge of the Company’s operations. The new management team
made ambitious plans to increase the rated capacity, diversify the product-mix and
upgrade the quality of the products to bring the Company’s operations at par with the
leading players in the country’s steel industry. In spite of formulation of Corporate and
Business Strategy on sound lines by the multi-disciplinary management team, the
Company is experiencing serious problems in achieving its objectives due to lack of
cohesion between the formulation of strategic plans and their actual implementation.
(a) Explain the relationship between Strategy Formulation and Strategy Implementation.
(b) What essential elements should the management of Pan Pacific Steel Mills Limited
consider for creating an environment of good relationship between Strategy
Formulation and Strategy Implementation? (10)
Q.2 Euro Motors Limited is engaged in the business of manufacturing and marketing of an
extended line of motor cars catering to the varied needs of a wide segment of the
automobile market. The Company operates in a dynamic market environment dominated
by four well-entrenched and strong companies competing aggressively to achieve
leadership status and expand their respective share of the market.
List six performance indicators, which in your opinion, would help to measure the success
of marketing strategy of Euro Motors Limited. (06)
Q.3 Apollo Mining Company Limited owns and operates integrated facilities of mining of
coal and iron ore along with power generation and distribution facilities. Although these
facilities have been developed at a substantial investment cost, the management has been
indifferent to the conditions of its workforce of 1500 employees. A major accident in the
coal mines, which occurred recently, resulting in the death of 120 workers, has triggered
wide-spread resentment and agitation among the workers due to the poor safety conditions
and they have demanded strict compliance with the Mine Safety Rules and Regulations.
Due to the aggressive attitude of the striking workers and to safeguard its assets, the
Company has deployed private armed guards at a considerable cost. After 28 days of
complete closure of all mining and other business activities due to stand-off and strikes,
the management and the Workers’ Union have agreed to enter into negotiations through a
process of collective bargaining.
(a) State four factors which, in your opinion, are responsible for the indifferent attitude
of the management of Apollo Mining Company Limited towards its workers.
(b) Briefly describe five different measures that the management should take to satisfy
the demands of the workers and help to achieve a conducive working environment. (09)
(2)
Q.4 Companies which seek expansion of business can achieve their objectives either through
organic/internal expansion or by pursuing acquisition strategies.
(a) Explain the key differences between strategies of expansion by organic/internal

growth and by acquisition. (06)
(b) Give any four reasons why organizations generally prefer to achieve expansion
through internal growth and not through policies of acquisition. (06)
Q.5 (a) Rapidly changing economic, technology and social environment along with the
pressures to produce more value-added products and services at lower costs compel
organizations to adopt measures to utilize their resources in the most efficient
manner. Although Human Resources are not reflected as assets in the Financial
Statements, they play a critical role in the achievement of the Company’s business
strategies.
Explain how sound Human Resource Management and Planning policies can play
an important role to enable a Company to successfully achieve its business
objectives. (08)
(b) Although managers at various levels are frequently involved in the Performance
Appraisal of their subordinates, there are certain weaknesses in this process.
Knowledgeable Human Resource Managers are aware of these weaknesses and take
measures to minimize their adverse impact.
In your opinion what kind of limitations should be kept in perspective by Human

Resource Manger while reviewing Performance Appraisal Reports? (06)
Q.6 You have been entrusted with the task of hiring an individual for the position of General
Manager Marketing for Good Health Dairies Limited. The company has been established
recently and is in the process of establishing marketing network for distribution of its
products throughout the country.
Identify and explain briefly, what kinds of managerial competencies would you examine
and seek in the prospective candidates for the position. (09)
Q.7 Companies which pursue market-driven business strategies consider that sponsorship of
high profile and attractive events are communication techniques to create awareness and
affiliation of their companies and brands with the target market. These companies enter
into agreements and provide financial and non-financial support for social, cultural,
literary and sports events to a group, organization or an individual celebrity in anticipation
of creation of a lasting awareness of the company’s name or its brand among the
audience. Sponsorship by leading companies, as a promotional alternative, has gained
world-wide prominence in recent years.
Briefly describe six main objectives which are envisaged to be achieved through
sponsorship of such high profile and attractive events? (09)
Q.8 In the preceding five decades, a significant number of companies have pursued well-
conceived strategies of Globalization in order to seize the immense business opportunities
by operating on a worldwide basis. These companies have achieved notable success in the
expansion of their business globally and have manufacturing facilities and marketing
networks spread in several countries.
State and briefly explain six significant objectives of multinational companies in pursuing
policies of Globalization. (09)
(3)
Q.9 Competition for attracting direct foreign investments among countries has always been
intense. Countries such as Singapore, Malaysia and Cyprus have been able to
satisfactorily fulfill the requirements of the foreign investors and achieve
significant growth through these investments. However, a large number of third world
countries have not been so successful in attracting direct foreign investments mainly due
to the high level of Political Risks perceived by the prospective investors.
(a) Explain what is meant by the term Political Risk in the above context.
(b) What are the different types of Political Risks which have to be considered by a
prospective investor while evaluating opportunities of direct foreign investment in a
third world country? (07)
Q.10 According to Maslow’s Theory of Hierarchy of Human Needs, all human beings have
different kinds of needs. Competent marketing managers must have insight in the
Hierarchy of Needs to be able to create appropriate promotional strategies for successful
marketing of their products.
In the context of Maslow’s Theory of Human Needs, which type of human needs would
be satisfied by the following:
(i) health insurance (ii) cosmetics

(iii) flowers for a sick friend (iv) tandoori nan
(v) burglar alarm system in a bungalow (vi) rare and expensive work of art
(vii) membership of an exclusive golf club (viii) wages received by a daily worker
(ix) sponsoring of a charitable hospital (x) a luxury car (05)
Q.11 Briefly explain the following concepts:
Business Ethics
Pull Strategy of Promotion
Licensing
Benchmarking (10)
(THE END)
BUSINESS MANAGEMENT
Suggested Answer
Ans. 1 (a) Strategy formulation policies can be successful only if the strategic plans are implemented
effectively by converting the plans into well-conceived actions designed to achieve the
objectives of the organization. Strategic plans and strategy implementation have to be
synchronized to perform in close interaction to achieve optimum results.
(b) The essential elements which should be considered by the management of PPSML for creating
good relationship between formulation of strategic plans and strategy implementation are:
(i) Organizational Structure: Organizational structure creates the formal pattern of

interactions and coordination amongst the management, supervisors and workers to link
the tasks and efforts of the individuals and groups to implement and achieve the
strategic plans. The management should ensure that the Organization Structure is
suitably integrated for achieving harmony among the various functions and greater
co-ordination at all levels.
(ii) Human Resources: Human resources with necessary skills should be deployed in
appropriate positions, for effective strategy implementation.
(iii) Technology: Technology comprises the knowledge, equipment and work techniques
necessary to deliver the products or services. Technology is an important factor in
strategy implementation. The management should ensure that appropriate and adequate
technological inputs are available to support the performance necessary to achieve the
objectives of the strategic plans.
(iv) Decision Process: Decision processes are required for the resolution of problems
encountered in the operations of the business and achievement of the objectives of the
strategic plan. Decisions relating to allocation of resources are particularly important for
strategy implementation because timely availability of resources are crucial for the
success of strategic plans. Sound policies and processes should be developed to ensure
that all significant decisions are taken on a timely basis and in a co-ordinated manner.
(v) Monitoring and Control Systems: Appropriate system should be established to ensure
that progress is monitored against the established standards on a continuous basis and
deviations if any, are identified for taking timely corrective actions.
(vi) Reward System: A well-conceived reward system comprising salaries, benefits,

promotions and recognition should be developed to provide necessary motivation to the
workforce for successful implementation of the strategic plans.
Ans. 2 The performance indicators to measure the success of marketing strategy of Euro Motors Limited
which is engaged in the business of manufacturing and marketing of automobiles in a dynamic and
highly competitive business environment may be as follows:
(a) Growth in sales revenue

(b) Increase in market share.
(c) Percentage increase in sales achieved through customer retention/brand loyal customers.
(d) Product development speed time i.e. time to develop, manufacture and market a new product.
(e) Number of customer complaints lodged. Percent increase/decrease in number of customer
complaints.
(f) Number of new distributorships appointed in the year.
(g) Sales of new products / models lodged in the year as a proportion of the Company’s annual
turnover.
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Ans.3 (a) The indifferent attitude of management of Apollo Mining Company Limited towards the
workers may be attributed to:
(i) Abundance of workers seeking jobs and comparatively few opportunities for
employment in the area.
(ii) Unsatisfactory enforcement of Mining Rules and Regulations by the concerned
regulatory authority.
(iii) The Management does not believe in ethics, justice and fair play in its dealings with the
workers.
(iv) The Workers and their Union is not fully aware of the rights of the workers and their
bargaining strength.
(b) The management of Apollo Mining Company Limited should take the following measures to
satisfy the demands of the striking workers:
(i) Compensation for the Affected Workers: Management should pay compensation to
the dependents of the workers who have lost their lives in the accident. Proper
arrangements should be made for treatment, including hospitalization, of workers who
have been injured in the accident.
(ii) Safety Equipment: Management should install proper safety equipment in the mines
and protective personal gear for ensuring safe working conditions in the mines.
(iii) Formal Safety Training of the Workers: Management should introduce Safety
Training Programs and educate the workers of the positive results achieved through the
introduction and implementation of these programs.
(iv) Provide Medical Facilities to the Workers: Management should provide adequate
medical facilities, including hospitalization for the workers and their families.
(v) Group Life Insurance: Management should provide Group Life Insurance coverage for
the workers.
(vi) Social Needs of the Workers: Management should sponsor recreational and social
activities for the workers and their families.
Ans. 4 (a) Organic/internal growth is a strategy to achieve growth by expansion in the company’s own
line of products and market portfolio. It relates to increasing the market share in the existing
market or entering new markets by bringing high value products.
Acquisition strategies involve expansion by way of purchase of controlling interest in another

existing companies.
The key differences between the two strategies are as follows:
(i) In internal growth strategy, expansion is achieved in a steady and planned manner
extending over a phase-wise schedule, whereas in an acquisition strategy, rapid
expansion is achieved through acquisition of existing assets of another company.
(ii) In expansion by internal growth, the success of the strategy is dependent, to a

considerable extent, on the management’s ability to formulate and implement sound
plans, whereas in growth by acquisition, the success of the strategy is also linked with
achievement of corporate, business and operational level synergies.
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(iii) In a strategy of internal growth, the level of competition can become more intense,
particularly if there are relatively few strong players, but in expansion by acquisition
the level of competition may be reduced by acquiring a rival competitor.
(b) A company may pursue a policy of growth by organic/internal expansion and not through
acquisition for the following reasons:
(i) Expansion of its physical infrastructure and facilities can be planned more efficiently to
fulfill the organizational requirements. In case of acquisition, the company would have
to utilize the existing sites and facilities which may not be the most suitable option for
its requirements.
(ii) The cost of acquisition of an existing company may be much higher than the cost of
expansion of assets through internal growth.
(iii) Often, acquisitions require substantial investment outlays and the acquiring companies
resort to heavy borrowings which may extend financial leverage beyond prudent limits.
(iv) In acquisitions, a company acquires functions of other companies which may result in
duplication of facilities or redundancies which ultimately results in lowering of
employees morale.
(v) Human Resources can be utilized more effectively and with a greater degree of cohesion
of corporate culture by adopting strategies of organic growth. Also, in the case of
organic growth, better career development opportunities are provided to the employees.
In case of expansion by acquisition of other businesses, the company usually has to
acquire and assimilate the staff of those businesses.
Ans. 5 (a) The Human Resource Management and Planning policies can play an important role in the
achievement of business objectives by:
(i) Determining Requirements of Human Resources: an essential element of HR

Management and Planning function is to ascertain accurately HR requirements to avoid
problems of manpower shortages, wastages, mismatch of work skills with the job
requirements and redundancies due to over staffing.
(ii) Ascertaining Training Needs: an important HR planning function pertains to
preparation and conduct of training programs to ensure that a cadre of skilled workforce
is available to meet the requirements of the organization.
(iii) Career Path Planning for Managers: Career path planning of trained and experienced
officers/managers is essential in order to retain them and keep them motivated to meet
the present and future requirements of personnel in all management positions.
(iv) Fair Compensation: Fair compensation plans, including fringe benefits are essential
for inducting and retaining a motivated and performance–oriented team and work force
at all levels.
(v) Industrial Relations: Properly conceived industrial relations strategies are essential for
maintaining a skilled and motivated work force and ensure continuity of smooth
operations.
(b) The limitations of Performance Appraisal are:
(i) Performance Appraisals often focus on employee’s efforts for short-term rewards rather
than on issues that are important to the long-term success of the organization.
(ii) Supervisors involved in Performance Appraisal often consider them in the context of
reward-punishment exercises and not on the overall skills and potential of the employee.
(iii) Performance Appraisal is often considered as a routine paperwork exercise rather than
conducting an objective critique of the individual’s performance.
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(iv) Individuals being appraised consider the exercise as being biased or unfair.
(v) Subordinates react negatively when evaluators offer unfavorable comments.
(vi) Personal biases and inconsistencies of the individual conducting the Performance
Appraisal may undermine the efficacy of the entire exercise.
Ans. 6 In order to recruit a suitable candidate for the position of General Manager, Marketing, I will
examine and seek the following managerial competencies:
(i) Communication Competency: The ability to effectively transfer and exchange information
with senior management and subordinates as well as other stakeholders.
(ii) Planning and Administrative Competency: The ability to plan and organize activities and
make decisions especially related to resource allocation, costs, etc.
(iii) Teamwork Competency: The ability to complete the tasks through individuals who have to
work collectively in a team environment.
(iv) Strategic Action Competency: The ability to understand the overall mission and strategies of
the organization and be able to achieve the objectives of the company.
(v) Global Awareness Competency: Ability to explore and seize business opportunities. The
Marketing Manager should have knowledge of different cultures and a receptive and open
mind.
(vi) Self-management Competency: The General Manager should have a sense of integrity and
good ethics and be willing to accept responsibilities.
Ans. 7 Companies which pursue market-driven business strategies consider sponsorship of attractive and
high profile events to achieve the following objectives:
(a) Increased Visibility

The wide exposure such events receive in both the electronic and print media provides
sponsors with vast publicity opportunities.
(b) Business-to-business Promotion:

Competition for prominent positioning of products in the shelf-spaces of popular retail outlets
is a big challenge for companies. Various types of sponsorships e.g. paid overseas holidays or
complimentary tickets/passes for popular events can be used to attract retailers, dealers and
other intermediaries in the distribution channel to promote the company’s products.
(c) Differentiate Product from Competitors

Sponsorship provides companies a competitive selling advantage because it offers
opportunities for category exclusiveness which can be used as product differentiation strategy
for creating greater acceptability amongst the customers. Sponsorships help companies to
create exclusive attributes for their products in the minds of the customers to fulfill their needs
and objectives.
(d) Active Display of Product Attributes

Sponsorship allows companies to draw special attention of the audience to the advantages and
unique attributes of their product by promoting special events e.g. tyre manufacturers may
sponsor car-racing events to demonstrate their products in action.
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(e) Cost Effectiveness

Sponsorships are usually more cost effective specially when a specific category of audience is
to be targeted.
(f) Targeted Sponsorship

Properly planned sponsorship programs integrated with predetermined objectives and focused
on specific audience targets can create lasting impact.
(g) Captive Viewership

Advertisements on TV are often avoided by the viewers, for example by changing the
channels. In case of popular programs/shows, it is possible to retain the attention of the captive
viewership.
Ans. 8 The significant objectives of multinational companies in pursuing strategies of globalization are:
(i) To achieve significant economies of scale in management and other functional operations of
the global companies.
(ii) To recover extremely high Research and Development expenditures required in the
manufacturing of knowledge-based products from widely dispersed target markets located in
different countries.
(iii) To gain access to wide global markets without incurring substantial expenditures on product
development in different markets.
(iv) To seize the advantages offered by growing economies, such as dismantling of trade
restrictions, growth of free trade zones and relaxation of regulations regarding direct foreign
investments.
(v) To enter into widely diversified markets and achieve maximum profits through transfer
pricing and tax concessions.
(vi) To derive maximum advantages of access to cheap sources of labour, raw materials and
energy.
Ans. 9 (a) Political risk is the probability that political decisions or events would negatively affect the
long-term security and profitability of an investment in a foreign country.
(b) The different types of Political Risks which would adversely affect the security and long-term
profitability of direct foreign investment in a third world country are:
(i) Domestic Instability – Domestic instability relates to the risks of subversion, revolution,
internal conflict and government crisis.
(ii) Foreign Conflict – Foreign conflict pertains to the extent of hostility and disputes that a
country has with other country(ies).
(iii) Political Climate – Political climate can be affected by radical shifts in government
policies and can be influenced by the number of political parties, their level of maturity,
political and economic agenda and approaches towards free or restrictive foreign
investment policies.
(iv) Economic Culture – Economic culture refers to the risks of significant shifts in policies
concerning government involvement and control of economic activities as well as
financial markets, including currency fluctuations, inflation, repatriation of capital and
dividends, regulation of prices of essential inputs and development and maintenance of
infrastructure.
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(v) Level of Corruption – Level of corruption refers to the degree to which the various
institutions, including the government, are perceived to be untrustworthy, open to bribes
and involved in various types of fraudulent and unethical practices.
Ans.10 The products / services would satisfy the following types of Human Needs:
Product/Service Type of Need

(i) health insurance security
(ii) cosmetics social//friendship/love
(iii) flowers for a sick friend social/friendship/love
(iv) tandoori nan physiological
(v) burglar alarm system in a bungalow security
(vi) rare and expensive work of art self-actualization
(vii) membership of an exclusive golf club esteem
(viii) wages of a daily worker physiological
(ix) sponsoring of a charitable hospital self-actualization
(x) a luxury car esteem
Ans.11 Business Ethics is a code of moral principles that the employees follow with respect to what is right
or wrong from the viewpoint of the organization’s dealings and interactions with its stakeholders.
The organizational culture and internal policies and systems have far-reaching ethical implications
and reinforce the set of values to be upheld by the employees in all their business dealings. The
standards of ethical conduct may be embodied in the Company’s Formal Code of Ethics.
Pull Strategy of Promotion is a promotional strategy based on aggressive advertising of brands to

build-up consumer demand. In a successful Pull Strategy, the customers ask for the brand by name,
inducing retailers or distributors to acquire stocks of the company’s goods.
Licensing is a technique of entering a specific market in which the licensor enters into an agreement
with a licensee, by offering the licensee the right to use the manufacturing process, trade mark,
patent, trade secret or any other item of value for a fee or royalty.
Benchmarking is the process of comparing the company’s products and processes with those of the
competitors or leading firms in other industries or any other accepted standards against which the
performance of the company is measured.
(THE END)
Page 6 of 6
December 10, 2009

(3 hours)
Q.1 Red Balloon Clothing Limited (RBCL) is engaged in the business of manufacturing a wide
range of children clothing since the past six years. The Company has built a reputation for
good quality products of latest designs and its brand name is very popular in the middle
class segment of the market. The Company strongly believes in a policy of giving “value
for the customers money.” At present, RBCL markets its products through a widely
dispersed network of independent retailers who sell the company’s brands along with the
products of other manufacturers.
RBCL is considering a proposal of forward integration and establishing its own chain of
retail outlets for sale of its products. RBCL would however, continue to sell its products
through the network of existing retailers also.
You are required to identify and explain briefly the different factors which RBCL should
examine while evaluating the proposal for establishing its own network of retail outlets. (10)
Q.2 Although Strategies of Cost Leadership and Product/Service Differentiation appear to be

highly attractive, many companies are often not able to achieve much success because they
lack the necessary capabilities to implement these strategies successfully.
(a) Explain what do you understand by the term Cost Leadership Strategy. (02)
(b) What is meant by Product/Service Differentiation Strategy? (02)
(c) In your opinion what kind of capabilities are of crucial importance for the successful
implementation of a Product/Service Differentiation Strategy? (04)
Q.3 (a) List and explain briefly any four important packaging features which would
influence the decision of a consumer to purchase an edible consumer product. (06)
(b) Market researchers often place reliance on external databases as the information can
be obtained readily with minimum of effort and at a low cost. However, experienced
market researchers are aware of the limitations of the external databases and use them
discreetly on a selective basis realizing fully the shortcomings of the information.
(i) State four limitations of using external databases.

(ii) Identify one specific situation in which it may not be advisable to use external
databases. Give reason for your selection of the particular example. (06)
Q.4 It is observed that work-related stress often pose a heavy burden in organizations and is
manifested by frequent absenteeism, late-coming, accidents and decline in the ability of
employees to perform in an efficient manner. In these situations, Employee Counseling can
help to create a secure and an enabling environment for mitigating the adverse effects of
stress on employees and enabling them to perform at peak levels of efficiency.
Identify the scope of Employee Counseling and explain briefly how such counseling
sessions can help employees to reduce work stress. (08)
(2)
Q.5 (a) Why mission–oriented business strategists do not view the Short-termism approach
favourably? (02)
(b) Give two examples of typical business situations to highlight the defects of pursuing a
policy of short-termism. (03)
Q.6 Superb Engineering Limited (SEL) manufactures parts and components for
assembly/manufacture of automobiles. During the past few years, the company has
witnessed phenomenal growth in its product lines and sales revenues have registered
significant growth. However, the overall profitability has not shown a corresponding
increase. SEL considers that a substantial proportion of the efforts and energies of the
management and staff at various levels are expended in handling a very wide range of
diversified activities. SEL is, therefore, examining the feasibility of outsourcing certain
activities of its operations to outside parties.
You are required to identify four advantages and disadvantages each of Business Process
Outsourcing in the above situation for SEL. (06)
Q.7 Strategic Planning and Management is an exercise undertaken at the highest levels of the
management hierarchy and involves decisions concerning formulation, implementation and
evaluation of cross-functional activities which would enable an organization to achieve its
stated objectives. In spite of the cumulative skills and considerable experience of the senior
management team, it has been observed that a number of organizations are not able to
achieve significant success and the actual performance often falls short of the set goals.
Explain the key factors, which in your opinion, are responsible for the management’s
inability to achieve all of the goals envisaged in the Strategic Plans. (09)
Q.8 In your opinion, what types of complexities are generally encountered by parent companies
in the planning and control of operations of their foreign subsidiaries? (06)
Q.9 Excel Chemicals Limited (ECL) owns and operates facilities for the manufacture of
industrial chemicals, including various types of highly corrosive acids. The Company’s
operations involve processes of procurement, production, packaging, storage and
transportation of chemicals which can result in serious fire, physical injuries and other
environmental and health hazards in the event of any lapses in the safety procedures.
Identify and explain briefly six safety steps which should be adopted and implemented by
the management of ECL as a responsible employer. (06)
Q.10 The pursuit of goals of achieving cost economies and operating with lean and more flat
organizational structures has resulted in creation of an environment in which the staff at the
managerial levels are required to perform with greater business competencies and
responsibilities. Consequently, managers at various levels have to acquire all-round
competencies of external business environment awareness as well as deep understanding of
the concepts of internal business management to be able to fulfill their responsibilities and
perform in an intensely challenging and rapidly changing business environment.
You are required to identify four different types of competencies each of external business
environment and internal business management which in your opinion are most important
for the present-day managers to enable them to perform successfully in the prevailing
corporate environment. (08)
(3)
Q.11 Capital Bank Limited is a leading financial institution and is well-known for its strength in
rendering highly efficient professional services to its customers and keeping ahead of the
competitors. The Bank follows a policy of recruiting staff at the entry level after careful
evaluation of the qualifications of the candidates, their potential for advancement,
professional aptitude and career objectives. The staff is groomed and entrusted with
increasing responsibilities after careful career-path planning for each employee. The Bank
operates in a highly competitive environment where the skills, knowledge and commitment
of its human resources are of critical importance for the success of its business. The
competitors are always on the lookout to identify professional staff and hire them at more
attractive compensation packages.
Required:
(a) What do you understand by the term Employee Compensation Package? (02)
(b) List and explain the essential steps involved in the formulation and implementation of
a well-conceived Employee Compensation Strategy which the Bank should
incorporate in developing its overall HR strategy. (09)
Q.12 (a) List the following steps involved in the operation of a typical Letter of Credit in their
logical order of sequence.
(i) The exporter’s bank endorses the documents (bill of lading/airway bill) and
delivers them to the importer’s bank.
(ii) The importer’s bank pays the proceeds to the exporter’s bank.
(iii) The importer obtains the bank’s promise to pay the specified amount on behalf
of the importer.
(iv) The exporter ships the goods and obtains the Bill of Lading/Airway Bill.
(v) The exporter delivers the documents to his banker.
(vi) The importer’s banker promises the exporter to pay the specified amount on
behalf of the importer. (06)
(b) Identify five advantages which a multinational corporation expects to achieve by

establishing manufacturing facilities in foreign countries. (05)
(THE END)
BUSINESS MANAGEMENT
Suggested Answers
A.1 RBCL should consider the following factors while evaluating the decision to establish its own network of
retail outlets:
(i) Examine the existing network of retailers of RBCL to ascertain the extent to which they have
advantages of location of their shops in important shopping centers.
(ii) Compare the capital expenditure involved in the establishment of retail stores and their recurring
operating expenses and inventory carrying costs with the costs incurred under the existing set-up.
(iii) Estimate the envisaged number of RBCL’s own retail stores to be established to cater to the
requirements of the target segment of the market.
(iv) Determine the ability of RBCL to mobilise sufficient financial resources required to establish and
operate the business of retail marketing of its products
(v) Examine whether sufficiently experienced and trained staff at various levels would be available to
manage and operate the retail outlets.
(vi) Ascertain the profit margins currently earned by the independent retailers on the Company’s
products and the impact of the self-owned retail outlets on the company’s profitability.
(vii) Consider the impact of the decision to establish own retail outlets on the Company’s future
relationships with the independent retailers.
(viii) Examine the need to revise the terms and conditions relating to sales to be offered to the
independent retail outlets.
(ix) Enquire into the business policies of competitors who have their own retail network and whether
RBCL would be able to enjoy a competitive advantage over the independent retailers.
(x) Examine the extent to which the availability of more reliable information of future market and
fashions trends would be an advantage after RBCL establishes its own retail outlets.
(xi) Analysis of the industry growth expected and the market share to be captured, carry out a viability
study of the share of market available
(xii) Analyze the value addition by gaining ownership of retail outlets; evaluate the possibility of brand
dilution in independent retail houses.
A.2 (a) Cost Leadership is a strategy that seeks to establish long-term competitive advantages by
emphasizing that value chain activities can be achieved at costs which are substantially below what
competitors are able to match on a sustained basis. This allows a firm to compete primarily by
charging a price lower than the competitors and still earn satisfactory levels of profits.
(b) A Product/Service Differentiation Strategy is a strategy which promotes and emphasizes that the
product/service offered by the firm is different from other available products/services of a similar
nature. The differences are based on certain desirable features and performance attributes and
therefore the high prices are justified.
(c) The capabilities which are most important for the success of a Product/Service Differentiation
Strategy are:
(i) Strong and functional research and development department, able to correctly anticipate and
assess the consumer behavior and desire.
(ii) Strong coordination between research and development, Marketing and Technical departments.
(iii) Innovative Management allowing better ideas to be cultivated.
(iv) Deep insight of the market and close association with the distribution channels.
(v) Strong brand name.
(vi) Strong connection and cooperation from well-established vendor network.
(vii) Capital Allocated for attracting technical and creative human resources enabling ability to
create a unique value/attribute that is hard to copy by competitors.
(viii) Protection of research should be available in order to ensure that resources are not imitated.
BUSINESS MANAGEMENT
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A.3 (a) The packaging features which would influence a consumer’s decision to purchase an edible
consumer product are:
(i) Convenience of the Size of the Package– The consumer should be able to chose from a range
of sizes available, that is, a sachet for a single use, or a size which would meet the
requirements for a period of say, one month or an economy package for a large family.
(ii) Preserve the Quality of the Product–The packaging should be capable of preserving the
quality of the edible product from the elements e.g. sunlight, humidity or moisture.
(iii) Product Information–The packaging should provide vital information regarding the
ingredients of the food item, their nutritional value and expiry date
(iv) Attractiveness of the Package–The packaging should be attractive in its presentation and
colour scheme to draw the attention and interest of the customer at the point of display of the
product on the shelves in the retail outlets. The design and color should be in line with the
brand and brand name should be displayed prominently
(v) Convenience of Handling the Package –The packaging should make it easy to take out the
edible product for use and also close the package easily after use.
(vi) Convenience of Storage–The package containing the edible product can be stored
conveniently and occupy minimum storage space.
(vii) Disposal of the Package–The package, after consumption of the contents, can be disposed of
safely from the environmental viewpoint
(b) The limitations of external databases are:
(i) The external database may not be accurate and it may not be possible for the user to determine
the extent to which the database is inaccurate.
(ii) The external database may not be current for the purpose of arriving at the decision in the
present changed circumstances.
(iii) The external data may not be impartial and may have been prepared with a bias for a particular
purpose.
(iv) The information required to reach reliable and rational conclusions may not be available in the
external databases.
(v) The data might be unrepresentative as every research has a different criteria for the target
segment depending on the in its objectives.
Examples:
Launching of a new food product in which reliable feedback and consumer reactions for taste, eating
habits, price considerations, type of packaging, etc are very important information. The external
database may not be able to address to the issues required to evaluate these factors for the particular
type of food product.
OR
Obtaining information of prospective subscribers and circulation of existing magazines for
launching a new high fashion magazine. Information regarding income, age, educational profiles of
the prospective subscribers may be available but information regarding their particular interests
would not be available in the external databases.
BUSINESS MANAGEMENT
Suggested Answers
A.4 Employee-Counseling includes working with individuals to promote and nurture relationships which are
supportive, psychotherapeutic, providing guidance for dispelling fears and apprehensions and resolving of
work-related problems.
The scope of Employee Counseling could be to:
1. help the employee identify areas that need improvement.

2. support the psychological equilibrium of employee
3. Bring in focus the nature of problem
4. explore the impact of the problems and exploring all possible solutions.
5. Create a constructive environment mutually beneficial to employees and organization.
Functions of Counseling:
(i) Provide Reassurance:
Offering reassurance to employees by inspiring them and giving confidence to handle problems and
inculcating in them a sense of direction and purpose in the discharge of their responsibilities and
duties.
(ii) Help to release of Emotional Tensions:
Employee Counselor can help to create a conductive non-critical and objective attitude by
providing suitable opportunities to employees to communicate and explain their problems to
counselors who are receptive and sympathetic to the problems faced by the employees so that the
tensions are released.
(iii) Clarification of Thought Process:

Enable employees to clarify their thought process and motivate them to accept responsibilities and
adopt a realistic approach in dealing with work-stress. It revives the employee’s level of aspirations
and motivates them to high levels of actual achievement.
A.5 (a) Mission-oriented business strategists do not view the strategy of short-termism outlook favourably
because it ignores the principle that long-term economic maximization of wealth and pursuit of
objectives on a sustainable basis cannot be achieved by maximizing economic wealth in each of the
individual short-term periods.
(b) Examples:
A pharmaceutical company may not incur expensive R&D costs and be satisfied with its existing
line of products which are popular. Although this would result in high profits in the short-term, the
long-term performance would suffer as new and more effective medicines are introduced in the
market by the competitors.
A beverage company may prefer to defer advertising expenditures to reduce the costs and report
high profits. However, in the long-run, the company may lose the efficacy of its brands and
competitive advantage to other more aggressive competitors.
A.6 The advantages of Business Process Outsourcing are:
(i) Outsourcing would enable the managers and the staff to concentrate in activities which are of critical
importance for the achievement of the corporate mission, thus improving their core competencies
and the overall productivity.
(ii) Outsourcing may help to reduce the operating costs of SEL.
(iii) Outsourcing would enable SEL to reduce the amount of capital investment that it would otherwise
have to incur in the facilities which would be provided by the outsourced agency. Also enable SEL
to improve core activities performance.
BUSINESS MANAGEMENT
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(iv) Careful selection of outsourcing companies would help to acquire new know-how and expertise
from the outsource agencies as they would be providing similar services to their several customers.
The disadvantages of Business Process Outsourcing are:
(i) Outsourcing involves loss of some control and places excessive reliance on outsiders.
(ii) Outsourcing can result in loss of valuable in-house skills.
(iii) Outsourcing may result in creation of competition in future.
(iv) Outsourcing may result in disclosure of critical confidential information to outsiders.
(v) If the level of the performance is not the same then it might result in brand dilution and shift in
brand loyalty.
A.7 The key factors which contribute towards the achievement of only a limited number of goals envisaged in
the Strategic Plans are:
(i) Inadequate understanding of the strategic plans and failure at the business and functional levels to
realize that sustained and coordinated efforts are required to achieve the goals.
(ii) Poor allocation of resources, organizational as well as human. Lack of support from the
management in providing adequate resources for the achievement of the goals set in the strategic
plans.
(iii) Weak organizational culture, leading to lack of involvement of the management at the business and
operational levels who feel that they are not on board in the strategic planning exercise and therefore
there is lack of “ownership” of the plans and goals from their side.
(iv) Consideration of the strategic planning as a ritual exercise and not as a day-to-day sustained effort
for achievement of the objectives of the plan, indifferent attitude and lack of commitment and
motivation on the part of the line managers towards the achievement of the goals.
(v) Poor Communication and lack of coordination between the top, middle and operational level of
management leading to poor goal definitions and unawareness of the departments role in achieving
the goal.
(vi) Pre-occupation of the operational level managers with the achievement of their short-term targets
and lack of awareness of the contribution of their own efforts towards achievement of the overall
objectives.
(vii) Inability to integrate and coordinate the various functions of research and development, HR
management, procurement, production, marketing and finance with the result that these activities are
working independently and at cross purposes.
(viii) Absence of a proper system to measure actual performance from time-to-time and compare the
results with the targets to take timely corrective measures in the event of any new development or
unfavorable variances.
A.8 The types of complexities generally encountered by parent companies in the planning and control of
operations of their foreign subsidiaries are:
Physical and Cultural Distances

The geographical and cultural distances separating the parent company increases the duration, expenses
and barriers in communications between the headquarters and their foreign subsidiary companies and
creates difficulties in the planning and control process.
Diverse Economic Conditions

The parent company has to adjust operations to the situations prevailing in the countries in which the
subsidiary companies are located. Differences in size of the market, nature of competition, type of the
products, labor costs and currency implications render the tasks of setting standards and evaluating
performance of foreign subsidiaries extremely complicated.
Uncontrollable Factors
BUSINESS MANAGEMENT
Suggested Answers
Planning and control is effective only in situations when timely corrective actions can be taken in the
event of deviations in performances. Corrective action may not produce positive results because many
foreign subsidiaries operate in conditions which are very different from those of the parent company.
A.9 The management of ECL should take the following Safety Policy measures to minimize the risks of
accidents in the plant for the manufacture of industrial chemicals:
(i) Involvement and active supervision by the top management and participation of the employees in
introducing effective safety policies in the entire premises.
(ii) Creation of a Safety Committee to review the safety measures and monitor the implementation of
the safety rules and procedures periodically to create a safe and secure working environment.
(iii) Preparation of Safety Rules and Instruction Manuals for strict compliance by employees at all
levels.
(iv) Education and training of the workers on a continuous basis and dissemination of information by
posting of safety charts, posters and installation of safety equipment at all sensitive areas in the
premises.
(v) Creation of an environment where the equipment and machines which are properly maintained and
the workers are provided protective uniforms.
(vi) Installation of proper warning/alarm systems and conduct of regular safety drills and exercises.
(vii) Adoption of a policy which ensures that the workers are not required to work for very long hours
which may adversely affect their concentration and result in performance lapses.
A.10 The different types of external business environment and internal business management competencies
requirements of managers to perform in the prevailing corporate environment are:
External Business Environment Competencies:

(i) Capable of evaluating external environment and be able to see the “whole picture”.
(ii) Capable of quick thinking and be able to make timely decisions regarding changes in the external
environment.
(iii) Being proactive in anticipating the changing environment.
(iv) Being sensitive to the interests and concerns of the different stakeholders in the organization in
which new complex business relationships such as partnerships, alliances, joint ventures are
prevalent.
(v) Ability to take and manage external business threats.
Internal Business Management Competencies:

(i) Awareness of the overall organizational objectives, rather than being limited to the day-to-day
operations of the organization.
(ii) Capable of handling increased workloads and pressures.
(iii) Responsible for building effective work groups and developing teams.
(iv) Flexible in handling human relations and in managing internal challenges of group work
performance.
(v) Initiative for self-development, learning and acquiring financial and information management and
IT skills.
A.11 (a) Employee Compensation Package refers to all forms of pay and rewards received by the employees
for the performance of their jobs, including cash, bonuses, benefits, facilities and perquisites.
(b) The steps which should have been followed in the formulation and implementation of a
well-conceived Employee Compensation Strategy are:
(i) Identification of the Objectives of the Employee Compensation Strategy

Compensation objectives should have been identified and articulated as part of the Bank’s
BUSINESS MANAGEMENT
Suggested Answers
overall planning process. The objectives should be in line with the organization's overall
corporate strategy and lead to the creation of a work force that is capable of implementing its
plans.
(ii) Review of Compensation Plan

Examination of the strengths and weaknesses of the existing compensation policies should
have been carried on a regular basis to enable the management to formulate new or improved
compensation package.
(iii) Identification of the Positions and Prepare their Job Descriptions

Identification of the positions at various levels and precisely defined job descriptions are
essential for the development of a meaningful compensation program. Job descriptions should
be reviewed periodically to ensure that they are in conformity with the employee skill
requirements, assignments and responsibilities.
(iv) Evaluation of the relative importance of the Positions and their significance for achieving
the objectives of the Bank
Evaluation and comparison of the positions is necessary to establish their relative importance
and the relationship between the compensation for different positions. The standards must be
well-defined and applied specifically to the positions rather to the individuals in these
positions.
(v) Comparison of the Compensation Packages with the packages offered by the
competitors.
Development of a rational compensation program in accordance with the competitive
environment by collecting relevant data of compensation packages offered by the competitors.
The Bank should identify the competitors and offer competitive compensation packages to
attract and retain skilled and motivated employees.
(vi) Administration of the Compensation Program

Administration of a comprehensive compensation program to be applied uniformly for all
employees. By adopting formal procedures and standards, arbitrary or unfair personnel
decisions can be avoided.
(vii) Communication of the Compensation Package

Communication of all aspects of the compensation package to the concerned parties including
the employees, supervisors, administrators and management who must have a thorough
knowledge of the program to avoid any misunderstandings.
A.12 (a) The steps involved in the operation of a letter of credit in their logical sequence are:
(i) The importer obtains the bank’s promise to pay the specified amount on behalf of the importer.
(ii) The importer’s banker promises the exporter to pay the specified amount on behalf of the
importer.
(iii) The exporter ships the goods and obtains the Bill of Lading / Airway Bill.
(iv) The exporter delivers the documents to his banker.
(v) The importer’s bank pays the proceeds to the exporter’s bank.
(vi) The exporter’s bank endorses the documents (bill of lading/airway bill) and delivers them to
the importer’s bank.
(b) The major advantages of establishing manufacturing facilities in foreign countries are:
(i) To utilize cheap raw materials, energy and human resources.

(ii) To achieve economies of large-large production opportunities available in certain countries.
(iii) To eliminate or achieve economies in costs of transportation of raw materials and finished
goods.
(iv) To overcome high tariff rates and various non-tariff barriers.
BUSINESS MANAGEMENT
Suggested Answers
(v) To obtain available tax concessions and tax holidays.

(vi) To achieve advantages of lower financial costs in certain countries.
(THE END)
June 10, 2010

(3 hours)
Q.1 Dandy Candies Limited (DCL) are manufacturers of a wide range of chocolates, candies and
sweets catering primarily to the market segment comprising of children in the age group of
6-15 years. DCL’s products are well accepted in the market in Karachi and its adjoining
metropolitan areas and two of its main brands are quite popular in the middle class segment
of the market.
The management has now realized that in spite of substantial capital investment in fixed
assets and good quality of its products, DCL has not been able to exploit the full potential of
the rapidly growing size of the market and achieve high level of operating capacity.
The Board has recently appointed a new Marketing Director and has given him a target to
increase DCL’s annual sales from the current level of Rs. 600 million approximately in each
of the preceding 2 years to Rs. 1200 million in the next 3 years. Achievement of this target
would launch DCL in the league of key market players and also significantly increase its
profitability. The incoming Marketing Director has a track record of good performance in
the consumer goods industry and achieving high sales targets by pursuing aggressive
marketing policies through deep insight of the market dynamics. The Marketing Director is
confident that he would be able to achieve the sales target set by the Board of DCL.
Briefly explain the Marketing Penetration Strategies which the Marketing Director should
pursue to achieve the sales target set by the Board. (10)
Q.2 (a) Identify the important functions which have to be performed by the Human Resources
Department of a commercial bank which has a strength of 17,500 employees deployed
in a network of 800 branches located throughout the country. The commercial bank is a
well-reputed organization known for its fair business policies, progressive outlook and
concern for development of a competent and well motivated cadre of employees. (06)
(b) Research Studies by Human Resource experts have shown that successful organizations
create internal work environments in which the employees are able to operate at their
optimal levels of productivity.
What are the important Human Resource Management practices which, in your opinion,
contribute towards workforce optimization in a manufacturing plant with several
integrated workshops and departments? (09)
Q.3 (a) Identify and explain briefly six factors which have contributed to the significant
increase in importance of International Trade in the preceding 3-4 decades. (09)
(b) According to Michael Porter the nature of competitiveness in any industry is a

composite of Five Forces. The Competitive Analysis model developed by Porter is
widely followed for formulating business strategies in many industries. List the five
Competitive Forces stated by Michael Porter. (05)
(2)
Q.4 Fine Sugar Mills Limited (FSML) owns and operates a sugar cane crushing plant for
manufacture of refined sugar. The affairs of FSML are looked after by a team of
professional management and the company ranks third amongst all the sugar mills in the
country in terms of its sales and profitability. The Company has developed an extensive
network of growers spread over a wide area who deliver cane at the factory site which is
then crushed in the minimum possible time to achieve high rates of sucrose recoveries.
Identify the key stakeholders of FSML and explain briefly why you consider each of these
constituent stakeholders to be of vital importance for the sustainable and long-term
profitable operations of the Company. (09)
Q.5 (a) What are the four main types of information that a properly designed Job Application
Form is expected to provide to the recruiter in the preliminary process of screening of a
prospective candidate? (04)
(b) State five different situations in which it would be advisable for a firm to pursue
policies of Unrelated Diversification. (05)
Q.6 In any market of significant size for products which have a widely diversified and dispersed
customer base there are a large number of firms, each, competing for its respective share of
the market by pursuing different competitive marketing strategies. In such a market
environment, an individual firm has to identify its distinctive role and positioning which
then determines the type of marketing strategy which it would pursue to achieve its
objectives.
You are required to list the distinctive characteristics of a firm which pursues Competitive
Marketing Strategies of:
(a) A Market Leader

(b) A Market Challenger
(c) A Market Follower and
(d) A Niche Marketer. (09)
Q.7 Management of Business Organizations are invariably seized with numerous problems and
expend a considerable proportion of their energy and time in making decisions to solve these
problems.
Explain briefly the various stages involved in the Decision Making Process. (09)
Q.8 (a) Accurate Engineering Limited is a company located in Europe and is engaged in the
business of manufacturing a wide range of high precision metallurgical components for
the automobile, medical equipment and miscellaneous engineering industries. The
Company’s customers are sensitive to quality and require components conforming to
most stringent tolerance standards. The Company is presently incurring high labour
costs and is considering a proposal to locate a portion of its facilities in Asia to achieve
cost economies.
Narrate at least six different types of Political Risks which should be considered by
Accurate Engineering Limited while evaluating an investment involving substantial
capital with long-term implications. (06)
(3)
(b) A Multinational Corporation has subsidiaries in several developing countries with

majority shareholdings in each of them. The MNC pursues a policy of centralized
financial decision making and the subsidiary companies are required to retain only
minimum balances to meet their immediate operating requirements and transfer surplus
funds to the parent company.
List various advantages the MNC seeks to achieve by pursing such a centralized
financial decision making policy. (06)
Q.9 (a) Describe briefly the following methods of selection of candidates:
(i) Group/Panel Interview

(ii) Structured Interview (05)
(b) State two advantages of each of the above methods of interviews. (04)
Q. 10 List eight Health and Safety hazards which are often faced by workers in a typical
manufacturing environment. (04)
(THE END)
BUSINESS MANAGEMENT
Suggested Answers
A.1 The incoming Marketing Director of DCL may pursue the following Marketing Penetration Strategies to
increase the Company’s annual sales from Rs 600 million to Rs 1200 million in the next 3 years.
(a) Pricing: DCL should reduce its prices to achieve a larger share of the growing market. This strategy
would be particularly rewarding as the target market for children is assumed to be highly price
sensitive and will result in substantial increase in the sales revenue. Besides, DCL’s average cost
would decline with increase in production and better utilization of existing capacity. Pursuance of this
pricing policy would therefore contribute towards increase in sales revenue as well as overall
profitability of DCL.
(b) Increase in Promotion and Distribution Support: DCL should launch well-conceived advertising
and promotion campaigns to attract those segments of the market in which its products are not
consumed at present. It would also be necessary to identify and appoint competent new distributors
who would aggressively promote DCL’s products. DCL should provide support to the retailers by
way of prizes and gifts for distribution among the children and also sponsor special events to increase
awareness of its products in the target market. DCL might have to explore both the push and pull
marketing strategy along with media advertising
(c) Product Modifications: DCL should introduce further product improvements and change design
features from time to time to make the products more attractive for the children. This strategy would
enable DCL to gain a larger share of the market as the consumers would increase the frequency of
their purchases.
(d) Incentives to Marketing Staff: DCL should offer performance related incentives and special benefits
to the marketing staff who are able to achieve and exceed the sales targets given to them.
(e) Market Development: DCL should introduce its products in new geographic areas besides Karachi
which offer good opportunities of achieving larger share of the market and increase in sales revenue.
A.2 (a) The important functions which have to be performed by the Human Resources Department of the
commercial bank are:
(i) Human Resource Planning
(ii) Recruitment, selection and induction of employees
(iii) Organisation of departments and design of work flows
(iv) Preparation of job specifications and job descriptions of employees
(v) Salary and wage administration, including reward systems
(vi) Planning for posting and transfers of suitable staff in the various branches
(vii) Training and development of staff
(viii) Measuring and monitoring of staff performance
(ix) Instituting measures for improving motivation and morale of employees
(x) Succession planning of competent staff
(xi) Handling of employee grievances and complaints
(xii) Employee welfare, health and safety
(xiii) Compliance with employment legislation and other legal requirements.
(xiv) Maintenance of centralised records of all the branches.
(xv) Ensuring equality amongst all the branches, policies should be made at central level with
equal remuneration and training opportunities for all the 17500 employees.
(b) The important Human Resource Management practices which contribute towards workforce
optimization in a manufacturing plant with several integrated workshops and departments are:
(i) Hiring of Workers: Workers are selected carefully on the basis of their skills to undertake the
specialized jobs they are required to perform.
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(ii) Workforce Planning : The strength of workers in various categories are determined in
anticipation of the expected workload and measures are taken for ensuring their availability at
the required point of time
(iii) Work Processes: Work processes are well-defined and training is provided to the employees to
enable them to perform their tasks in an efficient manner.
(iv) Working Conditions: The internal working conditions are conducive for maximum
achievement and the management supports high levels of performance.
(v) Performance Management Systems: Well-designed employee performance systems are
instituted in the organizations which are communicated and accepted by all the concerned
employees.
(vi) Conflict Management: Conflicts due to differences in perceptions, role ambiguities and
competition for resources must be contained and resolved by management in a fair and
equitable manner to promote team effort for the achieving the organizational objectives.
(vii) Reward System: High level of performance is expected from the workers and they are
adequately rewarded in a transparent manner for their good performance. Also reduce Staff
turnover rate by providing adequate compensation and support.
(viii)Employee Service: Make sure that the staff is provided with healthcare incentives, proper
maintenance of records and information system
A.3 (a) The factors which have contributed to the increase in importance of International Trade in the
preceding 3-4 decades are:
(i) Reduction in tariffs, quotas, exchange controls and liberalization of trade and investments have
resulted in making the imported products competitive in local markets.
(ii) Phenomenal improvement in communication and transportation technologies have resulted in
rapid movement of goods and consequent reduction in transportation costs.
(iii) Development of free-trade zones such as European Union and North American Free Trade
Agreement have resulted in increase in international trade owing to preferential movement of
goods and dismantling of high tariff regimes.
(iv) Global standardization and worldwide brand building with local adaption have created
significant market opportunities in different countries.
(v) Substantial expenditures have been incurred on R&D and standardization of manufacturing and
marketing techniques by global companies in industries such as manufacturing of
pharmaceutical products, energy development, telecommunications, fast food, etc and such
companies seek opportunities to apportion these costs to markets in different countries.
(vi) Important raw material exporting countries now have a growing class of affluent citizens and
foreign residents which have resulted in the creation of substantial markets for import of
vehicles, construction materials, equipment, edible products and luxury goods.
(b) The Competitive Forces stated by Michael Porter are:

(i) Potential threat of entry of new competitors
(ii) Potential threat of substitutes
(iii) Bargaining power of buyers
(iv) Bargaining power of suppliers
(v) Rivalry among existing competitors
A.4 Key stakeholders of FSML and their importance for the sustainable and long-term profitable operations of
the Company are :
(a) Shareholders: The shareholders are the ultimate owners of the Company and it is important to
maximize their wealth through sustained growth in real earnings and profitable expansion of the
business.
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(b) Distributors and Customers: The distributors and customers are important as the Company can
operate profitably only if it is able to build long-term relationship with the distributors and the
ultimate customers by offering quality products and value for money.
(c) Cane Growers: The sugar cane farmers are critical stakeholders as the Company has to build ongoing
relationship with them for supply of good quality cane according to the pre-determined delivery
schedules.
(d) Employees: The employees are important as the staff have to be trained and motivated to enable the
Company to maintain and strengthen its reputation as a progressive company and be able to continue
to operate as a profitable entity.
(e) Creditors: The creditors, including the banks, are important stakeholders as substantial amounts of
finances are required by FSML for making payments to the cane growers, financing of stocks of sugar
manufactured during the crushing season, purchase of components, parts and spares, etc The creditors
are important stakeholders as they have to provide funds to meet FSML’s requirements.
(f) Government: The government officials at various levels play an effective role for the smooth
operations of FSML for movement of heavy traffic, maintaining law and order particularly during the
crushing season, its role for fair pricing of sugar and ensuring its availability for the consumers
throughout the country.
(g) Community: The neighbouring community has to accept the Company as a socially responsible and
conscientious corporate citizen mindful of its obligations to the community and its overall welfare.
A.5 (a) A properly designed Job Application Form is expected to provide the following information to the
recruiter in the process of preliminary screening of a prospective candidate:
(i) Enable the recruiter to assess whether the applicant has the basic educational qualifications, and
technical skills to meet the requirements of the job.
(ii) Enable the recruiter to evaluate whether the applicant has relevant work experience to meet the
requirement of the job.
(iii) Enable the recruiter to draw tentative conclusions about the applicant’s suitability for the
position under consideration on the basis of previous work record.
(iv) Enable the recruiter to predict whether the applicant would fit in the cultural and social structure
of the organization.
(v) Enable the recruiter to reach a decision whether it would be worthwhile to process the
application further and call the applicant for test or interview.
(b) It would be advisable for a firm to pursue policies of Unrelated Diversification in the following
situations:
(i) The firm operates in an extremely competitive market or in a no-growth industry characterized
by declining industry-wide profitability and low returns on investments.
(ii) The firm considers it advantageous to control sources of supplies or marketing channels by
backward or forward integration.
(iii) The firm’s existing channels of distribution can be gainfully utilized to market the new products
and services.
(iv) The firm has an opportunity to purchase an unrelated business at a very low cost with prospects
of attractive rate of return on investment.
(v) The new products offer counter cyclical sales patterns compared to the firm’s existing product
lines.
Page 3 of 6
BUSINESS MANAGEMENT
Suggested Answers
A.6 A Market Leader

(a) develops strategies to expand the total size of the market
(b) pursues strategies to expand its own current market share
(c) defends its own market share vigorously
(d) Is customer driven and innovative
(e) Flexible and adaptive
(f) It tends to be on the cutting edge of new technologies and new production processes. It sometimes
has some market power in determining either price or output
A Market Challenger
(a) retains a substantial portion of the market share
(b) launches direct and indirect attacks on the Market Leader in areas in which there are apparent signs of
weakness of the Market Leader
(c) attacks firms other than the Market Leader to increase its own share of the market ]
(d) Offers price discounts and reduces own cost.
(e) Chooses only one target at a time, assesses the strength of the target competitor. Considers the
amount of support that the target might muster from allies
A Market Follower
(a) imitates and attempts to adopt the policies of the Market Leader
(b) adopts a secondary or runner-up position as it lacks the resources to challenge the Market Leader
(c) follows its particular strengths and skills to maintain its market share and profitability as it considers
that pursuing any other strategy would result in a less favourable outcome.
(d) no expensive R&D failures as best practices are already established.
(e) Employ “play it safe” strategy, the rationale is that by developing strategies that are parallel to those
of the market leader, they will gain much of the market from the leader while being exposed to very
little risk.
A Niche Marketer
(a) is a relatively small or a medium-sized firm
(b) specializes in a narrow segment of the market according to customer size or fulfilling specific
customer requirements
(c) meets the requirements of a particular geographical area.
(d) They tend to market high end products or services, and are able to use a premium pricing strategy
(e) They tend to keep their operating expenses down by spending less on R&D, advertising, and personal
selling.
(f) The firm typically looks to gain a competitive advantage through effectiveness rather than efficiency.
A.7 The various stages of the Decision Making Process are:
(a) Identification of the objectives: The first stage in the decision making process involves identification
of the objectives which may vary considerably. It is important at this stage to specify the criteria for
measuring the extent to which the objective has been achieved.
(b) Collection of information and ideas: The importance of outcome of the decision would determine
the extent of the efforts that should be made to collect the information and ideas and the degree of
accuracy of the input data required to reach a well-considered decision.
(c) Analyses of information and ideas: The information and ideas collected have to be analyzed to
assess the alternative courses of action. Decisions which cannot be reversed readily and have serious
long-term consequences require more in-depth and accurate analysis of the data and evaluation of the
ideas obtained from the different sources.
Page 4 of 6
BUSINESS MANAGEMENT
Suggested Answers
(d) Making of the Decision: This is the most important stage of the decision making process as the
decision maker has to select a particular course of action. Reaching the right decision is important
because this process involves selection of a particular course of action to the exclusion of the various
other alternatives. At times the decision maker may require additional information to reach a well-
considered decision.
(e) Communication of the Decision: Quite often the persons making the decision are different from
those who have to implement the decision. Consequently it is necessary to issue instructions to all
individuals who would be affected by the decision or who would be required to implement the
decisions.
(f) Evaluation of the results of the decision: Decision makers have to evaluate the outcome of the
decision. It enables them to modify the course of action or revise the objectives etc.
A.8 (a) The different types of Political Risks which should be evaluated by Accurate Engineering Limited are:
(i) The assets may be nationalized or expropriated by the government of the host country.
(ii) The Asian country may impose stringent exchange control restrictions which would make it
difficult to repatriate the profits and investments.
(iii) The country may face domestic instability such as revolution, social and political unrest and
terrorist activities which would be detrimental to the interests of Accurate Engineering Limited.
(iv) The country may be involved in conflict, disputes and war with other countries which would
cause disruptions in business.
(v) Deterioration of relationships between the investor country and the country in which the
investment is proposed would pose difficulties in the business operations of Accurate
Engineering Limited.
(vi) Frequent changes in the government with far reaching shifts in its policies.
(vii) Risk of sovereign default by the host country.
(viii) Maintenance of the tolerance standards, relaxation in any way could impact the demand.
(b) The MNC seeks to obtain the following advantages by pursuing a centralized financial decision
making policy:
(i) The parent Company has superior fund management skills which are not available in the
subsidiaries.
(ii) The risks of losses on account of devaluation in the currency of the host countries are
minimized.
(iii) The funds can be promptly invested in avenues which offer optimal returns.
(iv) The risks of expropriation of funds by the governments of the host countries are reduced
considerably.
(v) The pooling of funds can help to implement a more coordinated and effective overall fund
management strategy.
(vi) The parent company can obtain facilities on more favourable terms from the bankers due to the
substantial size of the pooling of funds.
A.9 (a) Group/Panel Interview consists of multiple interviewers who independently record and rate the
applicant’s responses during the interview session. The panel normally includes the immediate
supervisor, a representative of the HR Department and a Job Expert.
Structured Interview is a procedure in which interviewers ask the same set of questions in the same
order to all the candidates. The questions are based on job analysis of the position and the responses
from the candidates are reviewed for their relevance, accuracy and bias.
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BUSINESS MANAGEMENT
Suggested Answers
(b) The advantages of Group/Panel Interview are:

(i) Reduces the biases of an interview conducted by a single interviewer.
(ii) Increases the reliability and validity of the interview.
(iii) The candidate is simultaneously evaluated by all those individuals who are relevant to the
appointment.
(iv) Less time consuming and can provide the candidate insight of how the staff works together and
interacts
The advantages of Structured Interview are:
(i) The interview is highly focused and all the candidates are assessed according to their responses
to the specific job related questions.
(ii) It is easy to ensure that all relevant information has been collected.
(iii) Ensures that answers can be reliably aggregated and that comparisons can be made with
confidence between subgroups or between different survey periods.
A.10 The Health and Safety hazards which are faced by workers in typical manufacturing environment are:
(a) Contact with chemicals and other harmful materials.
(b) Excessive noise and vibrations of heavy machines.
(c) Extreme temperatures.
(d) Poorly designed equipment which affect postures of workers.
(e) Slippery floors and passage ways.
(f) Absence of safety guards on moving parts of equipment.
(g) Poor illumination e.g. light glare, insufficient light.
(h) Improper ventilation.
(i) Lack of safety rules and regulations
(j) (k) Faulty /Outdated safety equipment
(l) (m) Improper machine maintenance
(n) Excessive humidity
(THE END)
Page 6 of 6
The Institute of Chartered Accountants of Pakistan
Business Management
Final Examinations – Winter 2010 December 9, 2010
Module E 100 marks - 3 hours
Q.1 (a) Dental Equipments Limited (DEL) is engaged in the business of manufacture of a wide range
of equipments used by private dentists as well as leading hospitals. The Company strives hard
to achieve sustainable growth and meet the requirements of highly demanding dentists who
want the “very best and the latest” equipments to serve their patients.
DEL has recently observed a trend of unethical practices followed by its sales representatives.
The sales representatives who are not able to meet their targets, book fictitious sales at year
ends and later record them as sales returns. They also share a portion of their commissions
with the purchase representatives of the major hospitals.
State what policy measures should DEL adopt to eliminate the unethical practices of the sales
representatives. (06 marks)
(b) State the situations in which an MNC would prefer to operate in a foreign country as a branch
instead of establishing a subsidiary company. (04 marks)
Q.2 List and explain briefly four factors which in your opinion create Exit Barriers and prevent
existing participants from quitting a loss-incurring industry. (08 marks)
Q.3 Identify the business strategy/policy/tool which an organisation is pursuing in each of the
following situations:
(a) In 1990, Sony launched the first High Definition (HD) TV in the market at a price of $43,000
per set. These TV sets were purchased by customers who could afford to pay the high price
for the new technology. After reaping the maximum profits and recovery of the sunk R&D
costs, the price was gradually reduced in 1993 to $ 6,000 for a 28” TV set to attract new
customers. This strategy is called __________.
(b) The management tool that enables a firm to classify its range of products according to their
current market share and expected growth is called __________.
(c) The assessment tool used to compare and identify the variance between a firm's current
market coverage and potential market opportunities for its products is called __________.
(d) A company which has capabilities to manufacture a complete line of superior quality ball
bearings for a wide range of original equipment manufacturers and industrial users is
pursuing a strategy of __________.
(e) If a company engaged in the textile manufacturing business acquires majority holdings in a
sugar mill, a motor car manufacturing plant and a private airline; it is pursuing a __________
strategy.
(f) The chief executive officer who makes alternative plans to deal with emergencies or
unexpected situations prior to their occurrence is pursuing a __________ strategy.
(g) A firm uses different brands of essentially the same product to target different market
segments is pursuing a __________strategy.
(h) A bank which strives to develop better understanding of the customer’s needs and satisfy
them to create customer loyalty is adopting a policy of __________.
(i) A method of demand forecasting in which a firm markets its new products in a limited
geographical area to ascertain consumer response and from this sample develops projections
of the size of market over a larger area is called __________. (09 mark)
Business Management Page 2 of 3
Q.4 (a) Recruitment of the right type of staff is of critical importance for the short term as well as the
long-term success of an organisation. Induction of unsuitable employees creates difficulties
for an organization in the achievement of its goals, undermines the morale of other
employees and has adverse effects on the individuals themselves as they are misfit and unable
to make worthwhile contribution towards the organization.
Briefly describe qualities that a skilled recruiter should possess in order to be able to evaluate
prospective candidates for recruitment in a performance–oriented organization. (06 marks)
(b) A leading hospital which has a network of facilities at several locations in Karachi and also in
other cities intends to invite applications for the posts of Laboratory Technicians at its various
facilities.
List six important items that should be contained in an advertisement to be placed by the
hospital in a newspaper having wide circulation in several cities in the country. (03 marks)
Q.5 (a) List the following methods of payment for the imported products which are most
advantageous from the perspective of an importer in descending order.
(i) Open Account

(ii) Sight Letter of Credit
(iii) Consignment
(iv) Usance Letter of Credit (02 marks)
(b) State six constraints which in your opinion act as impediments towards attracting foreign
investments in an underdeveloped country. (03 marks)
(c) List four advantages of adopting market-based transfer pricing policies. (04 marks)
Q.6 (a) A well-established and successful Chinese company engaged in the business of manufacturing
of a wide range of home appliances such as refrigerators, washing machines, microwave
ovens and assorted juicers and blenders intends to launch its products in Pakistan. The
Company’s management is of the opinion that its products have significant cost and quality
advantages and can capture 4-5 percent share of Pakistan’s market in 5 years.
Identify and list at least twelve key parameters which should be considered by the company
for an objective evaluation of the Export Market Potential. (06 marks)
Note: Only list the key parameters – explanations are not required.
(b) Some companies enter into Licensing arrangements with the overseas companies as an
alternative to direct exporting. Identify the advantages that such companies seek to achieve by
following this strategy. (05 marks)
Q.7 (a) Explain the meaning of Brand Equity. (02 marks)
(b) Silkfinish Paints Limited (SPL) are manufacturers of a wide variety of superior quality paints
which are used in interior and exterior finishing of residential, commercial and industrial
buildings. SPL intends to launch an aggressive “Pull Strategy” to counter competition from
new entrants who are offering lucrative margins to the retailers to promote their products
which are inferior in quality and priced much below the prices of SPL’s products.
(i) What is meant by Pull Strategy? (02 marks)

(ii) Explain briefly what advantages SPL is seeking to achieve by launching an aggressive
Pull Strategy. (03 marks)
Q.8 (a) The role of Human Resource Managers in companies which have a very large workforce has
assumed increasing importance and they are now more closely involved and proactive in the
Formulation and Implementation of Strategies at the corporate level.
State the areas of specific responsibilities which fall in the domain of a Senior Human
Resource Manager involved in the Formulation and Implementation of overall Corporate
Strategy of an integrated textile mill having over 15,000 employees in various cadres.
(10 marks)
(b) What is meant by a Strategic Business Unit (SBU)? (03 marks)
Q.9 Management has to expend considerable efforts in devising business strategies to achieve corporate
objectives and goals effectively.
(a) Why do companies accord importance to the pursuance of a formal Strategic Planning
Process? (06 marks)
(b) Explain the different steps which the management has to undertake in the formulation and
implementation of a well-considered business strategy. (09 marks)
Q.10 One common factor which distinguishes well-managed and highly profitable service-oriented
companies from their competitors is the competence and commitment of their human resources.
The top companies assign very high priority towards the training and development of their staff
and genuinely consider their human resources as their “key strategic assets.” In these companies,
training and up-gradation of the quality of human resources, at all levels, is a continuous
endeavour with active involvement of the senior management.
Explain what competitive advantages these service-oriented companies expect to derive by

committing resources towards training and development of a competent and committed
workforce. (09 marks)
(THE END)
BUSINESS MANAGEMENT
Suggested Answers
A.1 (a) DEL should adopt the following policy measures to eliminate the unethical practices
followed by the sales representatives:
(i) Create a written Company Code of Ethics and circulate it to each member of the sales
department. This would eliminate the ambiguities and help the employees to
differentiate between what is considered to be acceptable behaviour and what is
unethical behavior.
(ii) Issue clear and specific instructions, requiring adherence to the norms of ethical
behaviour. These instructions would be deterrent for the sales representatives and
dissuade them from engaging in unethical practices.
(iii) The consequences of indulging in unethical behavior should be stated clearly in the
Code of Ethics.
(iv) Sales Representatives who are unable to achieve their allocated targets fully should
also be rewarded on an appropriate basis.
(v) DEL should sponsor and organize seminars and workshops on Ethics to emphasize
the importance of ethical behaviour.
(b) It would be advantageous to establish branch operations in a foreign country instead of an

overseas subsidiary company in the following situations:
(i) If the foreign business is not expected to be profitable in the initial years and
therefore the losses of the subsidiary company can have a negative effect on the
image of the MNC.
(ii) If the legal and accounting formalities of the branch operations are more simple vis-à-
vis those involved in a subsidiary company.
(iii) If the MNC does not intend to have a long term presence in the foreign country, it
would prefer to establish branch operations.
(iv) If the amount of investment involved in the foreign country is of a nominal amount
and it may be advisable to set up branch operations instead of a subsidiary company.
(v) If it is advisable to have a low operating profile to achieve the business objectives.
A.2 The factors which create Exit Barriers and prevent existing participants from quitting a loss-
incurring industry are:
Substantial Investment in Highly Specialized Fixed Assets:

This is particularly relevant in capital-intensive industries which require very large investments in
specific-purpose building and machinery. These assets do not have alternative uses and their
salvation value is usually low. The substantial initial capital costs and low salvation value of the
assets would result in heavy losses and create exit barriers.
High Redundancy Costs:

Organizations having a large workforce with high salaries or contracts that stipulate high
redundancy payments have to incur substantial costs by way of severance payments to its
employees to exit from the industry. These payments require heavy cash outflows and act as exit
barriers.
Ancillary Costs of Closure of Business:

The organization may have entered into long-term contractual agreements with important
suppliers or buyers and tenancy agreements carrying substantial penalties in the event of
premature termination of these agreements. The high costs of premature termination of
agreements are exit barriers as the closure of business would cause huge losses.
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BUSINESS MANAGEMENT
Suggested Answers
High Fixed Operating Costs :

An organization which has very high fixed operating costs and is faced with unfavourable business
conditions may continue operations if it is able to recover its variable costs fully and a portion of
its fixed costs. This is particularly relevant if the unfavourable conditions are considered to be of a
temporary nature and the firm is optimistic about the prospects of an upturn and recovery from
its current difficulties. This type of composition of preponderance of fixed costs acts as an exit
barrier.
A.3 The business strategy/policy in each of these situations is:
(a) Market Skimming Pricing Strategy

(b) BCG Matrix
(c) Gap Analysis
(d) Product Specialization
(e) Conglomerate Diversification or Conglomerate Expansion Strategy
(f) Contingency Planning Strategy
(g) Multi-brand Strategy
(h) Relationship Marketing
(i) Test Marketing
A.4 (a) A skilled recruiter should:

(i) Possess knowledge about the job to be filled – The recruiter should have a clear
understanding of the job and be able to ascertain whether it is necessary to induct a
new employee or the work can be handled adequately by reorganizing or reallocating
other jobs. If the job is necessary then the duties and responsibilities attached to the
job should be clearly spelt out.
(ii) Possess insight in the attributes and qualities of the individuals to perform the job –
The recruiter should be aware of the qualifications, experience and skills necessary to
perform the job.
(iii) Have knowledge of the sources and the means of attracting a range of suitable
candidates – In case it is necessary to recruit from external sources, the recruiter
should be aware of the sources where suitable applicants are available, identify the
potential candidates and adopt appropriate methods of recruitment.
(iv) Possess skills to evaluate the candidates who are most suitable for the job – The
recruiter should have insight in the methods of obtaining information about the
candidates and be able to apply the appropriate methods for selection of the right
candidate.
(b) The advertisement should contain the following information:

(i) Requirements of the job specifications stating main tasks to be performed and the
responsibilities associated with the position.
(ii) Outline of the hospital’s network and its reputation, working conditions, the facilities
available in the hospital and professional capabilities of the staff.
(iii) Location(s) at which the technicians would be posted.
(iv) Compensation package including fringe benefits.
(v) Specifications of job requirements such as education, professional training, particular
skills and experience.
(vi) Name /designation of the individual to whom the application should be sent and last
date for receipt of applications.
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Suggested Answers
A.5 (a) The methods of payment in the order of preference for the importers are:
(i) Consignment
(ii) Open Account
(iii) Usance Letter of Credit
(iv) Sight Letter of Credit
(b) The constraints which act as impediments towards attracting foreign investment in an
underdeveloped country are:
(i) Poor infrastructure facilities of roads and communications.
(ii) Currency depreciation of the underdeveloped country.
(iii) High costs of energy inputs and their unreliable availability.
(iv) Absence of laws relating to patents, copyrights and intellectual properties.
(v) High Risk of political instability in the country.
(vi) Widespread corruption in the government and other social sectors.
(vii) Lack of education and non-availability of a skilled and competent work force.
(viii) Absence of generally accepted accounting principles.
(ix) Uncertain long-term economic and financial policies.
(c) The advantages of market-based transfer pricing policies are:

(i) The individual units would achieve high level of efficiency as they can negotiate most
favourable market-based prices as if they were independent units.
(ii) The selling unit would make efforts to improve the quality of the products in
accordance with the requirements of the purchasing unit.
(iii) The performance of the individual units can be evaluated more objectively.
(iv) The tax authorities would accept more favourably a market-based transfer pricing
policy.
A.6 (a) Current Market Size: Economic Stability:

(i) Population Size and Growth (xi) Balance of Payments Position
(ii) GDP Size and Growth (xii) Taxation Policy
(iii) Domestic Production of Appliances (xiii) Monetary and Trade Policy Regulations
(iv) Volume of Import of Appliances
(v) Sources of Import of Appliances
Market Accessibility: Miscellaneous :

(vi) Import duties and tariffs (xiv) Non-tariff barriers
(vii) Existing distribution channels (xv) Attitude towards Chinese products
(viii) Pricing methods and credit terms (xvi) Political stability
(ix) Promotional and advertising practices (xvii) Cultural differences within the
country
(x) Resourcefulness of potential (xviii) Level of education
distributors
(b) Companies enter into Licensing Arrangements with overseas companies instead of direct
exporting to obtain the following advantages:
(i) Direct Exporting may be unattractive because of tariffs, quotas or other import
restrictions in overseas markets.
(ii) Licensing may allow fairly rapid penetration of overseas markets.
(iii) Licensing does not require substantial financial resources.
(iv) Political risks are reduced since the licensee is likely to be a local company.
(v) Local production may be the only feasible option in the case of bulky products such as
cement and flat glass.
Page 3 of 6
BUSINESS MANAGEMENT
Suggested Answers
A.7 (a) Brand Equity is the differential effect of awareness and familiarity of the brand name on the
customer response to the quality of a product or service. It is a measure of the brand’s ability
to capture and retain the preference and loyalty of the consumers. A brand has positive
brand equity when consumers react more favourably to it than to any generic or other
branded versions of the same product.
(b) (i) A Pull Strategy is a promotional strategy in which considerable expenses are incurred
in advertising and customer promotion to attract the final consumers who seek to
purchase the products on the strength of its brand name.
(ii) SPL intends to launch an aggressive Pull Strategy to achieve the following advantages:
 Further strengthen the brand image for its products and create greater brand
awareness among the quality conscious customers.
 Differentiate its products from those of the competitors and create value for
the customers who would be willing to pay a premium price for the products.
 Create customer loyalty by emphasizing that the long-term advantages of
superior quality paints far outweigh the apparent savings offered by
competitors by way of lower prices.
A.8 (a) A Senior Human Resource Manager involved in the Formulation and Implementation of
Strategy at the corporate level of a textile mill having 15,000 employees should have
responsibilities to achieve the following objectives :
(i) The organizational structure should be appropriately designed to achieve the overall
corporate objectives. The organizational structure should capitalize on internal
strengths and strive to remove internal weaknesses which may be impediments to
the achievement of the objectives.
(ii) The company’s objectives and goals should be communicated and well understood by
the employees at all levels.
(iii) The various divisions and departments should work in close coordination to achieve
the main goals and objectives of the company. Areas of friction and conflict which
may undermine performance should be identified and rectified at appropriate levels.
(iv) The managers at all hierarchical levels should make effective plans to achieve the
business and operational goals and targets entrusted to their respective departments.
(v) The job descriptions and job specifications should be precisely defined and clearly
understood by the employees at all levels.
(vi) The organization’s reward system, including benefits and policies of promotion
should be fair and equitable and designed to achieve optimum employee performance
at all levels.
(vii) The policy issues of training, job rotations, career path and succession planning
should be accorded the necessary degree of importance and be implemented in an
objective and fair manner.
(viii) The employees should be kept fully motivated and their morale and commitment
should be high at all times. The employees should take pride in their association with
the company.
(b) A Strategic Business Unit (SBU) is an independent unit within a large organization and has
its own staff, financial resources and products. A separate SBU pursues its own marketing
strategy and is established on the premise that a single strategic approach is not always
appropriate in a large diversified organisation which markets different products to serve the
needs of a wide range of customers.
Page 4 of 6
BUSINESS MANAGEMENT
Suggested Answers
A.9 (a) Companies accord importance to the pursuance of a formal Strategic Planning Process to achieve
the following objectives:
(i) A formal Strategic Planning Process helps to indentify the opportunities and risks
involved in the company’s business. The company can make well-considered
strategies and adopt measures to seize the opportunities accruing from its internal
and external strengths and also reduce the various business risks.
(ii) A formal Strategic Planning Process enables the company’s top management to be
involved in proactive thinking of the business objectives and taking coordinated
actions relating to deployment of resources to achieve its strategic goals.
(iii) A formal Strategic Planning Process ensures the participation of management and the
staff who are seized with the task of achievement of the business objectives. The staff
at all levels develop understanding of the productivity-reward relationship in the
strategic plans which increases their motivation and reduces the adverse impact of
resistance to change.
(iv) A formal Strategic Planning Process is essential to create alignment of the company’s
short-term, medium-term and long-term targets for achievement of the company’s
objectives.
(v) A formal Strategic Planning Process is essential for optimum coordination of the
corporate, business and functional strategies for achievement of the Company’s
objectives.
(b) In the formulation of a well-considered Business Strategy, the management conducts an

Appraisal of the company’s internal and external environment. For this purpose SWOT
Analysis may be carried out in order to find ways for (a) exploiting the company’s strengths
to help achieve short-term and long-term objectives and (b) reviewing the weakness and
threats faced by the company from the following standpoints.
The steps in the implementation of a well-considered Business Strategy are:

(i) Organizational Structure: Organization Structure is suitably integrated for achieving
harmony among the various departments and functions and co-ordination at all
levels.
(ii) Human Resources: Human resources with necessary skills and proper motivation are
deployed in appropriate positions for effective implementation of strategy.
(iii) Availability of Financial Resources: Adequate financial resources should be made
available in time for implementation of the strategy.
(iv) Technology: Appropriate technological inputs are made available to support the
performance necessary to achieve the objectives of the strategic plans.
(v) Decision Process: Sound policies and processes are developed to ensure that all
significant decisions are taken on time and in a coordinated manner.
(vi) Monitoring and Control Systems: Appropriate systems are established to ensure that
progress is monitored against the established standards on a continuous basis and
deviations if any are identified for taking timely corrective actions for
implementation of the strategic plans.
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BUSINESS MANAGEMENT
Suggested Answers
A.10 The well-managed service–oriented companies give high importance to staff training and
development and create a cadre of competent and committed employees to derive the following
advantages:
(i) The cadre of properly trained and competent staff who are fully knowledgeable of their
duties and responsibilities can handle customers in a highly professional and courteous
manner The competent staff inspires confidence in the customers and helps to retain their
loyalty which brings repeat business.
(ii) Success of even the well-conceived corporate and business strategies of service-oriented
companies depend to a considerable extent on the competence of their staff at various
levels to deal with a variety of situations where proper handling is of vital importance
towards the achievement of the corporate goals.
(iii) Properly trained and competent employees are able to avoid and handle accidents and
mishaps and contribute towards the safety and security of customers, other members of
the staff as well as the valuable physical assets.
(iv) A well-trained and competent work force at all levels requires less directions and
supervision and is able to handle the various day-to-day issues promptly in a responsible
manner to the satisfaction of the management. These companies can operate efficiently
with relatively flat organization structures and lower operating costs.
(v) A competent, committed and motivated workforce is able to create a high degree of
cohesion and team effort among the staff at various levels.
(vi) A well-trained and competent workforce with multi-skilled capabilities is able to handle
varied and different assignments.
(vii) The new inductees who undergo formal training programs are better absorbed in the
culture of the organization.
(THE END)
Page 6 of 6
SUBJECT SESSION
General: the paper was well designed and comprehensive. All important topics were
included and the questions were simply worded so as to help the students in
understanding what exactly is being asked. It is suggested that students consult reference
books and improve their understanding of the concepts so that they are able to tackle
questions in a better way. It is reiterated that marks allotted next to each part of each
question are checked so that the time to be spent on answering each may be gauged.
Q.1 (a) This common ethical dilemma was given to test the candidates’ personal
ethical and moral judgment. Students were required to give measures that
DEL should adopt, in order to eliminate unethical practices by sales
representatives. Most candidates mentioned measures like:
• Sales reps should be given written instructions about acceptable
behaviour and norms.
• Consequences of indulging in unethical practices should be made
clear.
• Training workshops should be held.
• Sales targets should not be superficially high as that may
demoralize the employees.
Very few touched on the important point of circulating a written Code of
ethics. Some candidates mentioned that surveys of hospitals and feedback
from doctors, etc. should be sought, which was completely irrelevant as an
organization would not degrade its employees by secretly seeking
feedback from customers.
(b) Establishment of branch operations instead of an overseas subsidiary:

Students need to understand the difference between incorporating a branch
in a foreign country and an overseas subsidiary. A branch is simply a part,
division or section of an entity that is set apart to undertake certain tasks or
responsibilities in order to carry on business and derive revenues in a
foreign country. An overseas subsidiary however, has a separate legal and
corporate existence and is not a part of a larger entity with at least 50%
shareholding of the parent company.
Students were unable to score high marks in this part as they mostly mentioned
benefits like cost savings and lesser legal formalities in case of establishing a
branch. The tax implications and long term benefits were not touched upon.
Page 1 of 4
Examiners’ Comments on Business Management – Winter 2010 Examination
Q.2 In this question ‘exit barriers’ that prevent going concerns from quitting the
business were to be explained. Answers were mostly good however, at this level
it is expected that terms like severance payments, redundancy costs and
ancillary costs associated with closure of business etc. are understood and
mentioned. Some candidates were unable to understand the question and in
haste mentioned reasons that would lead a corporation to wind up and leave.
Q.3 Students’ knowledge of various business strategies was tested through this
question. This style of testing the knowledge should be encouraged. Few
students scored well, others just did guess work. This shows that concepts are
just skimmed through and students do not make any effort to practically
understand the strategies.
Q.4 (a Both the parts of this question were generally attempted nicely and show
& that recruitment is a topic that is commonly liked and understood.
b) However, it is suggested that extensive reading should be done and
reference books should be consulted to improve the quality of responses.
Some of the students seemed to be in a hurry and missed to mention some
very mandatory points like required qualification or job description.
Q.5 (a) Four methods of payment against imports were given. These had to be
arranged in order of preference for the importer in descending order. It
was felt that students were not sure about the meaning of descending; so
many answers were given in reverse order which resulted in loss of easy
marks.
(b) Students had to list the obstacles in attracting foreign investment in

underdeveloped countries. There are so many factors that make up this
answer, some are: corruption, instability of government & its policies,
inflation, lawlessness etc. The question was mostly attempted well.
(c) The advantages of market based transfer pricing, asked in this question
are: fair pricing, competition between depts., resulting in improved
efficiency, tax benefits, easy performance evaluation etc. Most students
could mention one or two points only.
Q.6 (a) The easiest question of this paper and a golden opportunity to score quick
marks. There are numerous factors which a Chinese company would
reflect on before going ahead with the decision of whether or not to
export. Almost all students secured atleast passing marks in this part of the
question.
(b) This question asked the benefits availed by the licensor by entering into a
Licensing Arrangement. Most common error here was that students gave
the benefits availed by the Licensee instead of the Licensor. This usually
happens when students hurry to answer after reading two three words of
the question. It is advisable to take at least the initial five minutes to just
read the paper CAREFULLY before attempting to answer it.
Page 2 of 4
Q.7 (a) “Brand Equity” is a well-known concept in management studies but most
students gave wrong answers. Equity was mistaken for equality, students
thought that it meant having equal value or same name of many products
launched under one brand.
(b) The Pull Strategy is not an alien concept for anyone having some
knowledge of product management. It is a strategy in which promotional
expenses are incurred with the aim of attracting potential consumers and
reduce reliance on sales persons. The response was generally satisfactory.
Q.8 (a) The objectives to be achieved by Human Resource Managers are several
including fair compensation management, recruiting the most suitable
workforce, updating the skills of Employees through training &
development, maintaining a peaceful environment by conflict
management etc. There are several more of them but most candidates
could mention not more than four.
Despite the fact that this question pertained to basics of Business

Management, students not being able to do well shows a lack of
commitment on their part. Many students did not understand that HR
manager’s duties of strategy formulation and implementation are being
discussed and included points such as maintenance of personal records
etc.
(b) The basic definition of SBU is “an independent unit which has its own
resources and products and strategy” and because SBUs have independent
objectives they allow the owning conglomerate to respond quickly to
changing economic or market situations. Many students incorrectly
mentioned that SBU is a department of the organization which plays an
important role in achieving its strategy.
Q.9 (a) Students were lost whilst attempting this question. Some had no grip on
the concept of strategic planning. Those who had a fair idea could not
express themselves due to lack of reading. Mostly, vague and general
answers were given.
(b) Steps in the implementation of a well considered business strategy were

required in this part. It seemed like students had difficulty in organizing
their responses and hastily tried to get over this part. Students ignored
important areas like policies, systems and resource allocation. Most
answers left a lot to be desired.
Page 3 of 4
Q.10 This question again did not require any text book learning just some logical,
knowledge & wit. It just required students to give a point-wise enumeration of
advantages of conducting training. The same points were repeated in many
different ways. 3-4 points were created out of one. This manifested in the form
of a lengthy answer but not the one which was desired.
It was observed that students talked only about the benefits to the employees like
higher prospects for promotion etc. Benefits to the organization, clients and
overall business were often ignored. Competitive advantage in service-oriented
companies was touched upon by some. However, the true essence of
distinguishing oneself on the basis of good quality service did not come out.
(THE END)
Page 4 of 4
Business Management
Final Examinations June 9, 2011
Reading time – 15 minutes
Module E – Summer 2011 100 marks – 3 hours
Q.1 (a) A leading manufacturer of automobiles attaches high degree of importance to the
competencies and skills of its front-line operational managers in the manufacturing and
assembly lines.
Identify and briefly explain the different types of competencies and skills required for
effective performance by these managers. (05 marks)
(b) Employee Participation is often considered to be vital for the growth and development of
individuals and teams to enable them to make effective contribution towards achievement of
the goals of the organisation. List five advantages which employers seek to achieve by
encouraging Employee Participation in the affairs of the organisation. (05 marks)
Q.2 (a) Identify the force of competition which is relevant in the context of Michael Porter’s Five
Forces Model of Competition in each of the scenarios presented below. Substantiate your
answer by highlighting the salient features of the Model of Competition selected by you in
each of these scenarios.
(i) Four companies of similar size and strength are engaged in the manufacture of
detergent powder for washing clothes. These companies are key market players and
jointly share 95% of the aggregate market which is not expected to witness any
significant growth in the foreseeable future.
(ii) Soundhealth Pharmaceuticals and Goodcare Pharmaceuticals are manufacturers of

two new medicines for treatment of cancer. The medicines have been developed after a
long period of research at a very substantial R&D cost and are highly effective.
Both the existing manufacturers are earning exceptionally high profits in a market
which is expected to witness growth in the future.
(iii) Lucky Coal Mines Limited is the sole supplier of coal to a cement plant located in close
proximity to the mines. The cement plant requires substantial quantities of coal for
firing of its kilns. Quality of this coal is most suitable for the cement plant and also cost-
effective due to low transportation costs. Lucky Coal Mines has several buyers who are
willing to purchase the coal because of its high calorific value. (09 marks)
(b) Unique Textile Mills are leaders in the designing and manufacturing of cotton fabrics for
ladies fashion clothing. Identify four Strategic Objectives which in your opinion may be
included in the strategic planning process of Unique Textile Mills. (03 marks)
Q.3 Symco Bank Limited has introduced significant changes in its organizational structure and
downsized its operations so that it may be able to provide more efficient services to its customers
and meet intense competition from other banks.
(a) Define Downsizing and very briefly describe its impact on the Bank’s organizational structure.
(03 marks)
(b) List the important considerations which should be kept in perspective by the HR Manager of
the bank while pursuing a policy of downsizing. (05 marks)
Q.4 (a) What is meant by Market Research? (02 marks)
(b) Give four basic reasons why companies conduct market research. (04 marks)
Q.5 You have recently been appointed as Human Resource Manager of Fine Electrical Company
Limited (FECL), a leading manufacturer of a wide range of household appliances. The company
has over 800 employees working in the various departments involved in the manufacture of its
different product lines. You have observed that FECL does not have a system of Formal
Succession Planning Scheme in the company.
Required:
(a) Explain briefly what is meant by Formal Succession Planning. (03 marks)
(b) Briefly explain to the management of FECL the advantages of introducing a Formal
Succession Planning Scheme in the company. (05 marks)
Q.6 (a) What is Market Penetration Policy? Identify the conditions in which Market Penetration
Policy may be pursued to achieve optimum results. (06 marks)
(b) Explain briefly what you understand by the term Market Segmentation. State the criteria
which are essential for classification of markets in different segments. (05 marks)
Q.7 Highly Creative Strategic Planners in progressive organizations have innovative mindsets and do
not merely project past strategies in the future but are continuously engaged in “out of the box”
thinking to explore new opportunities beyond the existing strategy framework.
Identify the distinguishing characteristics of organizations which pursue innovative corporate

strategies. (09 marks)
Q.8 (a) Distinguish between a global business strategy and a multi-domestic/adaptive business
strategy. Identify a real life example of each strategy and give reason for your choice.
(06 marks)
(b) What are the key financial decisions which should be made by the management while
contemplating direct investment in a foreign country by formation of a subsidiary company?
(05 marks)
Q.9 A multinational company which has its headquarters in the UK pursues a strategy of exercising
very close control and centralization of all important decision-making processes of all of its four
overseas subsidiary companies.
Identify four factors which in your opinion may have influenced the MNC’s strategy of
implementing highly centralized decision making policies for its subsidiary companies. (10 marks)
Q.10 List ten responsibilities/obligations which employers must fulfill to ensure that the issues of Health
and Safety are addressed adequately in a manufacturing environment. (05 marks)
Note: Explanations are not required
Q.11 Briefly discuss the following:
(a) Business Ethics (2.5 marks)

(b) Environmental Scanning (2.5 marks)
(c) Tactical Planning (2.5 marks)
(d) Backward Integration Strategy (2.5 marks)
(THE END)
BUSINESS MANAGEMENT
Suggested Answers
A.1 (a) The different types of competencies and skills required by front-line operational managers of an
automobile manufacturing and assembly unit are:
Technical Competencies and Skills: Technical competencies and skills are necessary for knowledge
of procedures and rules, performance and management of day-to-day activities and for
understanding the manufacturing operations.
Technical skills are essential for applying the procedures for routine work, such as setting work
priorities, quality control, meeting schedules and conserving resources at the floor level. These
skills are important for the front-line managers because they have to guide and supervise the
production workers.
Human Competencies and Skills: These are interpersonal competencies and skills which enable
managers to work effectively with other employees as team players. Human competencies and
skills also include communication skills and the ability to motivate and lead subordinates and
ensure discipline. Human Skills are important for front-line managers because they have to liaise
with the workers as well as with other managers.
(b) The advantages of Employee Participation in the affairs of the organization are:
(i) Employee Participation would improve decision making as the employees would acquire the
necessary knowledge and insight to contribute effectively in this process.
(ii) Employee Participation would make the workers more willing to implement the decisions in
which they have also been involved.
(iii) Employee Participation would help to improve internal communication and coordination
and contribute towards better working relationships at all levels.
(iv) Employee Participation would tend to reduce the extent of supervision as the workers
would be more conversant with the actual work because of their close involvement.
(v) Employee Participation would enable the employees at all levels to acquire new skills and
develop leadership qualities.
(vi) Create an attitude change and ownership of the organization and tasks improving the
productivity.
A.2 (a) (i) Rivalry among Existing Firms

Since companies of equal size and strength are involved in competition in a market which is
not expected to show any growth, the strategies pursued by any one company can be
successful to the extent that it has competitive advantage over the strategies of its rivals.
Price competition, campaigns for creation of perceptions of quality differentiation, more

convenient and attractive packaging features and aggressive promotion would be observed
among the competing firms.
(ii) Potential Threat of Entry of New Competitors

Since the market has significant growth prospects and present firms are earning lucrative
profits, there would be a strong attraction for other resourceful companies to enter this
market. Although a new entrant would have to incur huge research and development costs
to develop the specialized products, yet threats from successful and experienced companies
would always be present.
(iii) Bargaining Power of the Supplier

Lucky Coal Mines is in a strong bargaining position. It can sell its coal to many other buyers
whereas the cement plant would have to incur high transportation costs - switching costs - if
it were to procure coal from other mines which are located at a considerable distance.
Furthermore, the quality of coal from other sources may not be as suitable for the cement
plant. Lucky Coal Mines can therefore dictate its terms e.g. price, advance payments on
placement of orders and recovery of transportation costs from the cement plant.
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BUSINESS MANAGEMENT
Suggested Answers
(b) Unique Textile Mills should include the following objectives in its strategic planning process:
(i) Maintain and consolidate its leadership status as designers and manufacturers of high
fashion fabrics.
(ii) Innovate; Bring new designs in the market well in advance of the competitors.
(iii) Minimize the time involved in the stages of Designing, Manufacturing and Marketing of the
products.
(iv) Play a pioneering role in introducing the latest technologies and textile machinery in the
country.
(v) New distribution channels: Create a network of company-owned retail outlets for
distribution of exclusive high-value fabrics.
(vi) Reduce the cost of manufacturing and venture into vertical integration
A.3 (a) Downsizing is the process of reducing the number of employees with the purpose of making the
organization more efficient and responsive to the changes in its business environment. It results in
more flat organizational structures, greater delegation of authority and responsibilities, improved
communication within the bank and more functions being performed at the lower echelons in the
organization, close to the points of interaction with the customers.
(b) HR Manager of the bank should keep the following considerations in perspective while pursuing a
policy of downsizing and laying off of employees:
(i) The downsizing process should be transparent and objective and not convey any impression
of favouritism or create a feeling of victimization.
(ii) The laying off of employees should not demoralize the surviving employees or pose a threat
to their job security concerns which would affect their morale and performance.
(iii) The layoffs should not result in loss of all employees who are performing important
functions and are conversant with the internal procedures of the bank.
(iv) The remaining staff should not be excessively overburdened as they would have to carry the
additional workload which was handled by the employees who have been laid off.
(v) The downsizing should not lead towards excessive consolidation of duties and
responsibilities which may result in compromising the important controls and security
aspects of the bank’s operations.
(vi) The bank should not have negative image in the financial circles nor should the customers
have any apprehensions about the goodwill and long-term financial standing of the bank and
its ability to continue to render good service to the customers.
(vii) Before downsizing there should be a fresh appraisal / performance competence done and
results taken in consideration
A.4 (a) Market Research is the systematic designing, collection, analysis and reporting of data relevant to
distribution and selling of goods and services in a specific marketing environment facing an
organization.
(b) The basic reasons for undertaking market research are as follows:
(i) to identify market opportunities and problems and determine the need for changes in
marketing plans;
(ii) to evaluate and predict consumers behavior which may influence their decisions for purchase
of various goods and services;
(iii) to analyse the marketing strategies of competitors and their impact on the firm’s business;
(iv) to formulate product development, pricing, promotion and distribution strategies to achieve
optimal results.
Page 2 of 5
BUSINESS MANAGEMENT
Suggested Answers
A.5 (a) Formal Succession Planning is an important HR function as it ensures availability of sufficient
number of appropriately qualified and competent employees from internal sources to meet the
future HR needs of the organization. Suitable employees are identified in the early stages of their
careers and are groomed through a process of job rotation and training, to assume more
responsible positions in the organization arising due to promotions, transfers, retirement or death
of key employees.
(b) The main advantages which would accrue to FECL by introducing a Formal Succession Planning
Scheme are as follows:
(i) It would enable FECL to anticipate HR requirements in advance and avoid awkward problems
arising due to delays in identifying and recruiting suitable employees from external sources to
fill in key vacancies.
(ii) It would enable the company to identify high-potential employees at an early stage whose
career paths can be planned for promotion to higher levels in the organization hierarchy.
(iii) It would align the HR function of career path planning of employees with the overall
corporate and strategic planning objectives.
(iv) It would increase the managerial depth within the organization which can readily fill in the
positions when necessary.
(v) It would provide internal promotion opportunities for the employees to increase their level of
motivation and commitment towards the company.
(vi) It would reduce the risk of inducting employees from external sources at higher levels who
may not be able to assimilate in the corporate culture of FECL and work in a cohesive team
environment.
(vii) Positive goals for key personnel, which will help keep them with the company and will help
assure the continuing supply of capable successors for each of the important positions
included in the succession plan.
(viii) Defined career paths, which will help the company recruit and retain better people.
A.6 (a) Market Penetration Policy aims to charge low prices of the product to capture a large share of the
market or achieve large volume of sales.
Market Penetration Policy may be pursued to achieve optimal results under the following
conditions:
(i) Discourage existing and potential competition in a highly competitive market.

(ii) Sufficient production capacity exists and the firm is prepared to sacrifice short- term profits
to capture a major share of the market.
(iii) Market is price sensitive and a low price would result in rapid growth of the market.
(iv) Manufacturing and distribution costs would show a downward trend with increase in
production and the size of the market.
(b) Marketing Segmentation is a process of dividing the total market into several distinct groups with
each group having certain homogeneous characteristics. The groups can be formed on the basis of
their geographic locations, income levels, age groups , educational qualifications, psychological
behavior, buying habits and cultural backgrounds, etc.
The markets can be divided into segments if the segment fulfill the following criterion:
(i) The market segment must be capable of classification as a distinctly identifiable and
measurable group having common characteristics.
(ii) The market segment must be of a size which is sufficiently large to elicit interest of the seller in
term of its sales revenue and profit potential.
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BUSINESS MANAGEMENT
Suggested Answers
A.7 The distinguishing characteristics of organizations which pursue innovative corporate strategies are:
(a) they compete in the market on the basis of their differentiated superior products/services as
compared to the offerings of other companies;
(b) they are continuously searching for new growth platforms for their business and are several steps
ahead of their competitors;
(c) they are able to anticipate threats from competitors and seek to respond with new or better
products/services to sustain their competitive advantage;
(d) they are always making efforts to develop new and innovative products to provide greater
customer value;
(e) they are forward looking visionaries and are continuously searching for means to change their
strategic direction;
(f) they value management cohesiveness at all levels and both the strategy planners and those
involved in implementation of the strategy work in close collaboration.
A.8 (a) A global business strategy specifies a standardized worldwide product and marketing strategy by
which a firm sells the same product in essentially the same manner throughout the world by
highlighting its main features such as quality, specifications, warranty, packaging, etc.
A multi-domestic or adaptive business strategy is one in which the firm treats each market in a
different manner and develops products and marketing strategies which appeal to the varying
customs, tastes and buying habits in the different national markets.
Real Life Example of a Global Business Strategy - photocopiers, medical equipments, chemicals,
cement, steel, etc are not sensitive to differences in cultures and are sold in different markets
highlighting similar features and attributes such as quality and convenience, etc.
Real Life Example of Multi-domestic or Adaptive Products strategy - Food products such as fast
foods, apparel and clothing, cosmetics, etc. which are adapted to meet the consumption habits,
tastes and cultural sensitivities and unique requirements of the different markets.
(b) The key financial decisions which should be made by the management while contemplating
investment in a foreign subsidiary company are:
(i) Should the parent company invest in the subsidiary as a wholly owned company or should
the parent company retain only a majority interest in the subsidiary?
(ii) If the parent company decides to retain only a majority interest, then should the subsidiary
raise equity through a resourceful local investor in the host country or should it make a
public offering of its shares?
(iii) Should the subsidiary be financed substantially through equity investment or should it raise
debt financing to meet a large proportion of its capital costs?
(iv) Should the subsidiary make the borrowings in the local currency of the host country or in
any other currency to avail benefits of exchange fluctuations?
(v) Should the subsidiary distribute a large portion of its profits as high dividends or should it
retain a substantial portion of its earnings to meet the cost of its expansion strategy?
(vi) Should the subsidiary raise the bulk of its working capital requirements through borrowings
from banks or should it place heavy reliance on trade credit?
A.9 The factors responsible for the MNC’s policy of close control and centralized decision making for the
subsidiary companies are:
(i) Large size of the subsidiary companies and Substantial Capital Investment - Due to the large size of
the individual entities and substantial investment of the MNC in the subsidiary companies, their
performance can have far-reaching implications on the financial standing and profitability of the
MNC.
Page 4 of 5
BUSINESS MANAGEMENT
Suggested Answers
(ii) Access to technology and manufacturing process - The manufacturing process in the subsidiary
companies involves sophisticated technology which has been developed by the MNC at a very high
R&D cost. The technology is closely-guarded and the parent company wants to ensure maximum
security and confidentiality of this technology.
(iii) Operations of the subsidiary companies are closely integrated and inter-dependent - The operations
of the subsidiaries are closely integrated and interdependent and unsatisfactory performance of
any one company can have adverse impact on the performance of other group companies,
including the MNC itself. There is therefore the need for more centralized control and supervision
of the subsidiaries .
(iv) Stringent Targets - If the products manufactured by the subsidiaries have to conform to stringent
quality control requirements stipulated by the parent company or if the operations are of a highly
environmentally sensitive nature, then the parent company would want to exercise more close
control of the subsidiary companies. Any lapse or mishap by the subsidiary can have far-reaching
adverse impact on the standing and reputation of the parent company.
A.10 (i) The plant and equipment must be maintained according to the specified standards.
(ii) The employees must be provided training for compliance with the safety procedures.
(iii) The Safety Policy should be communicated to all the employees
(iv) Instructions for proper handling of equipment should be displayed prominently in the work
areas.
(v) Employees who are exposed to risks should be provided proper safety gear.
(vi) All moving parts which may cause injuries to the workers should have protective fencing.
(vii) All slippery floors areas should display adequate warning signs.
(viii) First aid boxes with necessary supplies should be provided at various points.
(ix) Fire Alarms and fire fighting facilities should be provided and checked and refilled at regular
intervals.
(x) Health and Safety Advisors should conduct Workshops and Seminars at regular intervals.
(xi) Employees should immediately report all accidents on the prescribed Accident Reporting Forms.
A.11 (a) Business Ethics is a code of moral principles that management and employees follow with respect
to what is right and what is wrong from the standpoint of the organization’s dealings and
interactions with its stakeholders. Besides generally acceptable values and norms, the
organizational culture and internal policies of individual organizations play a very important role
in determining the ethical policies that are followed in the company. The guidelines for proper
ethical conduct are embodied in the company’s Formal Code of Ethics.
(b) Environmental Scanning is the process of collecting information about the external marketing
environment in order to identify and interpret potential trends. It includes analysis of collected
information to anticipate whether the trends represent opportunities or threats. Environmental
scanning includes assessment of political developments, economic trends and social and cultural
influences which would affect the organization.
(c) Tactical Planning refers to the day-to-day plans regarding implementation of the different work
activities required to achieve the objectives of the strategic plans. Tactical Plans pertain to the
current and short-term activities performed by low-level managers which are nevertheless of vital
importance for implementation and achievement of the objectives of the overall strategic plans.
(d) Backward Integration Strategy seeks the ownership or increased control of the firm’s sources of
important raw materials and other critical inputs and supplies. Backward integration strategies
are pursued in situations where the suppliers are unable to adhere to the buyers specifications of
quality, or are unreliable in meeting their commitments or are few in number and dictate
unreasonable terms or charge exorbitantly high prices to take advantage of the buyers who are
heavily dependent on the inputs from these suppliers.
(THE END)
Page 5 of 5
SUBJECT SESSION
General:
Question Paper was interesting and covered almost all the major topics. As for the
students’ performance, it was below average; although most students attempted all
questions but the usual problem of hazy answers led to failing grades. As observed in the
past, inadequate preparation, selective study, failure to read and understand the
requirements of the questions and weak expression power were the major reasons for
below standard performance.
Q.1 (a) The question pertained to skills essential for frontline operational
managers. Very few actually knew the difference between skill and
function, although both of these are basic topics of business management.
Most students emphasized on achieving objectives and crafting strategies.
These can not be categorized as skills. Skills essential for frontline
operational managers include resource allocation, conflict resolution,
motivating employees, communicating effectively etc. Some of the students
discussed strategic level decision-making; which is not the responsibility of
frontline managers.
(b) A very basic yet interesting question. What benefits do organizations reap
by “Employee Participation”? Most candidates mentioned Employee
motivation and commitment as the main benefits. These points were
rephrased and broken down into 3-4 points with the same matter being
repeated in different words. Advantages like better working relationship,
greater willingness to implement the decisions, reducing the need for
supervision etc. were missed out.
Q.2 (a) Porter’s Five Forces Model of Competition: in this question, students were
given three different scenarios and they had to identify and highlight the
salient features of the model of competition that would be appropriate in
each scenario. Most candidates were able to identify the model that would
be apt in each scenario. However, the reasons to support their choice were
brief, incomplete and weak. Some students mentioned 2 or 3 models under
each scenario which were contradictory and defeated the purpose of the
question. Many students confused “Threat of New Entrant” with “Threat of
Substitute Product”.
Page 1 of 4
(b) Four strategic objectives of a leading cotton fabric manufacturer were

required. Most candidates were not aware of the difference between
strategies, tactics and goals. Majority of the students referred to generic
objectives irrespective of whether they were strategic, operational or
tactical. Students didn’t realize that leading firms/companies capitalize on
their established reputation and premium quality of their products/services.
Hence, objectives like cost cutting, price reduction, discounts etc. were not
of much relevance.
Q.3 (a) This question required the students to define downsizing, its effects on the
organization and then explain what considerations should a HR manager
keep in perspective while pursuing a policy of downsizing.
Most students could write that downsizing means reducing the number of
employees and it results in a flatter hierarchical structure. However, while
discussing matters requiring consideration of the HR manager, hardly
anyone did justice to the question. Most students emphasized on payment
of due compensations and the legal and social consequences. Important
considerations like employee morale, effect on workload, transparency,
objectivity and image of the bank etc. were less frequently mentioned.
Q.4 (a) Students did have a fair idea about ‘market research’ but definitions lacked
substance and it was apparent that many students had difficulty expressing
themselves.
(b) Most of the students mentioned the basic reasons for undertaking market
research and scored good marks. Performance in this part was good as most
of the students could frame answers based on their general knowledge and
such answers did fit in.
Q.5 (a) Unfortunately, majority of the examinees were not clear about the concept
of Succession Planning. Many students wrote that it is the taking over and
handing over of duties by a new employee when the old employee resigns
or retires. Wholly irrelevant answers were given, like formulating plans for
making the employees successful. Some of the better replies simply
discussed fulfillment of future requirements but missed out key points such
as identification, grooming, training etc.
(b) This part of the question required mentioning advantages of formal

succession planning. As discussed in part (a), those who were not aware of
the basic concept, ended up stating wholly irrelevant points. However, this
part was better handled; although it is felt that students have to thoroughly
read and understand these topics to be able to produce good answers in a
specific scenario and to express themselves better.
Page 2 of 4
Q.6 (a) Market Penetration proved to be a difficult topic as very few students were
able to define this simple term which means increasing market share/sales
volume by lowering prices. Some students confused Market Penetration
Policy with Market Skimming Policy. Very few students could specify that
this policy is adopted when a firm has excess capacity and is in a position
to achieve economies of scale or when cost reduction is possible by using
new technology, etc.
(b) The concept of Market Segmentation was better understood as the students
were able to produce average, if not good answers. Many students knew the
basic concept and the bases on which the markets are divided.
Q.7 In this question, distinguishing characteristics of organizations which pursue

innovative corporate strategies were required to be identified. Innovative and
forward looking companies are continuously coming up with new products,
better services and technological advancements. They focus their strategies on
the future and are able to anticipate the threats and opportunities to better handle
market requirements, combat competition and avoid being obsolete. Some of the
students were well prepared and produced really good answers. However, the
majority seemed to rely on their general knowledge and could produce only two
or three valid points. Most of them emphasized on R & D and new products.
Some students offered long winded explanations, although the requirement was
only to identify the characteristics of organizations which pursue innovative
corporate strategies.
Q.8 (a) Majority of the students appeared to be confused while distinguishing

between a global business strategy and a multi-domestic/adaptive business
strategy. Most of them wrote that companies pursuing global business
strategies ‘think globally and act locally’! Multi-domestic strategy was
defined as a firm that serves the local market only and does not do business
globally. All such students were apparently placing reliance on guesswork
and need to consult good books.
(b) In this question, the students were required to list the key financial
decisions that need to be made by MNCs contemplating direct investment
in a foreign country through a subsidiary company. Most of the students
did not appreciate that their answers should be limited to financial
considerations only. Consequently, many irrelevant points were mentioned,
whereas relevant points were missed.
Q.9 This was one of the most poorly attempted question. Most students mentioned
that an MNC adopts a policy of centralized decision-making only when it wishes
to exercise close control over the subsidiary companies. Other important points
like safeguarding access to specialized technology and highly interdependent
nature of operations were mentioned by very few candidates.
Page 3 of 4
Q.10 Students were fairly able to list the responsibilities which employers must fulfill
in order to ensure that issues of Health and Safety are addressed adequately in a
manufacturing environment. Some students advised about buying health and life
insurance policies and bearing medical expenses, which were not relevant for
this question. Many students wrote 4 to 5 points, where a single point would
have been sufficient. For example, a student wrote that health policy should be
crafted, implemented, monitored and reviewed as four different points.
Q.11 Short notes were to be written on four different topics. The comments are as
under:
Business Ethics: Some students confused this concept with that of corporate
social responsibility. Majority of the candidates emphasized on rules and
regulations. A reference to values and culture would have been more
appropriate.
Environmental Scanning: Most of the students were not clear about this
concept and described it as an exercise to control environmental pollution and
keeping the world clean!
Tactical Planning: Many candidates defined it as strategic level decision

making and planning and implementation at management level, although it is
quite the contrary. A number of students incorrectly described it as a medium
term plan.
Backward Integration Strategy: Most of the students gave appropriate

definition of the concept with relevant examples. However, very few students
explained the situations in which this strategy is pursued.
(THE END)
Page 4 of 4
Business Management
Final Examination 8 December 2011
Winter 2011 100 marks – 3 hours
Module E Additional reading time – 15 minutes
Q.1 Sound Health Pharmaceuticals Limited (SHPL) is a reputable international company engaged in the
business of manufacture of a wide range of medicines with facilities located in several countries.
SHPL‘s products have been developed after long periods of research at considerable costs and are
prescribed by medical consultants for patients suffering from life-threatening diseases. As Director of
Human Resources, you have to recruit Director Public Relations and Media Affairs to replace the
incumbent official who is expected to retire shortly.
Identify and explain briefly eight critical skills and competencies you would seek in the prospective
candidates for this high-profile position in SHPL’s senior management hierarchy. (08 marks)
Q.2 Explain briefly the following types of Growth Strategies pursued by Business Organisations. Give
one example of each of these types of strategies.
(a) Horizontal Integration Strategy (04 marks)
(b) Forward Integration Strategy (04 marks)
(c) Conglomerate Growth Strategy (04 marks)
Q.3 (a) Business firms, at times, place excessive emphasis on Cost Reduction and Austerity policies to
achieve their profit objectives. These policies may be in conflict with the interests of customers,
employees and the society as a whole.
Identify any three adverse effects of introduction of stringent Cost Reduction and Austerity
policies on each of the above stakeholders. (4.5 marks)
(b) What is meant by the term Corporate Social Responsibility? (3.5 marks)
(c) State five important factors which should be included in developing an effective Accident
Prevention and Reporting System for a company involved in heavy mechanical and engineering
operations. (05 marks)
Q.4 (a) Accurate Engineering Limited is engaged in the business of manufacturing precision earth
drilling tools used by the oil exploration industry. The Company employs a high proportion of
skilled and experienced workers for the smooth and efficient manufacture of its quality-sensitive
high-value products. Recently, the company has been facing an unusually High Rate of
Employee Turnover which is a matter of serious concern for the management.
Identify five disadvantages which Accurate Engineering Limited would experience due to the
unusually High Rate of Employee Turnover. (05 marks)
(b) (i) Briefly explain what is meant by a Differentiation Strategy. (02 marks)
(ii) List six types of skills and resources which are critical for the pursuance of a successful
Differentiation Strategy. (03 marks)
Q.5 (a) Explain what is meant by Scenario Planning. (03 marks)
(b) In highly competitive business environments dominated by relatively few equally powerful
players, the participants make concerted efforts to implement effective Marketing Intelligence
Systems.
(i) What is meant by the term Marketing Intelligence System? (03 marks)
(ii) List five different sources which help in the creation of an effective Marketing Intelligence
System. (05 marks)
Q.6 (a) Explain what is meant by Geocentric Orientation in the context of global business companies.
(05 marks)
(b) Alpha Equipments is a Taiwanese manufacturer of various types of photocopiers and has
recently decided to export its products to Pakistan. Alpha Equipments is considering to appoint
a Single Distributor in Pakistan who would represent the exporter and would be responsible for
the entire marketing operations in this country.
State six different advantages that Alpha Equipments would achieve through the appointment
of a Single Distributor for import and distribution of its products in Pakistan. (06 marks)
Q.7 (a) Foresight Electronics is a knowledge-based company and is known for its ability to
manufacture innovative and new-to-the-market electronic products and sell them in specifically
identified niche markets. The company follows a Market Skimming Strategy to achieve its
profitability objectives.
Narrate four conditions which are essential for Foresight Electronics to be able to successfully
adopt its Market Skimming strategy. (06 marks)
(b) Household Furniture Co. are manufacturers of a wide range of furniture products used
primarily by customers in the middle income group.
Identify four different types of conditions in which it would be advantageous for the firm to
pursue Market Penetration Strategy. (04 marks)
Q.8 Horizon Limited (HL) is engaged in the business of manufacturing and marketing of a wide range of
consumer durable products. The company’s products are in different stages of their Product Life
Cycles. Consequently, HL pursues different promotional strategies for products depending on the
stage of their Product Life Cycles.
State the types of Promotional Strategies which HL may pursue for marketing of its wide range of
products in the (i) Introduction, (ii) Growth, (iii) Maturity and (iv) Declining stages of their Product
Life Cycle. (07 marks)
Q.9 (a) In your opinion what important factors have led leading Japanese companies to establish
automobile assembling/manufacturing plants in selected developing countries?
Identify five factors and substantiate them with brief explanations. (05 marks)
(b) Describe briefly the Political Factors which should be taken into consideration by a
multinational corporation while evaluating a decision to make substantial direct investment in a
foreign country. (03 marks)
Q.10 Selection and recruitment of candidates requires careful assessment of the diversified attributes of
the prospective candidates. Besides interviews, different types of tests are administered to ascertain
the suitability of candidates for the positions for which they are being considered for appointment.
(a) Explain briefly the purpose of each of the following types of tests which are administered to
candidates in the selection process.
(i) Intelligence Tests
(ii) Proficiency Tests
(iii) Aptitude Tests (03 marks)
(b) State two qualities of a well-conceived Selection Test and indicate why they are important.
(02 marks)
(c) Identify the different situations in which it may be considered necessary for an organisation to
dismiss an employee. (05 marks)
(THE END)
BUSINESS MANAGEMENT
Suggested Answers
Final Examination – Winter 2011
A.1 The critical Skills and Competencies required for the position of Director Public Relations and
Media Affairs of SHPL are:
(a) good understanding of SHPL’s mission, goals and objectives and the ability to
communicate them to all the stakeholders
(b) deep understanding and insight of the role of the various media channels in projecting a
positive image of the reputation and standing of SHPL
(c) demonstrable track record and experience in media relations and media contacts to
handle unforeseen situations which may affect SHPL’s reputation and image
(d) excellent interpersonal and communication skills with ability to deliver messages by
adopting appropriate styles, tools and techniques depending on the type of information
and the intended recipients
(e) good management and organisational skills and be able to prioritize and plan activities
taking into account factors such as deadlines and resources
(f) work closely with senior level executives as an effective member of the top management.
(g) assimilate complex information and take independent action where necessary and
handle multiple projects and work demands at a time
(h) excellent writing skills with a high level of capability to attend to details
(i) qualities of leadership and a positive frame of mind
(j) proficient in developing web-site content ,maintenance and supporting the in-house
broadcasting department
A.2 (a) Horizontal Integration Strategy:

This strategy seeks to achieve growth by ownership/acquisition or merging of functions
of organisations which operate on a similar level. It is characterized by integration of
firms producing the same kind of goods or operating at the same stage of the supply
/value chain. This strategy is pursued to achieve economies of scale by sharing of
resources and competencies to gain significant competitive advantages.
Example: A profitable cement company acquiring another cement manufacturing unit.
(b) Forward Integration Strategy:

It is a strategy which envisages gaining ownership or taking control of distribution
channels when the existing external distribution channels insist on unduly high profit
margins or are unreliable or are unable of meeting the firm’s distribution objectives.
Forward Integration strategy is most beneficial when significant competitive advantages
can be achieved through ownership or effective control of the distribution channels. The
firm must have sufficient capital and human resources for pursuing a successful forward
integration strategy.
Example: A leading manufacturer of branded fashion clothing establishing its own

network of retail outlets.
(c) Conglomerate Growth Strategy:

This strategy seeks to create diversified business units/entities, each of which is capable
of achieving excellent financial performance in its respective line of business. Firms
which pursue conglomerate growth strategies search across different industries for
opportunities for expansion and purchase of companies whose assets are undervalued
and therefore can be acquired at low prices, yet have the potential to offer high returns
on the investment. Firms which have excellent top management capabilities and can
effectively plan, manage and control individual units in different industries pursue
conglomerate growth industries.
Example: A prominent textile group establishing or making acquisition of a power

generation unit.
Page 1 of 7
BUSINESS MANAGEMENT
Suggested Answers
A.3 (a) Stringent Cost Reduction and Austerity policies may be in conflict with the interests of
the stakeholders in the following situations:
(i) Customers
 the products may be of an inferior quality and perform unsatisfactorily
 the products may have a very limited useful life
 sub-standard quality of raw material inputs and packaging may be harmful for
the health of the customers
(ii) Employees
 working conditions may not be conducive for the health of the workers
 poor maintenance of machinery and equipment may cause injuries and
accidents
 inadequate compensation may result in financial difficulties for the workers
(iii) Society as a whole

 cause pollution and create environmental hazard
 lack of interest in charities, sports and community activities
 impose social cost on the society by making improper use of public assets
(b) Corporate Social Responsibility is a form of voluntary business approach that a business
firm pursues to meet or exceed the expectations of its stakeholders by adopting social,
ethical and environmental measures. The goal of CSR is to make a positive impact
through its activities on the environment as well as all its stakeholders.
(c) The following important factors should be included in developing an effective Accident
Prevention and Reporting System for a company involved in heavy mechanical and
engineering operations:
(i) All accidents should be reported on Accident Reporting Forms and proper
records should be maintained of accidents resulting in death and major injuries.
(ii) Identification of particularly more risky activities and adopting special
precautionary measures such as installation of safety grills to prevent accidents.
(iii) Periodic training of employees for compliance with the safety rules and procedures so
that they are fully aware of the accident hazards while performing their duties.
(iv) Regular maintenance of plant and machinery to ensure that all the parts and
components are repaired/ replaced promptly so that they do not cause injuries to the
workers due to malfunction or breakdown of the equipment.
(v) Periodical review of the safety conditions should be carried out by an
independent person.
(vi) Statistical trends of recurring accidents must be monitored closely to identify and
examine the need for introduction of special measures.
(vii) Procedures for reporting ‘near-misses’ should be laid down: anonymously, if
necessary to encourage timely corrective actions and openness in reporting of
such incidents.
A.4 (a) Accurate Engineering Limited would experience the following disadvantages due to the
exceptionally High Rate of Employee Turnover:
(i) Loss of important confidential and proprietary information and knowledge of

work processes to competitors.
(ii) Disruptions and delays in manufacturing operations as new workers would have
to be recruited and would require training to learn the work processes.
Page 2 of 7
BUSINESS MANAGEMENT
Suggested Answers
(iii) Deterioration and inconsistency in the quality of the products as the new workers
would require time and hands-on experience to acquire the levels of proficiency and
skills necessary to manufacture precision earth drilling tools.
(iv) Effort and cost incurred in training of employees who leave the organisation are
irrecoverable losses. Additional effort and costs would be involved in the training
of new workers who would replace the outgoing workers.
(v) The new workers would require time to assimilate in the Company’s organisation
culture.
(vi) Additional costs of placement of advertisements, background verification,
medical examination and conducting interviews would have to be incurred in the
hiring of new workers.
(vii) Staff morale and motivation would be adversely affected which would create a
sense of insecurity among the remaining workers and result in low employee
productivity.
(b) (i) In a Differentiation Strategy, the firm is in a position to provide a product or

service which the customer perceives to be of a higher value than those offered by
other competitors. The customer considers that the additional cost of purchasing
the particular product or service is well below what the product or service is
worth as compared to the other available alternatives.
(ii) The types of skills and resources which are critical for the pursuance of a
successful Differentiation Strategy are:
 Strong marketing capabilities, including support of marketing channels.

 Sound capabilities for research and product engineering.
 Corporate reputation for technical and professional leadership.
 Good reputation for high standard of products and consistent quality.
 Strong relations with the suppliers of major inputs and services.
 Tradition of positive and prompt response to customers’ queries.
 incentives based on subjective measures
 stress continuous improvement and innovation
A.5 (a) Scenario Planning is a technique which involves the process of identifying alternative
scenarios in the future, and on the basis of different assumptions that the strategists may
anticipate in the future, formulate corporate strategy. The process of scenario planning
on the basis of different assumptions enables the company to realign its corporate
strategy quickly in the changing business conditions. The purpose of scenario planning is
to avoid formulating corporate strategy on the basis of a single future outcome which
may not materialise. Rather, the objective is to re-evaluate the relevance of the strategic
objectives which would be valid for different outcomes/events as they unfold from time
to time.
(b) (i) Marketing Intelligence System is an ongoing and organised procedure to

generate, organise, store, disseminate, analyse and retrieve large amount of data
from internal as well as external sources for use in making marketing decisions.
(ii) The different sources would facilitate in the creation of an effective Marketing
Intelligence System are:
a. Well trained and motivated sales force to provide inputs on the
improvements required in the company’s current marketing mix as well as
identify new market opportunities.
b. Motivated distributors, retailers and other intermediaries who would obtain
important information and pass it on to the company to improve the overall
quality of products and consumer services.
Page 3 of 7
BUSINESS MANAGEMENT
Suggested Answers
c. Obtain feedback from customers regularly to improve the quality of the products
and services in order to offer more value to the customers.
d. Participation in trade shows and examination of competitors products and
their advertisements etc.
e. Collect information from competitors’ published reports, suppliers, couriers
and transporters.
f. Published government statistics relating to population, agricultural
production, manufacturing data, etc. to extract information which can be
incorporated usefully in the Marketing Intelligence System.
g. Purchase of information from professional suppliers of data and information.
These external firms have access to useful data and sell them to the interested
parties.
A.6 (a) A Geocentric orientation is an approach followed by companies having global scale of
operations. The management of such companies considers a worldwide focus both at
the headquarters and also in the host countries to obtain optimal advantages. Major
issues such as raising of funds, building of plants, research and development are
centralised in the entire global perspective. At the same time, the company also
considers designing its products and services to cater to the local differences in tastes
and cultures to add maximum customer value and achieve optimal results.
(b) The advantages of appointment of a Single Distributer in Pakistan by Alpha Equipments

are:
(i) The large volume of business would attract a competent and resourceful
distributor who would wield considerable influence in the local business
community in Pakistan.
(ii) The appointment of a knowledgeable Single Distributor who is conversant
with the local business practices, culture and marketing channels would
ensure smooth handling of all marketing operations in a more professional
and purposeful manner.
(iii) The Single Distributor would be able to coordinate promotional efforts and
exchange vital information with Alpha Equipments on a continuous basis and
in a purposeful manner.
(iv) Training and marketing efforts of the retailers located in the various cities in
Pakistan would be coordinated in a much more effective manner.
(v) The Single Distributor would be able to maintain sufficient level of
inventories as he would have a better perception of the market demand and
as a result make prompt dispatches of supplies to the retailers as and when
required.
(vi) The Single Distributor would have high stakes in the business which would
lead to greater effort and a better principal – distributor relationship.
(vii) The logistics of exports including transportation costs would be less
cumbersome and more economical.
A.7 (a) Foresight Electronics would be able to adopt its Market Skimming Strategy successfully
in the following conditions:
(i) when the niche market for its products comprises of customers who can
afford and are willing to buy the product at the high prices.
(ii) when the firm is in a position to obtain the advantage of initial high price of
its products for the duration that it intends to pursue its market skimming
pricing strategy.
Page 4 of 7
BUSINESS MANAGEMENT
Suggested Answers
(iii) when the high price would create and convey an image of superior quality
products among the buyers.
(iv) when the unit cost of manufacturing a small quantity of output is not so high
so as to offset the advantage of selling the product at the high price.
(v) there should be a high entry barrier of the industry.
(b) It would be advantageous for Household Furniture Company to pursue a Market

Penetration Strategy in the following situations:
(i) when the demand for household furniture is price elastic.

(ii) when the firm is in a position to achieve significant economies of scale by
producing and selling a large volume of output.
(iii) when the quality of the furniture sold by Household Furniture Company and
its promotional strategies are designed to capture a large share of the
expanding market.
(iv) when there is intense competition in the market and Household Furniture
Company wants to retain/expand its share of the market to derive benefits in
future.
A.8 Horizon Limited may pursue Promotion Strategies in the marketing of its consumer durable
products in their different stages of Product Life Cycles as follows:
(a) Introduction Stage

(i) inform and educate the potential customers of the existence of the product
(ii) encourage trial of product and create awareness of the benefits that would
accrue to the customers by using the product and how it should be used
(iii) secure distribution in leading retail outlets
(iv) place heavy emphasis on personal selling and promotion in trade shows and
exhibitions.
(b) Growth Stage

(i) stimulate demand in selected market segments and promote the particular
brand as competition increases
(ii) increase emphasis on advertising to capture a large share of the growing
market.
(iii) enter new markets and expand coverage
(iv) identify new distribution channels
(v) shift emphasis from product awareness to the individual firm’s brand
preference through aggressive advertising.
(vi) Promote differentiation
(c) Maturity Stage

(i) focus on promotion and advertising to persuade the customers to purchase
the particular brand rather than to provide information about the product
(ii) selective promotion only as intense competition and increase in promotion
expenditures would result in lower profits
(iii) increase R&D budgets to improve product quality vis-a-vis competitors
(iv) extend product lines to meet niche customer demand.
(d) Declining Stage

(i) reduce promotion expenses as the size of the market is shrinking
(ii) focus of promotion towards reminding remaining customers.
(iii) Rejuvenate old products to make them look new.
Page 5 of 7
BUSINESS MANAGEMENT
Suggested Answers
A.9 (a) The leading Japanese companies have established automobile assembling or
manufacturing plants in selected developing countries due to the following reasons:
(i) The developing countries are witnessing significant economic growth and
increase in population which have created very large markets for various
types of vehicles. Establishment of automobile assembly/manufacturing
plants locally would fulfil the demand/supply gaps in these countries.
(ii) Labour and other manufacturing costs are on the high side in Japan and the
high prices of imported vehicles from Japan would be beyond the reach of a
large segment of the market.
(iii) The strong Japanese Yen makes the price of imported vehicles very expensive
in the developing countries and would restrict the size of the market
(iv) Transfer of technology and creation of job opportunities are viewed
favourably by the governments in the developing countries and they offer
liberal tax concessions to the Japanese companies to establish
assembling/manufacturing facilities in their countries
(v) The domestically assembled/manufactured vehicles of various types and
models are adapted to meet the local requirements in terms of prices and
their suitability for the particular developing countries.
(b) The following Political Factors should be taken into consideration by a multinational
company while evaluating a decision to make substantial direct investment in a foreign
country:
(i) Form of the Government and its Stability - a government having the support
of its citizens and enjoying political stability would provide continuity to its
economic and financial policies which would be beneficial for MNC.
(ii) Attitude towards Private and Foreign investment - a government which
pursues policies of encouragement towards private investment, including
foreign investment, would be considered favourably as against policies which
pursue government ownership of business enterprises.
(iii) Relations with other countries - a country which has good relations with
other countries would be considered favourably as it would provide stability
and sustained long-term operations for MNC’s business
A.10 (a) The purpose of different types of tests administered to the prospective candidates are:
(i) Intelligence Tests: Intelligence Tests are administered to measure the

candidate’s ability to think logically, analyse the pros and cons of problems
and make rational decisions. Intelligence Tests may also be used to determine
the candidate’s understanding of social values and customs.
(ii) Proficiency Tests: Proficiency Tests are designed to evaluate the candidate’s
level of skills, expertise and competence to perform the particular task for
which the individual is being considered for recruitment.
(iii) Aptitude Tests: Aptitude Tests are conducted to ascertain the candidate’s
ability to work with others in a team environment, handle work-related stress
and cope with the various demands of the job.
Page 6 of 7
BUSINESS MANAGEMENT
Suggested Answers
(b) A well-conceived Selection Test should have the following qualities:
(i) a high degree of validity - that is it should be capable of measuring attributes

which it seeks to evaluate in the candidate
(ii) a high degree of reliability – that is should provide results which have a high
degree of consistency among the various candidates.
(c) It may be necessary for an organisation to dismiss an employee in the following

situations:
(i) The abilities of the employee have been impaired and it is not possible for the
individual to continue to perform the assigned duties satisfactorily.
(ii) The employee has indulged in serious misbehaviour/indiscipline with the
supervisor or peers and this conduct is not conducive to the good working
environment of the organisation.
(iii) The employee cannot continue to work as it would be in contravention of the
legal requirements/ laws of the country.
(iv) The employee is involved in corruption/misappropriation of the employer’s
properties.
(v) The employee has divulged company’s confidential/proprietary information
to competitors.
(vi) The employee has attempted or made unauthorized access in the company’s
confidential information network with malicious intent.
(THE END)
Page 7 of 7
SUBJECT SESSION
General:
The question paper was quite easy and interesting but unfortunately many students had resorted
to selective study and were therefore inadequately prepared. The students lacked conceptual
understanding of the terms and gave vague answers, without understanding the precise demand
of the questions.
Q.1 The Public Relations job means moving people to action by creating credible and
meaningful relationships between an organization and the people and groups important
to its success. This question required the candidates to specify the critical skills
required for the position of Director Public Relations. Skills like problem solving,
experience and knowledge of the business, interpersonal and communication skills,
multi-tasking, leadership, writing skills, coordination with senior level executives, and
good management skills were mentioned by most of the students but appropriate
explanations were often missing. Moreover, since the question required eight critical
skills and competencies many candidates repeated similar skills using different words.
The students must understand that such techniques cannot impress the examiner and
simply result in wastage of time.
Q.2 In this question the candidates were required to explain three types of Growth
Strategies. Most of the students were able to define them and were able to give relevant
examples. However, the explanations were mostly incomplete or inappropriate. While
explaining Forward Integration, many students confused it with Backward Integration
which is the acquisition of source of raw material.
Q.3 (a) The performance in this easy question was good as most of the candidates were
able to identify the harmful effects of an Austerity Policy on various stakeholders
i.e. employees and society.
(b) This part required definition of Corporate Social Responsibility. CSR is a well-
known concept in business management, but many candidates performed poorly.
Many candidates included all sort of responsibilities in CSR. For example, many
students also stated the responsibility to pay the salaries and taxes on time as a
CSR.
(c) This part of the question required five factors which should be included in
developing an Effective Accident Prevention and Reporting System for a
company. Students attempted this question fairly well. However, many candidates
also indulged in repetition to complete the five factors. In some cases, the fact that
the company was involved in heavy engineering operations was ignored.
Page 1 of 3
Examiners’ Comments on Business Management – Final Examination Winter 2011
Q.4 (a) Overall performance in this question was good. Students were able to correctly
point out the disadvantages that Accurate Engineering Limited would experience
due to High Employee Turnover. Some students tried to repeat the same points
which was a sheer waste of time.
(b) A very basic marketing term, “Differentiation” was to be explained here. A large
number of students confused differentiation with segmentation. Many students
picked up the word differentiation and elaborated its dictionary meaning in
different contexts without addressing the concept in its marketing parlance.
While identifying the skills and resources required to pursue a differentiation
strategy, the students generally gave a long list of relevant as well as irrelevant
points.
Q.5 Both parts of this question were challenging as these topics had not been tested in the
past many examinations. The answers to this question strengthened the viewpoint that
the vast majority of students resort to selective studies.
(a) Only few students produced appropriate answers and lack of clarity in the
understanding of this topic was visible.
(b) (i) The performance in this part was average. Most of the students had vague
ideas of Marketing Intelligence System and believed it to be an informal
system of collecting information about competitors. In identification of
sources which help in creating an effective Market Intelligence System, the
performance was comparatively better probably because most students were
able to respond on the basis of their general understanding and experience.
(ii) Some students talked about concepts such as decision support system etc.,
which were not relevant.
Q.6 (a) In this question on Geocentric Orientation, most of the students wrote “think
globally and act locally” but the explanations that followed this sentence were
mostly incorrect, irrelevant or vague. Some students got totally confused and
discussed the concept of ethnocentric orientation.
(b) This part required identification of advantages of appointment of a single

distributor in Pakistan, by a Taiwanese company manufacturing photocopier
machines. Approximately fifty percent of the candidates were able to identify
most of the points correctly. However, a common mistake observed in many
answer scripts was that candidates compared appointment of distributor against
opening a subsidiary in Pakistan. Some of the students just mentioned advantages
of having distributors and missed the actual question. Such basic mistakes are not
expected at this level of examinations.
Q.7 The major issue with answering this question was that a number of students were
unable to understand the precise requirements of the question and defined what
skimming and penetration is, instead of listing the situations in which the respective
strategy can be beneficially adopted. Further, there were a number of students who had
no idea about the concepts of skimming and penetration.
Page 2 of 3
Q.8 The result of this question was very poor. The candidates are familiar with the basic
features of Product Life Cycle. This time they were asked to suggest the types of
promotional strategies required in different stages of the Product Life Cycle. Most
candidates had no clue. Majority of them mentioned more or less the same promotional
strategies in the introduction, growth and maturity stages. Many students repeated the
same points with variations in emphasis and usage of words. Some of the candidates
were so confused that they suggested Price Skimming Strategy for the Declining Stage
of the product life cycle.
Q.9 (a) This was a very easy question and most students were able to secure high marks.
However, many students ignored the fact that each factor consisted of one mark
only and offered very detailed explanations.
(b) This part required description of political factors to be taken into consideration
by a multinational, while making direct investment in a foreign country. The
performance was reasonable although many students also included
financial/commercial factors. Again, a lot of duplication of points was also
witnessed in both parts of this question.
Q.10 (a) Purpose of Intelligence, Proficiency and Aptitude tests was required to be
explained. Unfortunately almost all the examinees had no idea about the exact
purpose of these tests and just played around the words, especially in the case of
Intelligence and Aptitude tests.
(b) Two qualities of a well conceived selection test were required. In this part also,
the students lacked specific knowledge and mostly tried to mention generic
points.
(c) In which situation does it become necessary for an organization to dismiss an

employee, was the question. The overall performance was reasonable because on
the basis of the practical experiences, most students were able to discuss the
relevant points. However, many students wrote incorrect points and then tried to
repeat them in different words. For instance “not obeying instructions” and “not
following orders of seniors” were listed as two separate points.
(THE END)
Page 3 of 3
Business Management
Final Examination 7 June 2012
Summer 2012 100 marks - 3 hours
Module E Additional reading time - 15 minutes
Q.1 Fintex Company Limited (FCL) is in the advanced stage of implementing facilities for manufacture
of home textile products such as curtain draperies, sofa cloth, bed linen, towels, table covers, etc.
FCL intends to market its products to customers through 20 company-owned retail outlets to be
established in the major cities. FCL’s Institutional Marketing Division (IMD) would sell the
company’s products, as well as workers uniforms to be procured from external vendors, to
institutional customers such as hotels, hospitals, industrial companies and government
organisations.
FCL’s principal corporate objectives are to create a sustainable competitive advantage and obtain a
firm foothold in the substantial and fast growing target market of middle class customers. These
customers are keen shoppers who want quality products at affordable prices. FCL’s IMD also wants
to aggressively pursue marketing strategies to cater to the requirements of the institutional customers
who are a source of repeat business.
Identify and explain briefly four Critical Success Factors which in your opinion would create
sustainable long-term competitive advantage for FCL. (10 marks)
Q.2 According to the Boston Consulting Group Matrix, business organisations which have multi-
divisions and compete in different industries pursue separate strategies for their various business
divisions. The BCG Matrix describes the characteristics of the markets and the relative competitive
position of the various business divisions as Stars, Cash Cows and Dogs.
Explain the distinctive characteristics of each of these types of business divisions in terms of their
relative market positions. Also mention the types of business strategies which should be pursued by
each of these types of business divisions. (09 marks)
Q.3 (a) Employee Training is an important function of Human Resource Department of Apollo
Engineering Limited, a company which considers workers skills at the factory floor level to be
critical for achieving the overall strategic objectives. The HR Department classifies the factory
employees in 3 categories as follows:
(i) Competent to perform in the present position.
(ii) More than competent to perform in the present position.
(iii) Not yet competent to perform in the present position.*
*Note: These employees are not incompetent
Briefly discuss the Training Needs of employees in each of the above categories and explain
how they would help Apollo Engineering Limited to improve motivation amongst the
employees at all levels. (08 marks)
(b) Appropriate Employee Compensation and Reward Packages are central to a healthy and
enduring relationship between the employer and the employees. These Compensation and
Reward Packages comprise of salaries and fringe benefits, pleasant working environment,
career growth opportunities, challenging work, self-respect and sense of achievement, etc.
What principal objectives should an employer seek to achieve through a well-formulated
Employee Compensation and Reward system for a service-oriented company operating in a
competitive business environment? (06 marks)
Q.4 (a) What is Wilful Misconduct? State why acts of Wilful Misconduct are considered as serious
offences by employers. Identify four situations in which an employee may be guilty of Wilful
Misconduct. (04 marks)
(b) Sona Sugar Mills is being established in the outskirts of a small rural town. The management
has engaged a Chief Security Officer to plan for the security of the employees and plant
facilities.
State five measures which the Chief Security Officer should adopt to meet the objectives of
security of employees and physical facilities of Sona Sugar Mills. (05 marks)
Q.5 Consumer Products are classified by marketers in different categories as follows:
(i) Convenience Products detergents, packaged milk, newspapers, soft drinks, etc
(ii) Shopping Products readymade clothes, furniture, carpets, shoes, etc
(iii) Speciality Products televisions, refrigerators, branded watches, etc
The marketing mix of each category of Consumer Products comprises of the following ingredients:
Price Customer Buying Behaviour

• expensive • less frequent purchase/keen comparison of
price, quality and style
• low price • special purchase effort/brand loyalty
• high price • frequent purchase/less planning
Distribution Promotion
• distribution in few outlets • advertising and personal selling by
producer/resellers
• widespread distribution at convenient • mass promotion/advertising by producer
locations
• outlets in specialised markets/shopping • carefully targeted promotion by
malls producer/resellers
You are required to identify the most appropriate characteristics of each ingredient of the marketing
mix for the above categories of Consumer Products. (09 marks)
Q.6 All leading global business organisations possess certain distinctive capabilities and competitive
advantages which set them apart from those companies whose operations are confined within their
limited geographical areas.
Describe at least six core capabilities which are observed in leading global organisations regardless
of their special lines of business. (09 marks)
Q.7 (a) Research in a number of organisational settings shows that efforts to introduce major changes
for achieving the objectives of corporate turn-around and improvements invariably meet with
strong resistance from employees at various levels.
Identify the reasons why employees offer strong resistance to major organisational changes and
prefer to continue with the existing status. (05 marks)
(b) Explain the term Business Ethics and discuss its increasing significance in the present business
environment. (05 marks)
Q.8 (a) In the past two decades a number of Mergers and Acquisitions have been witnessed between
some of the most prestigious and financially strong international corporations in a wide range
of businesses such as pharmaceutical and automobile manufacturing companies, financial
institutions, supermarkets, etc.
Narrate the principal objectives behind the mergers and acquisitions of companies which are
considered to be financially sound and well-established in their own spheres of business.
(05 marks)
(b) Differentiate between the characteristics of Strategic Decisions and Tactical Decisions.
(04 marks)
Q.9 Firms ranking in second and third positions in highly competitive industries demonstrate significant
business strengths and hold a sizeable share of the aggregate market. Often these firms have to make
strategic marketing decisions whether to challenge the Market Leader to achieve the top position or
to continue to hold on to their Market Follower status.
Discuss the concepts of Market Challenger Strategy and Market Follower Strategy and briefly
explain the circumstances in which a firm would prefer to pursue a particular market strategy.
(10 marks)
Q.10 (a) Multinational Corporations (MNCs) which have widely dispersed operations in several
countries often prefer to centralise their cash management functions and conduct all their
major cash operations from pools located in internationally recognised financial centres. This
policy requires each subsidiary to retain minimum cash for its own transaction purposes and
remit all excess funds to a central cash depository.
Explain the advantages which MNCs seek to achieve through centralised cash management
policies and pooling of all excess cash balances at prominent international financial centres.
(06 marks)
(b) Give five reasons why the process of Globalization has assumed great importance in the
present business environment. (05 marks)
(THE END)
Business Management
Suggested Answers
Final Examination – Summer 2012
A.1 The Critical Success Factors which would create sustainable long term competitive
advantage for FCL and enable the company to obtain a firm foothold in the target market
are:
(i) Management and Organizational Competence:

The knowledge, skills and attitude of the management relating to understanding of the
home textile industry, the objectives and role of FCL, including insight in FCL’s
strengths and weakness and pursuance of appropriate corporate and business strategies
to achieve the objectives would be critical success factors .The management of FCL
would have to develop necessary competence for identifying opportunities,
formulating, implementing and monitoring sound corporate strategies, creating a
supporting organizational structure and mobilizing resources.
(ii) Manufacturing Capability and Production Process:

FCL should acquire and develop the best manufacturing capabilities and introduce
sound technical processes. It needs to manufacture products which would satisfy the
needs of its customers who want new and better products at affordable prices.
(iii) Skilled and Motivated Employees:

FCL must adopt sound policies relating to hiring, training, development, performance
evaluation, working environment and compensation of its employees. These policies
would promote motivation and commitment of the employees at all levels towards the
achievement of the objectives of the company.
(iv) Marketing Know-how and Promotion Strategies:

Market research and knowledge of the target market is essential for sustained growth
in sales. Marketing programs would have to be developed to meet the needs of the
customer groups. Company-owned retail outlets would enable FCL to achieve high
rates of sales turnover through finely tuned marketing policies and also retain high
profit margins which otherwise would be demanded by prominent retailers. Ability of
the Institutional Marketing Division to develop a supply chain of reliable vendors who
can manufacture products of the required specifications to be sold to the institutional
customers would also be a critical success factor for FCL.
A.2 The distinctive characteristics of the different types of business divisions in terms of their
relative market positions and pursuit of business strategies are as follows:
(i) Stars -- Star business divisions have a relatively large share of the market in high-
growth industries and offer lucrative opportunities for growth and profitability in the
long-run. Substantial investment should be made in Star business divisions to
maintain and strengthen their dominant positions. Strategies of vertical and horizontal
integration, market penetration and product development may be considered to further
consolidate the well-entrenched position of the Star business divisions and to compete
aggressively in the market.
(ii) Cash Cows -- Cash Cows are business divisions which have a relatively large market
share but compete in a low-growth industry. The Cash Cows are in a position to
generate substantial funds because of their strong competitive position. However, their
requirements of funds for expansion are minimal and they are therefore in a position to
generate funds which are in excess of their requirements. The Cash Cows are ‘milked’
as a source of corporate resources for utilization of funds in other business divisions
which offer long-term growth prospects and in which competitive advantages can be
achieved. Quite often the Star divisions with the passage of time are relegated to the
position of Cash Cows.
Page 1 of 7
Business Management
Suggested Answers
(iii) Dogs -- Dogs are those business divisions which have a relatively small share of the
market and compete in a slow or no-growth industry. Dog business divisions are not
able to earn fair profits and generally incur losses. Therefore such divisions are often
liquidated or divested or subjected to policies of retrenchment to curtail expenditures
on salaries and other associated costs. It may not always be advisable to liquidate or
divest the Dog divisions as their assets can be disposed of only at throw–away prices
because of the company’s weak bargaining position. This strategy may pay off if there
is a business turnaround at a later stage.
A.3 (a) Training Needs of employees of Apollo Engineering Limited in the different
categories are:
(i) Competent to perform in the present position: These employees should be

provided training by way of lecture sessions and skills enhancement programs to
enable them to be able to handle assignments in the next stage of competence.
Appropriate training programs for these employees would upgrade their work
skills and retain their motivation levels.
(ii) More than competent to perform in their present positions: These employees
should be provided training opportunities through participation in seminars, job
enrichment and job rotation to assume greater challenges and to facilitate them
to move to higher positions. In case it is not possible to promote such employees,
their job satisfaction level can be increased by delegation of authority and
responsibilities and redesigning their jobs. Such measures will increase their level
of motivation and deter them from seeking job opportunities elsewhere.
(iii) Not yet competent to perform in the present position: The specific areas of
weaknesses of these employees should be identified and on the job training
should be provided to enable them to overcome their weaknesses and perform
efficiently. Since employees in this category are not incompetent, providing
proper training through lecture sessions, workshops and on the job training
would improve their skills and help them to achieve competency in their present
positions.
(b) The Employee Compensation and Reward system for a service-oriented company
operating in a competitive business environment should be designed to achieve the
following objectives:
(i) Obtaining support of employees for the main strategic objectives of the service-
oriented company for innovation, efficiency, teamwork and high standards of
customer service.
(ii) Building of a durable and mutually beneficial long-term relationship between the
employer and the employees.
(iii) Deriving significant value-addition at all the stages of customer service chain
because human resources are strategic assets of a service-oriented company and
personnel costs account for a substantial portion of the total administration
costs.
(iv) Inducting and retaining a pool of suitably skilled and motivated work force.
(v) Inculcating a sense of financial transparency and fairness of the compensation
and reward system among the employees.
(vi) Articulating in precise terms the organization’s expectations of employee
performance and service standards to create a competitive business advantage.
(vii) Aligning the compensation and reward packages with the comparative packages
offered by the competitors.
Page 2 of 7
Business Management
Suggested Answers
A.4 (a) Wilful Misconduct is a deliberate act of violation of rules of employment by an

employee. Acts of Wilful Misconduct are considered to be serious offences as they can
cause serious financial loss to the employers and their reputation or pose grave risks to
the health and safety of other employees.
The situations in which an employee may be liable to be guilty of Wilful Misconduct

are:
(i) Theft.
(ii) Fraud.
(iii) Misuse of official properties/assets.
(iv) Damage to employer’s property with malicious intent.
(v) Harassment of other employees.
(vi) Gross misbehaviour with supervisors, peers and junior staff.
(vii) Conduct or actions which pose threat to the employee’s own life or the lives of others.
(b) The following measures should be adopted by the Chief Security Officer to meet the
objectives of security of employees and physical facilities of Sona Sugar Mills:
(i) Access to the factory premises should be properly controlled by installation of

CCTV cameras and deployment of trained security personnel. Only employees
on duty and authorised visitors should be allowed entry inside the factory
premises.
(ii) All vehicles/trucks carrying sugar cane and other supplies should be thoroughly
checked at certain designated points before they are allowed to enter the factory
area.
(iii) Security awareness training and orientation should be provided to the employees
who should immediately bring any suspicious activity to the attention of the
security personnel.
(iv) Crisis Management/Emergency Training should be provided to the employees,
including procedures to be followed in the event of a bomb threat, armed attack,
fire or any other emergency and communicated to the employees.
(v) Policy regarding zero tolerance of any criminal activity should be adopted and
communicated clearly and understood by the employees for strict compliance.
(vi) Personal records of employees should be investigated to ensure that they do not
have affiliation with any groups engaged in criminal activities. This investigation
exercise should be conducted in a discreet manner without causing any undue
concern or panic among the employees.
Page 3 of 7
Business Management
Suggested Answers
A.5 Identification of appropriate characteristics of each category of the Marketing Mix for the
different categories of Consumer Products are as follows:
Convenience Shopping Specialty

Products Products Products
(i) Price Low price High price Expensive
(ii) Consumer Frequent purchase/ Less frequent Special purchase

Buying less planning purchase/keen effort/brand loyalty
Behaviour comparison of price,
quality and style
(iii) Distribution Widespread Distribution in few Outlets in specialised

Channels distribution at outlets markets/shopping
convenient locations malls
(iv) Promotion / Mass promotion by Advertising and Carefully targeted

Advertising producer personal selling by promotion by
producer/resellers producer/resellers
A.6 The core capabilities which are commonly observed in leading global business organizations
are:
(i) In-depth knowledge of the organisation’s products/services, their strengths and special
customer service skills.
(ii) Highly developed marketing skills by way of insight of consumer behavior, market
segments, share of the market and distributions channels.
(iii) Capacity for continuous innovation and research which is a prerequisite for
maintaining and consolidating of their global leadership status in a highly competitive
business environment.
(iv) Creation and retention of a pool of talented and motivated management team and
work force aligned with the strategic objectives of the organisation.
(v) Financial resourcefulness with the capability to utilize the funds effectively with sound
planning and control structures.
(vi) Assessment of the strengths and weaknesses of the competitors in the different
territories in terms of their market share, competitive advantages and anticipated
business strategies.
A.7 (a) Employees offer strong resistance to major organisational changes and prefer to
continue with the existing status because of the following reasons:
(i) The employees may have concerns of financial insecurity due to loss of their
jobs or decline in their existing level of compensation.
(ii) The employees fear that they may lose their present position/status, power and
authority.
(iii) The employees may anticipate that changes in work assignments, alterations in
work processes and transfers would threaten their present work routines,
patterns of social-on-the-job interactions and friendships.
(iv) The employees may fear uncertainties in the new organizational design,
attitudes and working styles of new supervisors and their own status in the
organisation in the revised set-up.
(v) The failure of management to communicate to the employees in a convincing
manner the reasons and need for change which gives rise to suspicions and
apprehensions and results in resistance to change.
Page 4 of 7
Business Management
Suggested Answers
(vi) The fear of dissonance because employees may have to confront with new and
different process, systems, technology or expectations. The dissonance or
discomfort created by what is new or different is a psychological process which
causes resistance to change.
(b) Business Ethics are the moral principles of conduct applied in the commercial world.
Business ethics provide guidelines to individuals and organizations to determine
whether a particular action is right or wrong. Good business ethics are essential for
good strategic management as issues of ethics permeate in all areas of strategy
formulation, implementation and evaluation.
An ethical approach has become increasingly necessary both for corporate success and
a positive corporate image. The rapid expansion of information technology has created
awareness and enhanced the importance of ethical behaviour in business all over the
world. Pressures from employees, consumers and other stakeholders for adherence to
ethical and responsible business practices have led many organizations to make public
commitment of their ethical business standards. An increasing number of
organizations now adopt concepts of personal and corporate accountability in all
aspects of their business conduct.Misleading advertisements, poor employee health
and safety procedures, causing harm to the natural environment, poor product or
service safety standards, insider trading and discrimination in dealing with employees
are considered to be violation of acceptable ethical behavior.
A.8 (a) The principal objectives of mergers and acquisitions of financially strong and well-
established international corporations are as follows:
(i) To gain access to strategic proprietary assets/technical know-how and exploit

these strengths with greater effectiveness.
(ii) To gain market power and dominance, including access to strong distribution
channels in expanding and lucrative markets.
(iii) To achieve synergies in domestic and global operations across different
industries which offer complementary advantages.
(iv) To expand the size of operations to obtain advantages of economies of scale and
achieve competitive advantages in negotiations with suppliers, customers and
financial institutions from a position of greater strength.
(v) To diversify operations and spread risks over a more wide area.
(b) The distinguishing characteristics of Strategic Decisions and Tactical Decisions are:
(i) Strategic Decisions determine the course and define the contours of the
company’s main objectives, whereas the Tactical Decisions are concerned with
the achievement of targets within the framework of the main strategic objectives
of the company.
(ii) Strategic Decisions are made at the board of directors/senior management level,
whereas Tactical Decisions are taken by middle-level managers.
(iii) Strategic Decisions have long-term implications, whereas Tactical Decisions

have consequences which are of medium-term nature.
(iv) Strategic Decisions have far-reaching financial repercussions, whereas Tactical

Decisions have relatively less financial bearing on the company’s results.
Page 5 of 7
Business Management
Suggested Answers
A.9 Market Challenger Strategy - In this strategy, firms which are placed in second and third
positions launch aggressive marketing campaigns to capture a larger share of the market to
dislodge the market leader from its number one position. A market challenger must have
substantial resources and sustaining capability to challenge the market leader. A resourceful
market challenger may launch a full frontal attack to match the market leader’s main
strengths, i.e. product, pricing, advertising and distribution efforts. The outcome of the
challenge would depend on the relative strengths of each of the firms. Alternatively a market
challenger may pursue a strategy of indirect attack on the competitor’s weaknesses and
gradually make inroads in the market to achieve the top position. A market challenger may
also pursue a strategy of acquisition of smaller companies to eliminate competition and
steadily increase its share of the market to achieve top position.
Market Follower Strategy - In a market follower strategy, a firm prefers to retain its runner-
up position in the industry rather than to attack and dislodge the market leader. When the
market follower realizes that the market leader would put up strong resistance and not yield
easily from its well-entrenched position or the market follower lacks the resources to meet
the capabilities of the market leader, it decides to maintain its existing status.
A market follower may be satisfied with its existing runner-up position as it would not have
to incur the high expenditure on developing new products and educating the consumers of
the new product in the market. A market follower learns from the market leader’s products
and programs usually with less investment. A market follower retains the current customers
and plans to achieve a fair share of the market expansion and also avoids retaliation from
the market leader. A market follower strives to keep its manufacturing costs and prices low
and maintain the quality of its products to meet its targets of market share, sales revenue and
profitability without inviting retaliation from the market leader.
A.10 (a) Multinational Corporations seek to achieve the following advantages through policies
of centralised cash management and establishment of cash pools at prominent
financial centers:
(i) Security and Convenience: Centralised cash pools are maintained at major financial
centers which offer advantages of political and economic stability, convertibility of
currencies, access to international communication facilities and well defined legal
procedures. The pooling of cash funds at such locations provides security and
convenience of prompt transfer of funds from and to the subsidiaries.
(ii) Availability of Information: Location of cash pools at major financial centers provide
advantages of immediate access to latest information of the relative strengths and
weaknesses of various currencies, fluctuations in rates of return on financial
instruments in various currencies and ease of execution of financial transactions.
(iii) Holding of Minimum Surplus Funds for Precautionary Purposes: The pooling of
funds at centralised locations in excess of the transaction requirements of the
subsidiaries enables the MNCs to reduce the overall size of the cash pool without any
loss of level of protection to any individual subsidiary.
(iv) Reduction in Interest Costs: The large size of the pooled funds enables financial
managers to negotiate borrowings most effectively and thus reduce borrowing costs.
(v) Acquisition of Services of Competent Personnel: The funds can be managed by

highly competent financial managers whereas individual subsidiaries may not be in a
position to acquire the services of such executives.
Page 6 of 7
Business Management
Suggested Answers
(b) Globalization has assumed great importance in the present business environment due
to the following reasons:
(i) Adoption of free market economic policies by increasing number of countries has
created opportunities for capital investment and significant economic growth.
(ii) Rapid improvement in communications have reduced costs of transportation and
facilitated quick movement of goods, services and financial resources.
(iii) Technological advances have made it possible to manage and control business
operations in different countries through electronic mail, internet and frequent
travel by key management and other professional staff.
(iv) The development of the emerging markets has expanded the demand for products
and services worldwide.
(v) Global companies seek competitive advantages by locating production facilities
of components and parts in those countries where the costs are the lowest.
(THE END)
Page 7 of 7
SUBJECT SESSION
General:
Overall performance of the students in this paper was not satisfactory. Students not only
displayed lack of proper knowledge of the subject but also poor comprehension. It is quite
apparent that intrinsic motivation is lacking in students and appropriate measures should be
taken to create interest in this subject. Students have a cursory understanding of the major
topics but lack in-depth knowledge.
This was a balanced paper with enough margin for students to grab good marks. But majority
of students do not appear to cover the Syllabus comprehensively; clear examples were Q. 1 on
Critical Success Factors and Q. 2 on characteristics and business strategies of Stars, Cash Cows
and Dogs.
Another most common observation is that students answer the questions by repeating the text
written in questions or by reiterating the same point in different ways, which should be
avoided.
Q.1 This question required identification of four critical success factors which would
create sustainable long-term competitive advantage for a company that is in advanced
stage of implementing its facilities for manufacture of home textile products. Most
students limited themselves to good quality of products and low prices but could not
identify other important points. Many students just provided the points and gave no or
inadequate explanation, ignoring the fact that it was a 10 mark question and only four
points were required.
Q.2 This question required the students to explain the characteristics of the markets and
the relative competitive positions of Stars, Cash Cows and Dogs. This should be a
very familiar topic for anyone studying or related to management/business studies.
Most of the students mentioned market growth and market share but did not mention
the appropriate business strategies to be pursued in each case. Many students
emphasized quality as a descriptive characteristic of these business units whereas there
was no mention of quality in the entire matrix analysis. Many students gave
explanation of Problem Child which was not required. One wonders whether it was
lack of thorough reading of the question or flaunting of their knowledge. This exhibit
of their knowledge, however, did not gain them any extra marks! Students are advised
to use the allotted time wisely, and avoid giving irrelevant material.
Q.3 (a) The Training Needs of employees in three categories namely competent, more
than competent and not yet competent to perform in their present positions were
to be discussed in this question. Also how this training would enhance
motivation at all levels was required.
Page 1 of 4
Examiners’ Comments on Business Management – Final Examination Summer 2012
Training and learning and development are common and usual organizational
activities aimed at improving the performance of individuals. Therefore, it was
expected that students would give apt answers from their cognitive awareness
and observations if not from text book learning. Quite regrettably, the answers
did not meet the examiners’ expectations. Most of the students could not
differentiate between the training needs of the different categories of employees,
mentioned in the question.
A number of students stated that training is not required for competent

employees and extensive training is required for not so competent ones. There
was no mention of how specifically to train them or which skills should be
provided.
(b) A very important issue in Human Resource Management is Reward and

Compensation System. The aims and objectives of rewards were the issues to be
analyzed here. The performance in this part was good as the students were able
to mention at least some of the points. However, some of the students gave
entirely irrelevant answers like types of rewards and basis or criteria on which
rewards should be based, etc.
Q.4 (a) Wilful Misconduct was to be explained and situations where an individual was
guilty of the same were to be identified. Most students were able to correctly
explain the term and also quoted the four situations in which an employee would
be guilty of wilful misconduct. However, many students gave incorrect examples
also. It must be noted that late coming and absenteeism would not be considered
as wilful misconduct unless it is done with the malicious intent of foul play and
to hamper/paralyze the working of the organization. An important point which
many students ignored is that any explanation of Wilful Misconduct would be
incomplete unless it is mentioned that the misconduct was done on purpose. Just
stating that an employee committed a misconduct or an act which harmed the
organization is not adequate.
(b) Five security measures were to be identified which the Chief Security Officer
should adopt for the security of the employees of a Sugar Mill which is located
at the outskirts of a small rural town. Implicitly it is a remote, deserted and
isolated region. The most prevalent and common error here was that security was
confused with health and safety, presumably because these have been asked
several times in the previous examinations.
Q.5 This was a very interestingly designed question. Students were required to identify the
most appropriate characteristic of each ingredient of the marketing mix for the given
category of Consumer Products. The four categories were: Price, Consumer Buying
Behavior, Distribution and Promotion. Since the question was framed differently from
the questions which are normally asked, only those with good conceptual
understanding were able to do well and score high marks.
Page 2 of 4
Q.6 This question pertaining to core capabilities of leading global organizations was not as
well answered as it should have been. Students incorrectly perceive global
organizations as trouble-free and limitless entities, whereas practically every
organization has its strengths and weaknesses. Other observations are as follows:
• Most of the students gave the difference between local companies and global
companies which was not asked in the question.
• Many students listed a large number of “Capabilities” supposed to be

possessed by good organizations, whereas they were required to mention the
“Core Capabilities”.
Q.7 (a) Most of the students had a clear idea of the reasons why Employees offer strong
resistance to major organizational changes and prefer to continue with the
existing status.
(b) Quite a number of students confused the concept of Business Ethics with
Corporate Social Responsibility. Corporate Social Responsibility is not the same
as Business Ethics although there are some common grounds between the two,
such as the need to combat corruption. Corporate Social Responsibility refers to
the responsibilities of an organization on social and environmental issues,
whereas Business Ethics relates to matters such as honesty, trust and integrity.
Q.8 (a) The principal objectives behind merger and acquisition were required to be
narrated. Being students of accountancy, most candidates had a clear idea of the
concept of mergers and acquisition. Most of them were able to narrate the
objectives such as synergies, profit maximization, combating competition, cost
saving, taking advantage of the strengths of the other company, achieving
economies of scale and diversification of risks, etc. However, many students
wasted time and left a bad impression by quoting whatever benefit they could
think of.
(b) This part required the candidates to differentiate between strategic and tactical
decisions. Most students had a clear idea of the concept of ‘Strategic Decisions’
which determine the course and define the contours of the company’s main
objectives. These decisions are taken by the top management and have far
reaching financial repercussions. However, majority of the students confused the
concept of Tactical decisions with Operational decisions. Tactical or Business
strategy is concerned with achieving overall success in particular business
markets and allocation of resources whereas operational or functional strategy is
concerned with the contribution of the particular function or operation towards
achievement of the business and corporate strategies.
Q.9 Performance in this question was below average. Most of the students did not have a
clear idea of the difference between a Market Challenger and a Market Follower. Most
of them gave very brief answers. Many of them described the two concepts by
repeating the words as were given in the question and offered very little discussion
about when and why does a firm decide to pursue a particular strategy. Many students
were of the erroneous view-point that a firm would always like to challenge the
Market Leader to acquire that position. In fact, quite often firms are satisfied as market
followers, specially when they lack the resources to challenge the market leader or
when they do not want to provoke retaliation from the market leader.
Page 3 of 4
Q.10 (a) Highly centralized treasury function allows automation of basic processes and
information flows, sophisticated risk management techniques and highly
specialized functional competencies. Most of the students seemed to possess
only basic understanding of the issue. Instead of mentioning the key strategic
factors, most answers revolved round earning interest and saving financial costs.
(b) Performance in this question was extremely poor. Instead of providing reasons
why globalization has assumed importance in the present environment a great
number of students mentioned the advantages of globalization, which were not
required.
(THE END)
Page 4 of 4
Business Management
Winter 2012 100 marks - 3 hours
Q.1 A sound system of Environment Scanning is of critical importance in the formulation of Strategic
Plans of any progressive company operating in a fast-changing and competitive business
environment.
Hawk Engineering Limited (HEL) is engaged in the business of manufacturing of small motors
which are installed in printers. HEL has made substantial investments in manufacturing facilities
and R&D and has developed its own in-house technology and manufacturing processes. This gives
HEL competitive advantage over its rivals in terms of meeting the stringent requirements of its
quality conscious customers. Important customers of HEL are the original equipment
manufacturers of precision laser printers. Although motors account for a nominal proportion of the
cost of the laser printers, their efficient and reliable performance are of crucial importance for
HEL’s customers who provide performance guarantees for their products. HEL is one of the few
firms who manufacture these types of small motors. It is able to achieve high profit margins and
returns on its investments because of the superior quality of its products for which its customers are
willing to pay premium prices.
Identify and explain briefly four factors which HEL should monitor closely to anticipate the
emerging business environment in which it operates and its impact in the formulation of its
Strategic Plans. (10)
Q.2 (a) Sitara Limited is a well-known manufacturer of a wide range of chromium plated sanitary
fittings in Pakistan. The company has recently negotiated several long-term contracts for
export of various items of sanitary fittings. Consequently, the work force would have to be
increased significantly in a short period to expand the production. Prior to recruiting the new
workers, Adnan Khan, the Human Resources Manager, intends to prepare a HR Skills
Information Database of the existing employees.
Briefly discuss the purpose, usefulness and relevance of compilation of HR Skills
Information Database in the areas of recruitment, training and development and succession
planning of Sitara Limited (06)
(b) A number of firms prefer to conduct Performance Appraisal of their skilled workers on a
quarterly basis rather than as an annual exercise.
Identify three advantages of pursuing this policy of quarterly Performance Appraisal of

skilled workers. (03)
(c) Although companies experiencing high rate of employee turnover are in a position to recruit
new workers quickly to replace the outgoing employees, most of them are not aware of the
real costs of the high rate of turnover of their employees.
Briefly describe the different types of costs which are associated with high rate of turnover of
employees. (04)
Q.3 (a) What is meant by the term Customer Database? (02)
(b) Why, in your opinion, it is useful for a commercial bank planning to launch its credit card
marketing scheme to create, maintain and update the database of its existing and prospective
customers? (07)
Q.4 Identify the strategies/policies/objectives which are being pursued in each of the following cases:
(i) Poshak Fashions (PF) are designers and manufacturers of superfine cotton garments and
have their two outlets in Karachi and Lahore. PF produces only limited quantities of their
exclusive designs of garments for the narrow niche market of the most fashion-conscious
customers. PF introduces new designs of garments for the coming season and the unsold
inventory at the end of the previous season is sold at lower prices to other retailers in the
country after removing PF’s prestigious labels.
PF is pursuing a __________ market strategy.
(ii) Super Beverages believes that the world is one big market for its products and its various
subsidiaries and divisions pursue a uniform marketing strategy for sale of its products in
Super Beverages has adopted a __________ strategy for marketing its products in different
countries.
(iii) Sarmad Group is a pioneer in the textile industry in the country. The second generation
entrepreneurs of this Group have ambitious plans to launch new ventures in
telecommunications, electronic media and real estate development.
The Group is now seeking to follow __________ strategy.
(iv) To press for their demands, employees of Citizens Bank Limited have decided to work
strictly according to the terms of their contract of employment and refuse to perform any
extra tasks, resulting in slow down of banking services and causing inconvenience to
customers.
The employees of Citizens Bank Limited are pursuing __________ policy.
(v) Good Meats has recently established several retail outlets to sell selected cuts of choice meats
and establish its own brand name in a high growth market before new competitors enter this
market and set up their business on similar lines.
Good Meats wants to seize the __________ advantage of this market.
(vi) Neptune Chemicals, a manufacturer of industrial chemicals, has established independent
units who would be responsible for development of their own marketing strategies within the
company’s overall market and customer focus to be able to serve the needs of the various
categories of customers more efficiently.
The independent units are __________ of Neptune Chemicals. (06)
Q.5 (a) HR Managers often deal with delinquent employees and encourage them to change their
attitude and behaviour and adopt a positive approach towards their responsibilities to the
organisation. Consequently, HR Managers have to exercise considerable discretion and
provide proper guidance to the employees, rather than resort to immediate extreme punitive
measures.
Identify and explain briefly the various stages of dealing in a fair and equitable manner with
employees involved in wrongful behavior/actions. (08)
(b) The trend of outsourcing of certain activities by business firms to external entities has gained
considerable momentum in the past few years.
Identify four advantages which, in your opinion, these firms expect to derive from
outsourcing of selected business activities to external entities. (04)
Q.6 (a) Explain briefly the factors which have contributed to the creation and significant expansion
of Global Markets during the preceding 20-25 years. (06)
(b) Briefly explain the salient features of the terms which are usually incorporated in a typical
Franchising Agreement. Give one example of a Franchise Relationship between an
international company and a Pakistani enterprise. (05)
Q.7 (a) Progressive business organizations, which have substantial share of the market, are
continuously engaged in the planning of their marketing strategies to achieve specific
objectives in their existing markets and also to identify and seize opportunities in new
markets.
Explain briefly the various objectives which these organizations aim to achieve through their
marketing strategies in their existing markets as well as in the new markets. (07)
(b) Successful companies make concerted efforts to retain their competitive advantages vis-à-vis
their competitors as an ongoing exercise encompassing all spheres of their business
operations.
Narrate six measures which these companies usually take to retain and further consolidate
their competitive advantages. (06)
Q.8 (a) Blue Transport Company (BTC) operates a fleet of 150 buses which provides inter-city
transport services. The company takes considerable pride in the superior quality of its
services. BTC accords a high degree of importance to the human relationship management of
its employees, comprising of the ticketing staff, drivers and maintenance crew as it believes
that the commitment of its staff is a critical factor for the success of its business.
Describe the benefits that BTC expects to derive by pursuing a well-conceived policy of good
human relations management between the employer and the employees. (05)
(b) What is meant by Competency–based Job Descriptions? (03)
Q.9 Zest Dairy Company Limited intends to launch a new line of frozen fruit yogurts in the major
cities which would cater to the tastes of the customers for packaged food products. Assume that
you are their advertising media advisor and have to give a presentation on the advantages and
disadvantages/limitations of placing advertisements for the new yogurt products on each of the
following media channels:
(i) Television
(ii) Widely Circulated Newspapers and
(iii) Billboards (Hoardings)
Identify and list three advantages and disadvantages/limitations of placement of advertisements of

each of these different types of media. Explanations and illustrations are not required. (08)
Q.10 (a) Eagle Limited (EL) is a large conglomerate. The company is planning to establish a joint
venture in Centralia, a country which has several untapped sectors. EL foresees attractive
opportunities for development of its business in Centralia. EL is therefore, keen to pursue
corporate and business policies which would be perceived favourably, not only by the joint
venture partner but also by the government and other stakeholders. Adoption of these
policies would facilitate EL to expand its business in future.
Briefly describe four policies which, in your opinion, EL may pursue for achieving its long
term business objectives. (06)
(b) State the main reasons why leading companies obtain cross-border financing including
equity, debt and bank financing in different countries. (04)
(THE END)
Business Management
Suggested Answers
Final Examination - Winter 2012
A.1 HEL should closely monitor the following factors in the emerging business environment
in which it operates and its impact in the formulation of its strategic plans:
(i) Projection of future demand for laser printers in the international market – The
demand for motors by the original equipment manufacturers of laser printers is a
derived demand and changes in the demand for these printers can have
considerable impact on the business prospects of HEL. HEL would have to expand
its manufacturing capacity if it anticipates increase in the demand for laser printers
or alternatively explore new markets for its products if it foresees decline in demand
for these printers in its existing markets.
(ii) Technological changes – Changes in models and designs of laser printers due to
variations in customers requirements can have considerable impact on HEL’s
business prospects. HEL would have to keep abreast of these changes, continuously
enhance its R&D capabilities and introduce necessary modifications in its
manufacturing processes, designs and tooling. This would involve substantial R&D
expenditures and investments in additional equipment which would have to be
incorporated in its strategic planning process.
(iii) Threat of entry of new competitors – HEL is presently earning high profit margins
and realizing attractive returns on investments. Therefore, the threat of new
entrants who may pose competitive challenges to HEL is always present. HEL
should be prepared to meet the threat of new entrants and adopt appropriate
measures to maintain its competitive advantages and face threats posed by potential
competitors by interacting closely with its important customers and creating barriers
of high switching costs. This would involve continuous upgrading of technology
and improvement of manufacturing process to retain its competitive advantage.
(iv) Competitive rivalry and prices of Competing Products – Although HEL has
significant competitive advantages in terms of quality of its products over its
competitors, it should take cognizance of the strategies of its rivals who would want
to improve the quality of their products and may offer competitive prices to attract
HEL’s customers. HEL should adopt appropriate strategies to monitor these threats
and counter them effectively.
(v) Diversification – HEL’s present customer base and product range is considered to
be quite narrow. It may like to explore the prospects of marketing its products to
other original equipement manufacturers such as manufacturers of photocopiers,
computers, etc. and also introduce related products (other than small motors).
A.2 (a) The compilation of Human Resource Skills Information Database has relevance
and usefulness in the recruitment, training and development and succession
planning in Sitara Limited in the following areas:
(i) Recruitment – Compilation of HR Skills Information Database in a

systematic manner would help Sitara Limited to identify the pool of skills and
experiences of the employees currently available within the organization and
fill in the skill gaps by induction of new employees for the expansion of the
facilities and efficient functioning of the organization to meet its corporate
objectives. This is necessary to ensure recruitment of only such skilled
employees who can contribute to the company’s requirements for expansion
of its manufacturing capabilities.
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(ii) Training and Development – HR Skills Information Database would help to

identify the deficiencies and weaknesses among the existing workers and
adopt appropriate training and skills development programs to enable them to
perform their work more effectively and strengthen the HR capabilities of
Sitara Limited.
(iii) Succession Planning – HR Skills Information Database would help to

identify employees who are most suitable for promotion to higher levels in
the organization hierarchy due to the creation of new openings in the firm
and also in the event of retirement or death of an employee. A proper HR
Skills Information Database would help to match these individuals with the
HR requirements at various levels and fill in the vacant position promptly
without causing any disruptions or delays.
(b) The advantages of a policy of Quarterly Performance Appraisal of skilled workers

by such firms are:
(i) Employees efforts and capabilities are recognised promptly and they are
suitably rewarded for their performance resulting in enhanced performance
level of the individual employees in terms of productivity and low material
losses due to defects in workmanship.
(ii) The employer can ensure that the quality specifications of its products are
strictly adhered to.
(iii) The employer is able to identify and retain the highly skilled workers and
promptly replace those workers who are unable to meet the quality standards
(iv) Employees make sustained efforts throughout the year, rather than strive to
achieve high levels of performance close to the year end to earn good
appraisal rating.
(c) The costs associated with a high rate of turnover of employees include:
(i) Hiring Costs – comprising of recruiting and advertising expenses, salaries of

interviewers, employee testing costs, verification and reference checking time
and expenses.
(ii) Training Costs – including cost of orientation time of new workers, staff time
and salaries of trainers, cost of training materials, supervisors’ and co-workers
“coaching” time and salaries.
(iii) Productivity Costs – including lost productivity due to “break-in time” of
new employees and lack of awareness of the company’s products and
services.
(iv) Separation Costs – such as HR staff and time of supervisors and salaries to
process separation formalities and exit interview time and costs.
(v) Disclosure of Confidential Information – former employees may pass on
expert knowledge or disclose important confidential information to
competitors.
A.3 (a) A Customer Database is an organized and updated collection of comprehensive

information of existing and prospective customers names and addresses, telephone
numbers, demographic information of age, income, number of family members,
business activities, interests, purchases and other useful information.
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(b) (i) Identify prospective customers – The customer database would help the
bank to identify prospective customers and contact them by telephone calls,
personal visits and promotion letters to convince them of the advantages of
acquiring the bank’s credit card facilities.
(ii) Formulation of marketing policies – Credit Cards have different features

e.g. platinum cards, gold cards, etc. with varying credit limits, bonus points,
payment or waiver of initial and annual fees, etc. Information obtained from
the customer database can help the bank to formulate policies for the different
needs of customers and offerings of types of credit cards which best serve
their needs.
(iii) Provide vital information of high-value customers – Information from the

customer database can enable the bank to create a profile of privileged
customers and cater to the special needs of these customers.
(iv) Negotiate Terms with suppliers to benefit high-value customers –

Information from the customer database can be used by the bank to seek
concessional special terms for its customers from relevant institutions such as
hotels, travels agents, selected retail outlets, etc.
(v) Adopt proactive competitive strategies – The bank can use the information
from the customer database to upgrade the cards and enhance the credit
limits of customers who have shown good performance in terms of customer
profitability and timely payments of their dues to compete effectively with the
products offered by the competitors.
A.4 (i) Market skimming (ii) Global

(iii) Conglomerate or Diversification (iv) Work-to-rule
(v) First mover advantage (vi) Strategic Business Units
A.5 (a) A competent HR Manager should pursue the following stages in handling
employees who have been involved in behavior/actions which are contrary to the
rules of company discipline :
(i) Investigation – A thorough investigation should be undertaken of the nature

of the delinquent behavior of the employee and the factors which have led
the employee to behave and conduct himself in a manner which is contrary to
the accepted norms of the firm’s rules and discipline.
(ii) Counseling – The objective in this phase is to create awareness among the
employees of organizational policies and rules. Often, creating awareness of
rules and knowledge of disciplinary actions may prevent violations by the
employees. Counseling by the immediate supervisor can have positive effects.
(iii) Written documentation – If change in behavior is not achieved, then a
second session of meeting with the concerned employee would become
necessary. Whereas, the first phase took place as a conversation between the
supervisor and employee, the proceedings of this meeting are documented in
written form in which the employee and the supervisor prepare written
solutions to prevent further continuation of the problem.
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(iv) Final warning – When the employee does not follow the written solutions
noted in the second step, a final warning meeting is held. In this session, the
HR official emphasizes to the employee the importance of rectifying the
inappropriate behavior/actions. Employers may also demote employees or
temporarily suspend their services for a limited period with pay. The
demotion/suspension period is used to demonstrate the seriousness of the
problem and the organisation’s determination to bring a change in the
behavior of the employee.
(v) Discharge – If the employee fails to follow the action plan that was
developed and the problem continues to persist, then the services of the
employee are terminated after giving notice and keeping all the legal
implications of the action in perspective.
(b) Business firms expect to derive the following advantages by outsourcing of selected
business activities to external entities:
(i) Reduce requirements of capital investment and human resources as the

facilities and services are provided by the external entities to whom these
activities have been outsourced.
(ii) Place greater focus on core value-added activities of the business as the
ancillary activities are outsourced to external suppliers.
(iii) Achieve cost economies as the suppliers of the outsourced activities are able
to obtain the advantages of economies of scale.
(iv) Derive benefits of the particular expertise and innovations of the external
entities who provide these services.
A.6 (a) The factors which have contributed to the creation and significant expansion of the
Global Markets are:
(i) Specialisation of Products – Certain countries have achieved high degrees of

specialisation in the manufacturing of specific types of goods which have
worldwide demand. These products are promoted on a worldwide scale
through aggressive advertising campaigns to create and expand their global
markets.
(ii) Reduction in tariff barriers and relaxation of direct foreign investment
regulations – MNCs have been able to increase their exports significantly and
expand global markets as policies of liberalisation of trade restrictions and
relaxation of foreign investment regulations have received worldwide
acceptance.
(iii) Economies of Scale – Access to global markets allow MNCs to obtain
benefits of economies of scale which are achieved by manufacturing large
quantities that can be sold in several markets in different countries.
(iv) High R&D expenditures on Products – A number of knowledge-based
products involve exceptionally large R&D costs which can be incurred only
in countries with substantial financial resources and technical human
resource base. Worldwide demand for such R&D-intensive products is
responsible for creation of global markets for these types of products.
(v) Reduction in Communication and Transportation Costs – Efficient and fast
means of communications and reduction in transportation costs have
provided considerable impetus to the growth of global markets for a large
number of products
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(b) The terms which are incorporated in a typical Franchise Agreement are:
(i) The franchisor authorizes the franchisee to use the franchisor’s complete
brand concept, goodwill and business operating systems and methods to
conduct business as defined in the franchise agreement.
(ii) The franchisee undertakes to make investment of a specified amount in the
business and operate within a defined territory.
(iii) The franchisee undertakes to achieve predetermined sales targets.
(iv) The franchisee is entitled to benefit from the promotion and advertising
campaigns of the franchisor to facilitate the franchisee to achieve the sales
targets in the defined territory.
(v) The franchisee makes an initial payment of the stated amount and further
commission or royalties on the amount of sales.
(vi) The franchisee undertakes to purchase selected material inputs from the
franchisor or a specified supplier.
Examples: McDonald, Burger King, Dunkin Doughnut, Marriot Hotel, etc.
A.7 (a) Progressive organizations aim to achieve the following objectives by pursuing
various marketing strategies:
(i) They pursue marketing strategies to achieve maximum market penetration

and increase their share of the existing and expanding market.
(ii) They plan their strategies to achieve market leadership status or to hold on to
their second or third tier positions in the market depending upon their own
resourcefulness and objectives and the relative strengths and competitive
advantages of the market leader.
(iii) They pursue marketing strategies to overcome competitive pressures by
special price offers and more aggressive promotion and advertising
campaigns and modifications in product specifications to create
differentiation advantages.
(iv) They create market acceptability for their products and pursue marketing
strategies to consolidate their position through aggressive promotion, more
efficient distribution and creating stronger linkages with the distribution
channels.
(v) They pursue marketing strategies to maintain market visibility, create
goodwill and strengthen relations with their stakeholders to improve their
business reputation in order to counter threats from competitors.
(vi) They also pursue marketing strategies to explore new markets to diversify
into those markets which offer higher profitability prospects and to identify
and seize new opportunities which would create synergy effects with the
existing product mix.
(b) Successful companies must take the following measures to retain and consolidate
their competitive advantages vis-à-vis their competitors by:
(i) Developing, retaining and motivating a cadre of corporate leadership which

has a strong value-driven vision of the company’s mission.
(ii) Creating an efficient and flexible organizational structure to achieve the
objectives of the company in changing business environments.
(iii) Making continuous efforts to improve their performance capabilities in all
spheres of their business activities and achieve competitive advantage.
(iv) Providing superior and value-added products/services to their customers as
compared to the competitors.
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(v) Protecting their intellectual property rights and ensuring that they are not
infringed by any unscrupulous competitors.
(vi) Training and development of employees and empowering them to achieve
the company’s objectives and share the company’s values.
(vii) Stating clear performance standards and fair and equitable reward systems to
the employees to obtain high levels of motivation.
A.8 (a) BTC expects to derive the following benefits by pursing a well-conceived policy of
good human relations management between the employer and the employees:
(i) The employees at all levels would be committed to achieve high levels of
performance in providing good service resulting in customer satisfaction.
(ii) A more co-operative work environment would encourage better team work
among the various cadres of employees leading to safety of the passengers,
vehicles and staff.
(iii) The reduced lost time due to good maintenance of the vehicles and more
efficient handling of customers would result in low operating costs and higher
profitability.
(iv) The staff would be satisfied with the management’s good relations policy
which would result in low absenteeism and minimum employee turnover
rate.
(v) There would be open communication between the management and the staff
and sharing of information to achieve positive results.
(vi) The good human relations policy would encourage training and development
of the staff at all levels.
(b) Competency–based job descriptions define observable and measurable behaviour

traits of skills and performance that individuals must exhibit to do the job
efficiently. Competency–based job descriptions are primarily worker performance-
focused rather than work description-focused and place high degree of emphasis on
achievements. Competency–based job descriptions specify that the employees must
be capable of achieving high levels of performance and commitment in demanding
and highly challenging work environments.
A.9 The advantages and disadvantages/limitations of placement of advertisements by Zest

Diary Company for introducing their frozen fruit yoghurt products on the various types
of media are:
Advantages Disadvantages/Limitations
Television
(i) offers combined effects of highly (i) entails high cost.
attractive sights, sound and motion to
appeal to the audience.
(ii) captures high attention of the (ii) has very short exposure.
audience.
(iii) reaches a large segment of the (iii) has minimum audience selectivity.
prospective market.
(iv) qualities of the product can be (iv) audience can move away from the
highlighted more effectively. TV sets during advertisement breaks.
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Widely circulated newspapers

(i) extensive coverage of different (i) newspapers have a very short life and
categories of the prospective advertisements are effective only if
audience. they are repeated frequently.
(ii) a large part of the audience may read (ii) quality of the advertisements are
the newspaper in their free time or generally not ‘audience attention
when required when it is more easier captivating type’.
to respond.
(iii) customers can refer back to the (iii) newspapers have a very restricted
newspaper whenever there is a need ‘pass-on’ or secondary audience.
for the product.
(iv) captures attention of the audience for (iv) busy readers glance through the
a relatively longer duration. newspapers to read the headlines and
ignore the advertisements.
Billboards(Hoardings)
(i) high repeated exposure to the passing (i) limited audience selectivity.
traffic.
(ii) can be installed at most strategic (ii) ignored by the fast moving traffic on
locations. busy roads.
(iii) colourful digital graphic billboards (iii) billboards placed too closely are
attract attention of large audience. eyesore for the audience and are
ignored.
(iv) audience often find the similar
colours on billboard boring and
therefore avoid looking at them.
(v) high costs are involved in the
maintenance and upkeep of the
billboards.
A.10 (a) Pursuance of the following policies by Eagle Limited would be perceived favourably
by the joint venture partner and other stakeholders and also contribute towards the
industrial development objectives of Centralia:
(i) Eagle Limited should act as a good corporate citizen and respect the culture,
customs, traditions and values of the host country.
(ii) Eagle Limited should offer its best manufacturing technologies and practices
to the joint venture in the host country.
(iii) Eagle Limited should allow the local partners to set their own rules and
regulations and adjust the manufacturing processes to match the skills of the
local workers.
(iv) Eagle Limited should keep the expatriate employees to the minimum strength
and provide training to the local managers to enable them to acquire skills
and assume responsibilities at all levels.
(v) The joint venture should be encouraged to develop local R&D which would
help to reduce dependence on imported inputs.
(b) Leading MNCs engage in international or cross-border financing and raising funds,
including equity, debt and bank financing in different countries:
(i) to obtain financing at overall lower costs, comprising of interest costs and
impact of any adverse fluctuations in exchange rates.
(ii) because of liberalization of foreign exchange regulations which allows easy
and free movement of capital in the important financial centers.
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(iii) because financing can be obtained conveniently in different countries in

which MNCs conduct significant business operations.
(iv) fund raising in certain countries is easier because the debt and equity markets
there are broad-based and have greater market depth.
(v) to seize strategic advantages of their presence and relationships in important
financial centers in many countries.
(THE END)
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SUBJECT SESSION
General:
The overall performance in this paper was quite below expectations as has been the case in the
past many sessions. It was quite a normal paper as most of the concepts that were tested were
the same and remote areas of study were avoided. The most important reason for such a
lackluster performance seemed to be selective study. Insufficient proficiency of the subject,
imprecise articulation and reliance on rote learning and bookishness were also responsible for
the below average result.
The students are advised to adhere to the following guidelines if they really desire to improve
their performances:
• Cover the whole syllabus;
• Develop reading habit and try to read books and magazines other than the prescribed books
on relevant topics. This will enhance their knowledge base and allow them to quickly recall
the relevant points rather than wasting time in thinking them over;
• Do not try to deceive the markers by repeating the same points again and again or by
producing irrelevant stuff. It would not yield any additional marks and would result in
wastage of precious time.
Question 1
A short scenario was given which pertained to a company which is a leading supplier of a
small motor which is installed in printers. The candidates were required to identify and explain
the factors which the company should strictly monitor to anticipate the emerging business
environment (challenges) and which can have a profound impact on its Strategic Plans.
General understanding of the business environment was required to answer the question.
Unfortunately, most of the candidates did not read the question carefully. They were more
focused on social, political and environmental factors and overlooked important points like
projection of future demand, competitive rivalry and diversification. Some students also
included internal factors like skilled human resources which was not required. Some of them
discussed SWOT, PESTEL, Porter & Ansoff analysis which were entirely irrelevant.
Question 2 (a)
This question pertained to HR Skills Information Database and its usefulness in the areas of
Recruiting, Training and Succession Planning especially with reference to an organization
which is about to recruit new workers, to expand production. Generally, the students performed
well. However, some of them confused it with normal HR database rather than HR Skills
database.
Question 2 (b)
This part required identification of advantages of quarterly performance appraisal of skilled
workers rather than as an annual exercise. Majority of the answers were quite satisfactory.
However, some students did not read the question carefully and mentioned advantages of
performance appraisal without discussing the main issue, i.e. how often should appraisal be
carried out. Some students discussed the advantages from the point of view of employees
instead of discussing from the employers point of view.
Page 1 of 4
Question 2 (c)
This part required the students to describe the different types of costs that are associated with
high rate of employee turnover. These costs may be enormous but are quite often ignored. The
students generally performed well and identified and described the relevant costs such as
training and recruitment costs, cost of lost productivity/sales and the loss of competitive
advantage, etc.
Question 3 (a)
This 2 mark question was rather easy and almost all the students met the requirement i.e. to
portray the correct meaning of the term Customer Database.
Question 3 (b)
This question required a very focused answer i.e. usefulness of a customer database for a bank,
which is about to launch its credit card. Instead, most students gave general answers where
usefulness of the database for a bank was discussed with little or no reference to the specific
situation i.e. launching of credit card.
Question 4
In this question, six brief situations were given and the students were required to identify the
types of strategies, policies or objectives which the organization was pursuing, in each of the
given situations.
An average response was seen as most students were able to give 3 or 4 correct answers. In
response to part (ii) the appropriate answer was Global; but Geocentric was also acceptable.
However, many students wrote ethnocentric. Majority of the students had no idea of the
concepts of ‘Work to rule’ and ‘First mover advantage’.
Many students probably tried to use “write what you know” approach and just identified
whether the given situation reflected a policy, a strategy or an objective. Most students were
not familiar with the technical business terminology or jargons. Specialized terms capture the
complexity and specificity of business concepts. No other words can encapsulate their meaning
and if they are replaced by normal “transliterated” words, then that meaning is lost. Many
students gave explanatory footnotes in support of their answers which were not required and
resulted in wastage of precious time. There were some students who generated multiple
answers; such answers are not acceptable.
Question 5 (a)
Students displayed lack of knowledge of the issue namely the stages of dealing with employees
involved in serious offences or gross misconduct. The question specifically required
identification and brief explanation of the various stages. However, many students patched all
the stages together in one long point. They generalized their answers stating that after oral and
written warning if the behavior does not show signs of improvement, the employee should be
discharged. Some of them only listed down possible actions against such employees with few
even concluding that HR should try to be polite. In many cases, the stages identified by the
students were unorganized and indistinguishable.
Some students broke down the initial stage of investigation into multiple points, each
describing the different ways the matter should be investigated. So much detail was not
required.
Page 2 of 4
While discussing the last stage of Discharge or Termination, many students ignored a very
important point i.e. that the legal formalities should be complied with while terminating an
employee; otherwise it may have serious implications for the employer.
After describing the various stages many students stated that the process should be fair,
equitable and confidential which was not really required as it was mentioned in the question
itself.
Question 5 (b)
Outsourcing is the buzz word in business these days and hence very relevant. Its advantages
were asked and most students seemed to have a good idea and answered fairly well.
Question 6 (a)
Most of the students had fair idea of the factors which have contributed to the creation and
significant expansion of Global Markets. Usually they mentioned the correct points. However,
some of them also included points which were not relevant such as cheap labour and raw
material, growing competition, absolute and comparative advantage, increase in demand and
increase in number of wealthy people in the developing countries, etc. Many students
mentioned the relevant points such as greater specialization but were unable to clearly spell out
as to how it results in greater globalization.
Question 6 (b)
This part required the salient features of the terms of a franchising agreement with brief
explanation and an example of a franchise relationship. Since the students do come across
various agreements, during their training, many of them jotted down a long list of general
clauses instead of those pertaining specifically to franchising agreements. Some of the
important clauses that form part of such agreements are those relating to achievement of
desired sales in the defined territory and the undertaking to purchase input materials from the
franchisor or a specified supplier. These were generally missed.
Question 7 (a)
A below average performance was seen in this part of the question in which the requirement
was to provide the objectives that progressive organizations aim to achieve through their
marketing strategies. Most students wrote any and every thing about marketing that they knew,
repeating the same things again and again. Quite often the answers were equivocal and mostly
mentioned that through marketing, the firms introduce new products, enter new markets,
increase sales and profitability, promote brand extension etc. Objectives such as market
penetration, overcoming competitive pressure, creating goodwill and strengthening relationship
with customers were covered by few candidates.
Question 7 (b)
This part required the measures which companies take to retain and further consolidate their
competitive advantage. The performance was quite reasonable as majority of the students were
able to cover the main points specially those relating to marketing and HR. However, efficient
organizational structure and capable leadership was touched upon by very few students.
Page 3 of 4
Question 8 (a)
Students performed well in this question as almost all the students could mention the benefits
which BTC (name of company) expects to derive by pursuing a well-conceived policy of good
human relations management between the employers and the employees.
Question 8 (b)
Very few students could appropriately explain as to what is meant by a Competency Based Job
Description. Most students could not mention the most important distinguishing factor i.e. that
Competency Based Job Descriptions are primarily worker-performance focused rather than
work-description focused.
Question 9
This question required Advantages and Disadvantages of advertising in TV, Newspapers and
Billboards. It was quite easy but majority of the students could only mention one or two
advantages and disadvantages in each case. They mostly discussed costs, reach to the
audience/customers and attractiveness of the advertisement. Other areas were rarely covered.
Question 10 (a)
This question enquired about the policies which a large conglomerate should pursue while
entering the market in a country for the first time, by way of a joint venture and which would
be perceived favorably by the joint venture partner, the government and other stakeholders in
that country. The students didn’t seem to appreciate the essence of this question. They
struggled with explaining marketing and production policies rather than getting to the gist of
this question and identifying policies which would be looked upon favourably in that country
or in other words which would enable the company to gain popularity. Some of them wrote
that the company should pursue a policy of CSR but did not explain any further.
Question 10 (b)
The candidates were supposed to identify the main reasons why leading companies obtain
cross-border financing. The performance was quite poor. Most of the students could identify
low interest cost as the only reason. Other reasons such as exchange liberalization, broad based
debt and equity markets, etc. were rarely covered. Surprisingly, some students also mentioned
reasons on account of which cross-border financing is discouraged such as risk of exchange
fluctuations and exchange controls.
(THE END)
Page 4 of 4
Business Management
Q.1 Grand Shipping Company Limited (GSCL) operates a fleet of container ships and plies on
some of the busiest sea routes. To render efficient services in a competitive business
environment, it is critical for GSCL to develop and retain a trained and motivated
workforce comprising of onboard crew, staff at the ports and office personnel. GSCL makes
concerted efforts to implement high-performance systems in all spheres of its operations in
which the human resources are of vital importance.
Describe the human resource policies and practices which may have contributed towards
GSCL’s success in achieving high-performance systems in its operations. (09)
Q.2 Markets are often demarcated into different segments on the basis of their unique
characteristics and attributes. The different market segments may be classified as:
(i) Geographic or location segments (ii) Demographic segments

(iii) Time segments (iv) Usage or consumption segments
Appropriate pricing strategies must be adopted for each of these market segments to achieve
the desired objectives.
Explain and illustrate with appropriate examples the pricing strategies which may be
pursued for each of the above market segments to achieve specific objectives. (10)
Q.3 (a) Various studies show that in the present business environment, strategies of vertical
expansion are pursued less frequently than the other strategies of business growth.
Explain briefly the reasons why firms do not always consider it advantageous to
pursue strategies of vertical expansion vis-á-vis the other strategies of business
growth. (08)
(b) Mission of an organisation, articulated and clearly defined in its mission statement, is
a combination of the inspiration and description of the road ahead for the
organisation.
State the essential elements which a progressive organisation would want to capture
and propagate amongst its employees in a well-crafted mission statement. (05)
Q.4 (a) State the advantages of pursuing a policy of congenial human relations management
in a large-sized industrial organisation having several divisions/departments. (05)
(b) In the course of selection process, candidates are administered various kinds of tests
to ascertain their suitability for the positions. These tests must show a high degree of
Reliability and Validity.
State what is meant by Reliability and Validity of these tests and why these concepts
are considered important in the selection process. (05)
Q.5 Identify the business strategy/policy/definition which is most relevant in each of the
(i) The process through which representatives of management and workers union
negotiate a labour agreement is known as __________
(ii) Promotion of a firm’s brand status and acceptability by increasing customer
perception of its superiority over other brands of similar products is __________
(iii) A form of promotion that links a brand of a consumer product to cultural, social,
sports or other activities of high public interest is known as __________
(iv) A company’s obligation to be sensitive to the needs of all its stakeholders and create
an overall positive impact on the society is known as __________
(v) The approach in which a multinational company assigns the best employees to key
positions in its worldwide operations regardless of their nationalities is __________
(vi) The activities of two or more businesses when brought together create value that is
greater than the value which they can achieve individually is due to the effect of
__________
(vii) The protection granted by law to intangible assets such as patents, copyrights, trade
marks and authors of books is called __________
(viii) Purchase of all or part of a business from its owners by its managers is called
__________
(ix) Potential changes in political conditions in a country that may cause a company’s
operating performance or financial position to deteriorate are called __________
(x) Implementation of measures to reduce electricity, petrol/diesel and gas consumption
by efficient control and management and also to protect the natural environment is
called __________ (10)
Q.6 (a) Fine Foods Limited, a recognised name in the packaged food industry, intends to
launch its new line of cereal-fruit based products for infants.
State the important information which should be presented/contained in the labels

on the new line of products. (04)
(b) State how manufacturing companies find and develop new product ideas. (04)
Q.7 (a) The magnitude of Foreign Direct Investments has increased significantly in recent
times and the momentum of its expansion continues as an ongoing process.
Describe any five factors which in your opinion have contributed to the expansion of
foreign direct investments in recent times. (7.5)
(b) State three advantages of market-value based transfer pricing transactions among
inter-group companies. (4.5)
Q.8 Products of leading multinational companies have firm footholds in the markets in several
countries around the world.
State six strategic factors which contribute towards the success of these companies in such
highly diversified business conditions and market environments. (09)
Q.9 (a) What are the different types of entry barriers which may discourage entrants from
establishing new manufacturing units in spite of substantial demand/supply gap for
products in any industry? (07)
(b) Identify the various steps involved in the Delphi Technique of decision making. (05)
Q.10 Mercury Telecom Limited (MTL) recognises the need for developing a cadre of trained
management staff to provide efficient services to its customers. You have been engaged by
MTL as an external consultant to prepare and implement a Training and Development
Program for its new management trainees.
Describe the essential steps you may take to develop a comprehensive Training and
Development Program which would meet the management training objectives of MTL. (07)
(THE END)
Business Management
Suggested Answers
A.1 The following human resource policies and practices may have contributed towards
GSCL’s success in achieving high-performance systems in its operations:
(i) Selective Hiring – Pursuance of rigorous hiring procedures and recruitment of only
those individuals who have necessary qualifications/skills, fitness, aptitude and
willingness to perform in challenging and demanding work environments.
(ii) Extensive Training Programs – GSCL would have accorded high priority to the
learning proficiencies, cultural flexibility and open mindsets of its staff to perform in
diverse working conditions because official regulations, working environment and
cultures vary considerably from ports to ports. Comprehensive training would have
been provided on a continuous basis to enable the employees to meet the challenges
in the performance of their duties.
(iii) Self-managed teams and decentralised decision making – GSCL would have
developed effective work groups and teams of individuals of diverse backgrounds,
both on the ships and at the ports, because they are required to take timely actions,
reach well-considered decisions and assume responsibilities.
(iv) Emphasis on high-quality performance – A culture of high quality performance

from the employees would have been expected and encouraged at all levels since
their cumulative efforts are of critical importance for achievement of GSCL’s goals.
(v) Pay for performance rewards – A performance related rewards system would have
been instituted in GSCL in order to retain a motivated and committed workforce.
Such a reward system must have been perceived by the employees to be fair,
equitable and merit-based.
(vi) Employment security – GSCL would have provided security to its employees in
order to gain their loyalty and commitment for achieving top quality performance.
(vii) Transformational leadership – The top leadership would have pursued a

transformational style of management whose positive impact permeates at all levels
in GSCL. This style of leadership would be a source of continuous inspiration and
motivation for the employees who have to work as a coordinated team.
A.2 (i) Geographic or location segments – High prices are charged for the same
products/services in posh locations where customers are willing to pay the high
prices and low prices are charged in relatively less affluent areas where the
consumers are not well-off or have different types of needs, although the cost of
offering may be the same in both the locations. A bottle of water of 1.5 liters may
sell for Rs 25 in the super market, but in a prestigious restaurant the price charged
for the same brand of bottled water may be as high as Rs 95.
(ii) Demographic segments – Different prices may be charged from different customers
for the same product/service on the basis of differences in their age, gender or
profession. Lower entry fees may be recovered from students and senior citizens to
encourage them to visit a museum or an amusement park as compared to the entry
fees charged from other visitors.
Page 1 of 6
Business Management
Suggested Answers
(iii) Time segments – The market may be segmented to recover high prices for use of
the service during peak business hours and low prices for use of the same service
during the slack or off-peak periods. A provider of telephone services may levy a
higher tariff structure for calls made during the business hours and lower rates for
services provided after the normal business hours. This pricing strategy would
encourage more customers to make their calls during the off-peak periods.
(iv) Usage or consumption segments – Marketers often differentiate the market

segments on the basis of customers volume of purchases, frequency of usage or their
particular types of use and reward them with low prices as compared to the high
prices charged from those customers who make their purchases in small quantities
or usage for specific purposes. A supermarket may offer special discounts on certain
items to those customers whose purchases are in excess of a specified quantity to
encourage bulk purchases. Also, lower tariff structures may be charged for
electricity used for drawing water from tube wells for agricultural purposes to
reduce costs of inputs used in the production of agricultural products and higher
rates for electricity consumed in commercial establishments.
A.3 (a) In the present environment, strategies of vertical expansion are not always
considered to be as advantageous as other strategies of business growth due to the
following reasons:
(i) Vertical expansion requires huge capital investments, diverse management

competencies and technical skills which are often beyond the capabilities of
individual firms.
(ii) Firms seek to achieve advantages of economies of scale which can be obtained
only if the volumes in their main lines of business are sufficiently large and
enable specialist firms to provide the products/render services at costs which
are lower than those which can be achieved through pursuance of policies of
vertical expansion.
(iii) Vertical expansion requires long term commitments in different types of
business activities from which it may be difficult to withdraw in times of
changes in business environment. Therefore, firms prefer to enter into
business relationships of long-term contracts, alliances, franchising, licensing,
etc with external parties rather than pursue policies of vertical expansion.
(iv) Advantages of business specialisation outweigh the disadvantages on account
of lack of direct control of sources of raw materials or distribution channels.
In present business situations, large and reputable manufacturers and service
providers are competing vigorously for securing business. Consequently, these
firms prefer to concentrate in their core business activities and procure
supplies/services from specialists in their chosen fields.
(b) The essential elements which an organisation would want to capture and propagate
amongst its employees in a well-crafted mission statement are as follows:
(i) purpose of existence of the organization

(ii) the manner in which the organisation defines success
(iii) strategy that should be pursued to achieve success
(iv) shared values and behaviour that the organisation expects from all its
employees
(v) pursuance of the mission as a living statement that can be translated into
goals and objectives at different levels in the organisation.
Page 2 of 6
Business Management
Suggested Answers
A.4 (a) (i) A policy of congenial human relations management would enable the
organisation to achieve harmonious working relationships between the
management, employees at various levels in different departments and the
workers union.
(ii) A policy of congenial human relations management would encourage
commitment and motivation among the employees at all levels to achieve
high levels of productivity and profitability to achieve the corporate
objectives.
(iii) A policy of congenial human relations management would minimise
industrial conflicts and establish procedures for prompt and amicable
settlements of grievance and disputes.
(iv) A policy of congenial human relations management would facilitate two way
communication and dissemination of information between the management
and the employees at different levels and build trust and promote better
relations in the organisation.
(v) A policy of congenial human relations management would achieve optimal
employee flexibility.
(b) Reliability means that the tests yield consistent scores when the same test is
administered to an individual on two or more different occasions. Reliability is
important because if an intelligence test is given to an individual on two separate
occasions and the results show marked variations, then there would not be much
faith in the consistency of the results and it would lead erroneous decisions.
Validity denotes the accuracy with which a test is able to measure what it purports
to measure. Validity of a test refers to the correctness of the inference that can be
made on the basis of the results of the test. The result of a high test score
administered to an engineer should reflect on the candidate’s on-the-job
performance to substantiate the validity of the test. A selection test must show valid
results, otherwise there would be no justification to continue with the particular test.
A.5 (i) collective bargaining

(ii) brand positioning
(iii) event related marketing/promotion/sponsorship
(iv) corporate social responsibility
(v) geocentric staffing/orientation/geocentricism
(vi) synergy
(vii) intellectual protection rights
(viii) management buy-out
(ix) political risks
(x) energy conservation
A.6 (a) The labels on the cereal-fruit based products for infants should provide/contain the
following information:
(i) name of the manufacturer and country of origin

(ii) statement that the product is for consumption of infants
(iii) price of the product
(iv) ingredients used in the manufacture of the product
(v) nutritional values of the product
Page 3 of 6
Business Management
Suggested Answers
(vi) net weight of the contents of the product

(vii) date of manufacture of the product and expiry date
(viii) easy-to-understand information/instructions on how to use the product
(ix) method of storage of the product - before and after opening the package
(x) warning about potential misuse
(xi) contact point with the company in the event of any complaint/additional
information.
(b) Manufacturing companies find and develop new product ideas by:
(i) conducting formal research and development in R&D departments

(ii) brain storming sessions in internal meetings
(iii) suggestions/ideas put forward by employees
(iv) market surveys of customer needs
(v) tracking of offerings by competitors
(vi) re-engineering of different products available in the market
(vii) information provided by distributors and retailers regarding consumers
problems and needs
(viii) ideas gained in trade and industrial shows and exhibitions.
A.7 (a) The factors which have contributed towards the expansion of foreign direct
investments in recent times are:
(i) Expansion of global markets and competition to secure business globally

require firms to operate simultaneously in several countries by making direct
foreign investments in the host countries.
(ii) Foreign direct investments allow the firms to gain first-hand advantages of the
prevailing and emerging business opportunities in the host countries.
(iii) Foreign direct investments enable firms to overcome barriers to trade and
operate abroad as domestic entities without the unfavourable impact of
customs duties, tariffs and other import restrictions.
(iv) Foreign direct investments are channeled in business opportunities to seize
advantages of low costs of labour, raw materials and energy in the host
countries and ensure their uninterrupted supplies.
(v) Foreign direct investments in manufacturing facilities in host countries create
a perception of locally manufactured products among the buyers.
(vi) Various countries offer attractive incentives such as tax holidays and facilities
of special export/industrial zones to companies to attract them to make
foreign direct investments.
(b) Market-value based transfer pricing transactions among inter-group companies offer
the following advantages:
(i) The selling entity would have to offer good quality products as the buying
entity has the option to purchase the goods/services from other sources.
Consequently, there would be all round improvement in the levels of
efficiency within the transacting entities of the group.
(ii) Market-value based transfer pricing are free from administrative biases and
help in accurate measurement of performance of individual entities.
(iii) Since the individual entities function as independent cost/profit centers, the
chances of internal disputes over determination of prices of inter-company
transactions would be eliminated.
(iv) The tax authorities would more readily accept the tax returns filed by the
different entities based on market-value based transfer pricing transactions.
Page 4 of 6
Business Management
Suggested Answers
A.8 The strategic factors which contribute towards the success of leading multinational
companies in several countries having diversified business conditions and market
environments are:
(i) These companies have well-defined corporate missions which are important part of
their business strategy formulation process and are implemented at all levels in their
organisational hierarchy.
(ii) These companies have strong and competent global business leadership with sound
knowledge of the business environment in the countries in which they operate.
(iii) These companies view the entire world as a potential target market and often adapt
products to cater to the needs of the markets in different countries. The MNCs also
launch global as well as country-specific advertising/promotional campaigns to
attract and create satisfied customers.
(iv) These companies have created internationally recognised trademarks and brands
which are their most valuable assets. Customers in their target markets have strong
brand preferences and loyalties and purchase the products by their popular brand
names.
(v) These companies have developed effective distribution systems which deliver the
products to the different markets located in the cities as well as in the remote
villages.
(vi) These companies have abundant financial resources which are allocated
intelligently in countries in which they can earn high returns on investment.
A.9 (a) The different types of entry barriers which may discourage new entrants from
establishing new manufacturing units in spite of the substantial demand/supply gap
for products in any industry are:
(i) It may be difficult to achieve economies of scale quickly due to

technical/operating constraints with the result that the new entrants may
sustain substantial losses for a considerable period.
(ii) The technology and specialised know-how for manufacture of the products
may be held closely by a few suppliers and it may be difficult or too expensive
for new entrants to gain access to such technology.
(iii) The existing suppliers may have deeply-entrenched brands and enjoy strong
customer loyalty which may make it difficult for the new entrants to compete
with them.
(iv) The existing suppliers may be financially resourceful and enter into price wars
to deter new entrants.
(v) The initial capital requirements may be too large and beyond the capacity of
potential new entrants.
(vi) It may be difficult for new entrants to have access to sources of raw materials
as the existing manufacturers may have highly favourable ownership/lease
rights of these sources.
(vii) The existing suppliers may have well-established relations with
knowledgeable and resourceful distribution channels and the new entrants
may find it difficult to develop new marketing channels for distribution of
their products.
(viii) The government regulatory policies may prohibit new entrants from
establishing new units to provide protection to state-owned industries.
(b) The various steps involved in the Delphi Technique of decision making are:
(i) Problem is identified.
(ii) The group members (physically separated and unknown to each other) are
asked to offer solutions to the problem by providing anonymous responses to
a carefully designed questionnaire.
Page 5 of 6
Business Management
Suggested Answers
(iii) The responses given by all the group members to the questionnaire are
compiled and re-circulated to all the group members.
(iv) The group members are individually asked to offer a new solution to the
problem after having studied the individual responses given by all other group
members.
(v) The steps at (iii) and (iv) above are repeated until a consensus solution of the
problem is reached by the group.
A.10 The creation of a comprehensive Training and Development program for the new
management trainees would involve the following steps:
(i) Conduct a need analysis approach to identify the required job performance skills
and match them broadly with the levels of present skills of the management trainees
and develop specific objectives to overcome the deficiencies.
(ii) Design and compile the training program material, including instruction manuals,
exercise workbooks for providing job related learning skills and computer-assisted
learning modules.
(iii) Devise a validation program which would be presented to a small group of trainees
so that the initial flaws and shortcomings, if any, in the training material are
rectified.
(iv) Administer the training and development program by imparting training to the
individuals nominated by MTL to participate in the program. The training would be
provided through lecture sessions, participative seminars and simulated
on-the-job learning techniques.
(v) Evaluate the effectiveness of the training and development program by assessing the
extent of success of the program towards enhancing work skills among the trainees
and achieving the objectives of MTL.
(THE END)
Page 6 of 6
SUBJECT SESSION
General:
The performance in the paper could not come up to the expectations. The trend of inadequate
preparations, inability to fully comprehend requirements of the questions and writing
what-one-knows rather than addressing the replies in a focused manner were witnessed in too
many instances. At this advanced level the students are expected to demonstrate a better grasp
and understanding of the subject.
Comments on the replies to the specific questions are presented below.
Question 1
This question pertained to a company which was involved in shipping operations but most of
the students mentioned the general functions of a Human Resource Department with no
specific points that may be applicable to a shipping company. For example, majority of the
students mentioned hiring duly qualified employees, their training and development and
performance based pay but specific issues such as cultural flexibility, ability to work in diverse
working conditions and pursuance of transformational style of management were covered by
few students only.
Question 2
This question pertained to demarcation of markets on the basis of geographic/location,

demography, time and usage/consumption segments. It posed problems for a large number of
students. Approximately 7.3 % of the students did not attempt this question which carried 10
marks. The difference in pricing strategies for geographic segments and time segments were
better explained. However, segments based on demography and usage were not clear to most
of the students. Many students also discussed irrelevant issues like market penetration,
skimming strategies, etc.
Question 3 (a)
The requirement was to give reasons as to why firms do not always consider it advantageous to
pursue strategies of Vertical Integration vis-à-vis the other strategies of business growth.
Majority of the students explained different growth strategies in detail without realizing that
the requirement as mentioned above, was quite different.
Question 3 (b)
Here again, the requirement was to state the essential elements of a mission statement which a
progressive organization would like to propagate amongst its employees. Instead, majority of
the students stressed upon the general characteristics of a mission statement such as
brevity/preciseness/clarity etc. Many students gave points which were quite meaningless, in the
given situation. For example the following types of sentences appeared in many copies:
• Educate and train properly.
• Mission statement should keep in view the growth requirements.
• Mission statement should be compelling enough to motivate the employees.
Page 1 of 4
Question 4 (a)
This was a very easy question. However, most of the answers were restricted to explaining that
a policy of congenial human relations management in a large-sized industrial organization
would increase motivation, efficiency and commitment among the staff and that pursuance of
this policy would facilitate two way open communication in the organization. The points that
such a policy would minimize industrial conflicts and create an environment for amicable
settlement of grievances and disputes were missed by a number of students. Some students
kept on stressing the same point, mostly about motivation, in different words and lost easy
marks.
Question 4 (b)
The question pertained to the reliability and validity of selection tests. Surprisingly, a very
large number of the replies were off the mark. Some of the answers did not bear even remote
awareness of the concepts of reliability and validity. For example, while discussing reliability,
many candidates discussed matters related to confidentiality and invigilation during the test.
While discussing the importance of reliability and validity many candidates gave general
comments such as these would ensure selection of suitable candidates or elimination of
inappropriate candidates. Such comments should be avoided as these are indicative of the fact
that the candidate does not understand the exact concept, because selection of the right
candidate is the ultimate objective. How reliability of the test is important, for achieving this
objective, requires a more specific answer.
Question 5
This was an objective type question where 10 different situations were given and in each case,
the students were required to mention the term which could best describe the given situation.
An average performance was witnessed which was understandable because each situation had
a specific answer and only those students who had good understanding of the topic could
answer them. The advice here is that specific terminology or business jargon should be used in
such questions. Other terms are not acceptable. For example in sub part (i), many students
stated Labor Union Agreement or Labor Management Negotiation whereas the correct answer
was Collective Bargaining.
Question 6 (a)
This was an easy question in which the students were required to identify the information that
may be available on the label of a cereal meant for infants. Since the answer was to be based
on matters which we routinely observe, replies were quite satisfactory and a large number of
students were able to score high marks.
Question 6 (b)
The requirement here was to identify as to how manufacturing companies find and develop
new product ideas. Answers were fairly up to the mark and covered most of the essential
points. However, the point regarding re-engineering of different products available in the
market to develop new products was mentioned by few students only.
Page 2 of 4
Question 7 (a)
The requirement was to describe any five factors which have contributed to the expansion of
foreign direct investments. The performance was above average as generally the students
mentioned the relevant points. However, a number of students mentioned incorrectly that
relaxation of custom duties also provides impetus to the growth of foreign direct investment. In
fact, it is to overcome the unfavourable impact of high custom duties, that companies make
direct investments in host countries.
Question 7(b)
The advantages of market-based transfer pricing transactions among inter-group companies

were well understood and most of the students secured good marks in this part of the question.
Question 8
The question was about factors which contribute towards the success of leading multi-
nationals in highly diversified business conditions. This was an easy question. Majority of the
students had a clear idea of those factors and secured good marks. However, some students
identified the factors in 3 or 4 words and did not give any description. Some students gave very
general and irrelevant points such as proper supervision, compliance with regulatory
requirements, licencing and registration, compliance audits and departmentalization etc.
Question 9 (a)
The requirement was to mention the different types of entry barriers which may discourage
new entrants from establishing manufacturing units inspite of the substantial demand/supply
gap for products in an industry. The major factors are those which are created by competitors.
Most of the students mentioned correct as well as incorrect points. Here again, guesswork was
quite visible as students mentioned all sorts of points which they could think of, such as, policy
of nationalization, threat of being taken over by competitors, threats by influential persons who
run competing businesses, etc. These were totally irrelevant points and did not secure any
marks.
Question 9 (b)
The replies to the question on Delphi Technique of decision making were, indeed,
disappointing. A large proportion of the students mentioned the general steps involved in the
decision making process. Distinguishing characteristics of the Delphi Technique, i.e. the group
members are required to give anonymous responses to a carefully designed questionnaire, the
replies are compiled and re-circulated to the group members and the process is repeated until
a consensus solution is reached to the problem, were wholly missing in most of the replies.
Question 10
This last question was about training steps. The essential steps to develop a comprehensive
training and development program had to be described. The performance was below average.
Generally, the students tried to give lengthy answers by going into too much detail, whereas,
important points such as gap analysis and issues related to training material and training
methods were mostly missing. A common error was that review or evaluation of the training
program was mentioned after mentioning the implementation of training steps. Validation has
to be done before the implementation else all the resources deployed may go down the drain.
Instead of giving steps involved, many candidates described the matters that should be taken
care of, to ensure that the training program is successful. Most such points were irrelevant and
did not fetch any marks.
Page 3 of 4
(THE END)
Page 4 of 4
Business Management
Winter 2013 100 marks - 3 hours
Q.1 Marketing policies relating to five different types of businesses/products/services are

presented in the following table:
---------------------------Policies---------------------------
Businesses/Products Price Place Promotion
i) Fast food restaurant Skimming pricing Proximity to Prestigious business
exclusive restaurants magazines
ii) High-end ladies beauty Discounted prices for Highly affluent areas Both beauty and elite
parlour large groups of the city social magazines
iii) Branded pickles and Prices substantially Sold at company Limited promotion in
jams lower than owned outlets national newspapers/
competitors TV and cooking shows
iv) Uniforms for students Extreme price Through distributors Live cricket matches
in government schools competition in leading shopping on TV
malls
v) Locally manufactured Higher than imported Located at a distance Advertisements in local
refrigerators and air- brands from main markets newspapers
conditioners of similar products
You are required to identify the policies which you consider to be inappropriate along with
brief reasons to support your point of view.
Note: Policies which are considered to be appropriate may not be discussed. (11)
Q.2 Peak Corporation Limited (PCL) has acquired your services as an HR Consultant for
preparation of employee disciplinary procedures to be implemented in the organisation. The
draft procedures would be presented to the management for approval and inclusion in the
Employee Handbook, copies of which would be provided to all the employees.
State the important aspects of the guidelines that you would cover in the draft of employee
disciplinary procedures in PCL. (08)
Q.3 (a) Eastern Company Limited (ECL) is located in Country A and its assorted line of
fast-moving consumer goods are well accepted in the domestic market. ECL is
presently considering to expand its operations and establish manufacturing facilities in
three overseas countries.
List four different types of factors/influences which would form the basis for
determining whether ECL should adopt policies of product standardisation vis-a-vis
policies of product customisation, in the market environments in different countries. (06)
(b) Give two examples each of products which are usually marketed as:
standardized products
customized products (02)
Q.4 (a) Define the term Consumerism. Identify the inherent rights of consumers in the
prevailing business environment. (06)
(b) While formulating its marketing strategy, a manufacturer must decide whether it
intends to pursue a pull marketing strategy or a push marketing strategy. State the
salient features of a pull marketing strategy and a push marketing strategy and indicate
the situations in which each of these strategies would yield optimal results. (07)
Q.5 Zest Pharmaceutical Company Limited (ZPCL) had assigned some of the most talented
individuals in the organisation to formulate the company’s strategic plan. The strategic plan
was considered and approved by the top management, including the board of directors.
However, ZPCL’s actual performance was rather disappointing and the company was not
able to achieve the objectives envisaged in the strategic plan due to shortcomings in the
various stages of implementation of the strategic plan.
As an external consultant, identify and explain six critical factors in the strategy
implementation process which may have been responsible for the poor performance of
ZPCL. (12)
Q.6 (a) Long-life Concrete Limited (LCL) is a manufacturer of pavement blocks and enjoys a
sustainable cost-leadership position in its line of business. Recently, a number of
competitors have posed serious challenges to the favourable cost-leadership advantage
enjoyed by LCL over its rivals.
State the different strategies and tactics that LCL should pursue to sustain its cost-
leadership advantage over its competitors. (06)
(b) Innovative companies allocate dedicated resources to identify and explore

opportunities for developing new products. List the basic attributes which are essential
to make a new product viable and worthwhile for expending further time and effort on
its consideration. (04)
Q.7 (a) Governments in all countries consider it their responsibility to promulgate and
implement laws and policies concerning health, safety and security of workers.
State five objectives which governments seek to achieve by making these laws and
ensuring their compliance. (05)
(b) Give three reasons why multinational companies often enter into agreements of
collaboration with partners in foreign countries to seize certain advantages instead of
operating entirely on their own in these foreign countries. (06)
Q.8 Most companies prefer to achieve their objectives of expansion through organic/internal
growth.
Give any four reasons why a company may prefer to achieve expansion through internal
growth and not through acquisition of other entities. (06)
Q.9 State what is meant by the term ‘Employee Attitude Survey’. How an Employee Attitude
Survey is conducted and what are the different purposes for conducting the survey? (05)
Q.10 Goodhope Enterprises had implemented several employee incentive schemes with the
expectations that they would raise the level of motivation amongst the employees and
improve their overall performance. However, the incentive schemes failed to yield the
desired results and the company’s management has initiated enquiries to determine the
reasons for the lack of success of the incentive schemes.
Identify and explain three factors which in your opinion may have contributed to the lack
of success in the implementation of the incentive schemes. (06)
Q.11 Briefly state what is meant by the following terms:

(i) Human resource management
(ii) Offshore manufacturing
(iii) Behavioural interviews
(iv) Competency-based salary system
(v) Tax havens (10)
(THE END)
Business Management
Suggested Answers
Ans.1 Fast-food restaurant

(i) Skimming pricing is inappropriate – should be based on market penetration policy.
(ii) Location is inappropriate- should be in highly–frequented and busy areas.
(iii) Promotion in prestigious business magazine is incorrect – should be promoted on
billboards and widely circulated newspapers.
High-end ladies beauty parlour

(i) Discount pricing policy for large groups is inappropriate – ladies prefer to visit beauty
parlours alone or with selected few family members/friends.
Branded pickles and jams

(i) Prices substantially lower than established competitors are inappropriate – it may convey
an image of inferior quality of products.
(ii) Selling in company owned outlets is an inappropriate policy – pickles and jams are
purchased at large number of dispersed locations such as super markets, grocery shops and
local convenience stores.
(iii) Limited promotion in national newspapers and TV cooking shows is inappropriate –
products are purchased frequently and customers have to be reminded continuously of the
brand and superior quality of the products.
Uniforms for students in government schools

(i) Extreme price cutting competitive policy is inappropriate – school uniforms are almost of
the same quality, hence there is no need for extreme price competition.
(ii) Distributors in leading shopping malls is inappropriate – school uniforms for students in
government schools are purchased in outlets located close to the schools and through retail
outlets.
(iii) Promotion in live cricket matches on TV is inappropriate – TV advertisements are
expensive and uniforms are normally sold at reasonable prices and at the beginning of the
school sessions.
Locally manufactured refrigerators and air conditioners

(i) Pricing policy is not appropriate – customers prefer to purchase locally-manufactured
refrigerators and air conditioners only if the prices are considerably lower than imported
products of well-known brands.
(ii) Location at a distance from main markets for similar products is not appropriate –
customers prefer to shop around and compare product features and their prices in the main
markets.
(iii) Promotion policy is not appropriate as prospective customers do not place reliance on
advertisements in local newspapers for these products.
Ans.2 The important aspects of guidelines of the draft disciplinary procedures of PCL should include
the following:
(i) Specific mention that whether the procedures would apply to all the employees or only to
certain categories of employees in the organisation.
(ii) List of the types of improper conduct/offences that would constitute violation of rules and
warrant disciplinary action.
(iii) Statement of the manner of communication of the specific charge of misconduct/offence
which may be an oral warning or in the form of a memo in writing to the concerned
employees.
(iv) Statement of the types of disciplinary actions that would be taken for the various offences
committed by the employees.
(v) Stipulation that every case would be properly investigated before any disciplinary action is
proposed against the concerned employees.
Page 1 of 6
Business Management
Suggested Answers
(vi) Stipulation that the reason(s) for imposition of any penalty would be provided to the
concerned employees.
(vii) Clear statement that the concerned employees would be provided an opportunity to
respond to the charges and present their case within a specified time limit.
(viii) The employees right to appeal and the procedure for filing of appeal against any
disciplinary action/imposition of any penalty.
(ix) Level of the officials who would be responsible for instituting enquiries against employees
in various grades.
(x) The time limit in which all the matters would be disposed of to ensure prompt and speedy
action.
Ans.3 (a) The factors/influences which would form the basis for determining whether ECL should
adopt policies of product standardisation vis-à-vis policies of product customisation in
markets in different countries are:
(i) If the needs and preferences of customers in the markets in the three countries are of a
homogeneous nature, ECL should adopt policies of product standardization. Conversely, if
the needs and preference in the countries show considerable variations, ECL should adopt
policies of product customization to cater to the needs and preferences of customers in the
(ii) If the income levels in all the three countries are more or less the same, ECL should follow
a policy of standardisation of products. However, if there are marked differences in the
income levels among the countries, a policy of customization of products would enable
ECL to develop products which can meet the requirements of customers in the target
market segments at affordable prices in the different countries.
(iii) If significant economies of scale can be achieved by manufacturing homogeneous products
for the different markets, it would be advisable to adopt policies of standardisation.
However, if the economies of scale are not available, it would be preferable to adopt
policies of product customization according to the economies which can be obtained in
each of the markets.
(iv) If significant advantages of efficiencies in marketing, distribution and after-sales services
can be achieved by adopting uniform policies in all the three countries, it would be
advisable to manufacture standardised products. However, if the promotional strategies
have to be tailored to appeal to the different cultures prevailing in the different countries, it
would be necessary to adopt policies of product customisation for the different countries.
(v) If it is necessary to face aggressive marketing policies of domestic manufacturers in
different countries, ECL would have to adopt policies of product customisation to counter
the policies of the competitors in the markets in different countries. In the event the
marketing policies of domestic competitors would not have much bearing on the products
of ECL, it would be advantageous to adopt policies of product standardisation in all the
countries.
(b) Examples:
Standardised products: Lux soaps, Head and Shoulders shampoo, Sony TVs, HP Laptop
computers, etc.
Customised products: McDonald Burgers, Suzuki vehicles, Zong mobile phone services,
etc.
Page 2 of 6
Business Management
Suggested Answers
Ans.4 (a) Consumerism is an organised movement of the consumers to strengthen their rights and
powers by forming consumer groups and impressing upon the producers that consumer
satisfaction is essential for the long-term profitability of the producers.
In the prevailing business environment, consumers have:
(i) the right to expect that the product would perform according to the claims made by
the manufacturer
(ii) the right to have information about the ingredients/composition of the products
(iii) the right to be protected against unfair exploitation or intrusion of privacy by the
manufacturer
(iv) the right to expect that the product would be safe for the user
(v) the right to good quality of life and protection of the environment for the existing and
future generations of consumers.
(b) Pull Marketing Strategy:

 In a pull marketing strategy, the manufacturer places greater reliance on advertising,
direct promotion and other forms of direct communication with the consumers to
persuade them to demand the product from the intermediaries and thus induce the
intermediaries to place orders with the manufacturer.
 A pull marketing strategy would yield optimal results when there is strong brand
loyalty for the product and the consumers are convinced of the superiority of the
product and demand the particular brand by name from the intermediary.
Push Marketing Strategy:

 In a push marketing strategy, the manufacturer deploys own sales force and offers
attractive margins and extended credit terms to the intermediaries to encourage
them to carry, promote and sell the product to the end users.
 A push marketing strategy may be adopted when there is low brand loyalty for the
product or the intermediary is in a position to influence the customer’s decision or the
product is an impulse purchase item.
Ans.5 The important factors which may have been responsible for the poor performance in ZPCL’s
strategy implementation process in spite of formulation of a well-conceived strategic plans are
discussed below:
(i) Changes in business conditions

The actual business conditions may have unexpectedly deteriorated due to factors beyond
ZPCL’s control. These may have derailed the strategic plan and created impediments in its
implementation
(ii) Communication of objectives of the strategic plan

If the objectives of the strategic plan were not communicated fully to those responsible for
implementation of the strategic plan, the employees not being fully aware of the goals
envisaged in the strategic plan may have performed without complete knowledge of the
specific goals assigned to the various departments.
(iii) Non-supportive corporate culture

The management may not have been able to create a conducive organisational culture
which is necessary for promoting sound work ethics and thus obstacles may have been
created in the achievement of the objectives of the strategic plan.
Page 3 of 6
Business Management
Suggested Answers
(iv) Lack of alignment between the organisation structure and the strategic plan
The organisational structure comprising of production, R&D, marketing and human
resources departments may not have been able to work in close collaboration in pursuit of
the goals envisaged in the formulation of the strategic plan due to imbalances in the
allocation of powers and responsibilities.
(v) Improper allocation of resources

Resource allocation is a critical management activity which facilitates the implementation
of the strategic plan. The resource allocation process in ZPCL may not have been in
accordance with the strategic plan because of pressures from certain groups and personal
considerations.
(vi) Inadequate monitoring of implementation of the strategic plan

ZPCL may not have established milestones and standards for measuring the performance
in the various stages of implementation of the strategic plan. This may have prevented
ZPCL from identifying any deviations and taking prompt corrective actions to ensure that
the implementation process was in accordance with the objectives envisaged in the strategic
plan.
(vii) Poor linkage between employee performance and rewards with the strategy
Decisions regarding salary structures, rewards and promotions must be aligned with the
aims of the strategic plan and be able to motivate the employees towards achievement of
the objectives of the strategic plan. The compensation and reward packages in ZPCL may
have been based on personal considerations and may have resulted in lack of motivation
among the employees which created impediments in the achievement of the objectives of
the strategic plan.
(viii) Inability to manage conflicts

Individuals and groups within the organisation may have had conflicts on certain issues.
Differences in expectations, perceptions, work schedules and departmental goals in ZPCL
may have resulted in conflicts which may have been impediments to the achievement of the
goals envisaged in the strategic plans.
Ans.6 (a) Long-Life Concrete Limited should adopt the following strategies and tactics to meet the
challenges posed by the competitors and maintain its sustainable cost-leadership
advantages:
(i) Efficient operation of the physical facilities – The manufacturing plant, raw material
handling equipment and packaging and loading facilities should operate at high
capacities with minimum down-time for maintenance, repairs and other stoppages.
(ii) Vigorous pursuance of policies of purchase of raw materials in optimal quantities to
minimise costs, including inventory carrying costs and overall financial costs.
(iii) Exercise of tight control on all operating costs, such as salaries and wages, power and
fuel and other overhead expenses.
(iv) Continuous review and revision of marketing strategies to make them more effective
and customer-value oriented.
(b) The new product should possess the following basic attributes to make it worthwhile to
expend further time and effort:
(i) The new product should offer an attractive opportunity for its acceptance in the
market, i.e. there must be demand potential for the new product.
Page 4 of 6
Business Management
Suggested Answers
(ii) The opportunity for development of the new product must be practicable and
physically possible.
(iii) The opportunity must have potential for profitability and the benefits must exceed the
cost of the product by a significant margin.
(iv) The opportunity must be attractive for a considerable period that is the opportunity
must be available for a reasonable period to make it worthwhile for consideration.
Ans.7 (a) Governments seek to achieve the following objectives by promulgating comprehensive
laws and enforcing compliance of these laws for the health, safety and security of workers:
(i) Encouraging employers and employees to reduce hazards in the work place and
strengthening the health, safety and security programs.
(ii) Establishing minimum safety and health standards.
(iii) Creating an effective legal framework for enforcement of the rules and regulations.
(iv) Framing procedures for reporting of job-related accidents, injuries, illnesses and
deaths.
(v) Preventing employment of child workers.
(vi) Providing special facilities for female workers.
(b) Multinational companies enter into agreements with partners in foreign countries to seize
the following advantages:
(i) Obtain country-specific advantages – Differences in cultural, economic and political

conditions may create barriers which may make the entry difficult for the MNC in
the foreign country. The MNC may therefore need to collaborate with a
knowledgeable local partner to establish the asset base quickly on favourable terms.
(ii) Overcome regulatory constraints – Many countries impose restrictions on
ownership of majority shareholding by foreign companies. Moreover, a local investor
is better placed to understand and implement the regulatory requirements,
particularly where the MNC does not intend to make a very major investment.
(iii) Reduce political risks – MNCs are concerned that political and economic changes
would adversely affect the safety of their assets and earnings in foreign countries.
Collaboration arrangements with domestic partners would help to reduce political
risks by limiting their overall investment exposure in such countries.
Ans.8 Companies prefer to pursue policies of growth by organic/internal expansion and not through
acquisition for the following reasons:
(i) Expansion of physical infrastructure and facilities can be planned more efficiently to fulfill
the organizational requirements. In case of acquisition, the company would have to utilize
the existing sites and facilities which may not be the most suitable option for its
requirements.
(ii) The cost of acquisition of an existing company may be much higher than the cost of
expansion of assets through internal growth.
(iii) The sizes of the entities presently available for acquisition may not be appropriate for the
particular need of the entity.
(iv) In acquisitions, a company acquires all the functions of other companies resulting in
duplication of facilities or redundancies which ultimately results in inefficient performance
and lowering of employee morale.
(v) Human Resources can be utilized more effectively and with a greater degree of cohesion of
corporate culture by adopting strategies of organic growth. Also, in the case of organic
growth, better career development opportunities are provided to the employees.
Page 5 of 6
Business Management
Suggested Answers
Ans.9 Employee Attitude survey is a systematic investigation of the views and opinions of the
employees in an organisation on issues relating to the work of the organisation or their role within
the organisation.
Employee attitude survey may be conducted by means of questionnaires or interviews.
Employee attitude survey may be undertaken:

(i) to make a general assessment of employee morale
(ii) to obtain their opinion/input regarding introduction of any new policy in the organization
(iii) to encourage employee commitment in the planning and implementing new initiatives in
the organization
(iv) to give the employees a sense of ownership in the organization’s decision making process.
Ans.10 Lack of success in implementation of incentive schemes by Goodhope Enterprises may be due to
the following factors:
(i) Increased earnings may not have been an incentive for some individuals. Employees who
already have enjoyed adequate income may be more concerned with other aspects of their
work, such as leisure time.
(ii) Employees may have felt that their efforts have not received adequate recognition due to
external impediments or inefficiencies prevailing elsewhere in the organisation. This may
have led to frustration and discontentment amongst such employees and adversely affected
their performance.
(iii) Even if employees were motivated by money, the effects may have not been altogether in
the best interests of the company. An individual orientation may encourage self-interest at
the expense of teamwork; it may lead to emphasis on output at the expense of quality and
lowering of standards to achieve bonus incentives.
(iv) Employees may have perceived that the targets set by the management in the incentive
schemes are not achievable in spite of their best efforts and that the scheme is a ploy to
extract more work from them. Further, the employees may have considered that the
incentive schemes to be of a discriminatory nature and may be manipulated to favour
certain individuals rather than to be adopted equitably for the entire workforce.
Ans.11 (i) Human resource management involves planning, organising, directing and controlling the
human resources by placing the right persons in the right places and providing them with
training in order that they make effective contribution towards achievement of the
organisation’s corporate objectives.
(ii) Offshore manufacturing means an arrangement by which a firm in one country enters into
a contract with a foreign-based firm in another country to manufacture its products or
components on behalf of the firm which has awarded the contract.
(iii) Behavioural interviews are conducted to ascertain how the candidate responded to various
real-life job-related situations in the past.
(iv) Competency-based salary system means the employees are paid for the range of skills and
knowledge they provide to the employer, rather than for the positions or jobs that the
employees hold.
(v) Tax havens are countries that have highly generous tax laws to encourage foreign citizens
to conduct their operations in such countries.
(THE END)
Page 6 of 6
SUBJECT SESSION
General:
The paper was quite similar to the papers in the past yet no improvement was noted in the
overall performance. As in the past, the candidates seemed to suffer from the following:
• Selective studies
• Failure to understand or address the exact requirements of the questions
• Repetition of the similar points in different words
Question 1
This was a practical question and tested the students understanding of some basic business
strategies i.e. those related to pricing, place of business and selection of media for carrying on
promotional activities. A practical situation was given in which five different businesses were
identified and policies followed by them in each of the above areas were specified. The
students were required to identify the policies which seemed inappropriate in the given
situation and to justify their decision.
Generally the response was good but many students could not properly explain why they
considered a policy inappropriate. A common mistake was that most of the students could not
identify the following inappropriate policies:
• in case of high-end ladies beauty parlor the policy of discount to groups is incorrect.
• there is no need for extreme price competition in the case of school uniforms.
Question 2
This was a direct question in which the candidates were required to state the important aspects
of the guidelines that are covered in employee disciplinary procedures.
The overall performance was average as many students did not adhere to the exact
requirements of the question. Some of them tried to draft the disciplinary procedures which
were not required. Some students mentioned guidelines related to routine matters also which
were not asked for.
Question 3
According to the situation given in the question a successful local company intended to expand
its operations and establish manufacturing facilities in three different countries. The candidates
were required to list four factors and influences which would help the company to choose
between policies of product standardization and policies of product customization and to give
two examples each of standardized and customized products.
The performance was below average. Many candidates did not know the exact meaning of the
terms product standardization and product customization. Many others gave partially correct
answers as they could only cover factors related to customers e.g. their income levels and
preferences. Factors not directly related to customers such as economies of scale and efficient
marketing and distribution were missed.
Page 1 of 4
Question 4(a)
The requirement was to define consumerism and identify the inherent rights of consumers.
Most of the students did not have any idea of the term ‘consumerism’ and described it as
consumption pattern. However, they had a good idea of the inherent rights of the consumers
and therefore the overall performance in this question can be termed as average.
Question 4(b)
Most of the students seemed to understand the push and pull marketing strategies and stated the
salient features of the strategies in detail. However, in majority of the cases, they were unable
to correctly identify the situations in which these strategies may be used which showed that
their success in correctly describing the two strategies was more on account of memorization
rather than conceptual understanding.
Question 5
The requirement of the question was to mention six critical factors in the strategy
implementation process, which may have been responsible for a company’s failure to achieve
its strategic objectives despite the fact that its strategic plan was designed by competent
personnel and approved at the highest level.
Overall performance in this question was average. Majority of the answers orbited around
inadequate employee participation and lack of resources whereas other major factors were
missed out.
Some students misunderstood the question and mentioned the shortcomings in the strategy
formulation process whereas many students wrote the general points for developing successful
strategic plans.
Question 6(a)
In this part, the candidates were required to state the strategies which an organisation would
need to pursue in order to be able to maintain its cost leadership position.
The question was quite simple and a high performance was expected. However, majority of the
students failed to realize that they should restrict the replies to the cost aspects but they delved
on unrelated issues like innovative products. Some of the students went into excessive details
relating to cost cutting of individual expenses rather than discussing the overall approach. On
the other hand, many students restricted themselves to purchase of raw materials and did not
cover other important aspects like efficient plant operations and inventory management.
Question 6(b)
This was a straight question which required listing of basic attributes which make introduction
of a new product viable and worthy of further investment in terms of time and effort.
About fifty percent of the students did quite well. However, the rest were rather confused as
regards the requirement of the question and instead of mentioning the relevant attributes they
explained the steps that the company may need to take to make the new product successful
Page 2 of 4
Question 7(a)
In this part the candidates were required to state the objectives that governments seek to
achieve by promulgating health and safety laws. It was an easy question and most students did
well. However, some students seemed confused. They covered it more from employer’s
perspective and discussed matters such as good image and corporate social responsibility.
Some students offered detailed explanation of each objective without realizing that this was a
five mark question and each objective carried just one mark.
Question 7(b)
The requirement was to give three reasons due to which multi-national companies enter into
agreements with local partners in foreign countries instead of operating entirely on their own.
This was also quite easy and almost all students did well.
Question 8
Majority of the students had a clear idea of the reasons why companies prefer to pursue
policies of growth by organic expansions and not through acquisitions. However, some
students did not read the question carefully and wrote benefits of expansion only which was
not required. Moreover, some students identified the reasons correctly but could not describe
them properly due to poor writing skills and inappropriate vocabulary.
Question 9
In this question the students were asked to state the meaning of employee attitude surveys and
to explain how and for what purpose they are conducted. Most of the students mentioned about
the use of questionnaires and interviews for the conduct of surveys. However, very few of them
could give the purpose of such surveys except that these are conducted to obtain employees’
opinions.
Many students seemed very much confused as they also discussed entirely unrelated issues like
employee disciplinary procedures, performance appraisals and behavioral interviews, etc.
Question 10
The question referred to a situation which is commonly faced by many companies, i.e. where
incentive schemes fail to achieve the desired results. The candidates were required to discuss
any three factors that may give rise to such a situation. The performance in this question was
good as the students usually had good idea of such factors.
Question 11
This was a straightforward question which required meaning/definition of five terms/concepts.

The terms Human Resource Management and Competency Based Salary System were
generally well defined
In defining offshore manufacturing, majority of the students simply mentioned manufacturing

in other countries but only few could clearly state the motive and methodology i.e. awarding
contract to produce where labour and/or raw materials are cheap and then importing them in
the country where the firm which awarded the contract is located. Many candidates confused it
with offshore oil drilling and some of them incorrectly stated that offshore manufacturing is
carried out by establishing plants outside the country.
Page 3 of 4
Most of the students did not have any idea of the concept of behavioral interviews. Many
students made wild guesses, for example some of them mentioned that in behavioral
interviews, gestures and posture of the interviewees are observed.
Tax havens were better described but some students went to the extreme and stated that in tax
havens there are no taxes.
(THE END)
Page 4 of 4
Business Management
Q.1 (a) Companies prepare formal mission statements which purport to define their unique
characteristics and set them apart from other organisations. However, it is observed
that mission statements of a number of companies do not have much bearing and
relevance with their overall corporate culture and values, aspirations of their
employees and actual achievements.
Identify and explain briefly four factors which may be responsible for the variances in
the objectives stated in the mission statements of these companies and their culture,
values and performance levels. (06)
(b) Allcom Limited (AL) has been established recently to provide internet services. AL
has received numerous complaints of the poor quality of services of the company’s
customer care personnel. State what measures AL’s management should adopt to
improve the performance of its front-line customer care staff. (04)
Q.2 Strategic Management is a long-term planning process undertaken to achieve the

organisational goals during a period ranging between 3-5 years. Describe the important
stages involved in the Strategic Management process of major business organisations. (09)
Q.3 (a) Briefly explain the reasons why certain organisations prefer to outsource functions
concerning recruitment of new employees to private employment agencies and
professional recruiters rather than to handle these functions themselves. (08)
(b) Interviews are a widely accepted method of the recruitment process and often play a
major role in the decision whether to accept or reject a candidate for a particular
position. However, the results of these interviews may not always be reliable due to
the weaknesses in the process of the interviews which may result in erroneous
recruitment outcomes.
Describe four shortcomings in the interview process which, in your opinion, may
result in erroneous recruitment outcomes. (06)
Q.4 (a) Sigma Corporation Limited (SCL) is engaged in the business of manufacturing
assorted range of components and parts for different types of original equipment
manufacturing and assembling units. SCL wants to implement high performance
work systems in the different stages of the manufacturing processes.
State the practices that SCL must adopt to achieve high performance work systems in
all their manufacturing processes. (06)
(b) Various types of Benchmarking are used as points of reference or standards against
which performances of organisations are measured. State the difference between
Internal Benchmarking and Functional Benchmarking. Give one example each of
Internal Benchmarking and Functional Benchmarking. (05)
Q.5 (a) Aggressive marketing and promotional campaigns of consumer products through
repetitive TV advertisements, eye-catching displays on large-sized billboards
reinforced by appealing slogans and attractive advertisements in prominent
newspapers and magazines are launched by marketeers to attract customers.
Explain briefly the different objectives of these aggressive marketing and promotional
campaigns on which substantial expenses are incurred by the manufacturers of
consumer products. (06)
(b) What is meant by the term Test Marketing? (03)
Q.6 Identify the business strategy/policy/definition which is most appropriate in each of the
(i) A leading manufacturer of textile products is considering acquiring an existing

fast-food chain which has outlets throughout the country. It is pursuing a policy of
________.
(ii) Fortune Bank Limited envisages adding 50 new branches to its existing network of
450 branches in the country. The bank is launching a policy of ________.
(iii) Sunrise Juices Limited manufactures an assorted line of juices, jams and pickles. The
company is in the process of acquiring a fully developed 500 acre fruit and vegetable
farm to meet a significant proportion of its raw material requirements. Sunrise Juices
is pursuing a policy of ________.
(iv) Super Sports is engaged in the manufacture and export of hand-stitched footballs and
pays salaries to its employees according to the number of units stitched during the
course of a week. The employees are paid ________ salaries.
(v) The favourable impact which a well-entrenched brand has on customers perceptions
of quality of the product and would contribute to the future high earnings potential of
the company is known as ________.
(vi) A multinational company follows a policy of manufacturing products and adapting
its marketing strategies to the local environments in the different countries in which it
operates. This multinational company is pursuing a policy of ________.
(vii) Tests designed to evaluate the skills and competency levels of candidates to perform
the jobs actually required of these individuals are called ________.
(viii) The cumulative pool of education, knowledge, skills, expertise and training of the
individual workers in an organisation is known as ________.
(ix) A competitor who aggressively pursues a policy of undermining the status of the
market leader is called a ________.
(x) A process by which a multinational company having a number of subsidiaries in
different countries may make adjustments of foreign currency transactions/balances
among the different subsidiaries is called ________. (10)
Q.7 (a) Narrate (with brief comments) the different types of promotional strategies which are
adopted for marketing of consumer goods in the following stages of their Product Life
Cycles:
(i) Introduction stage

(ii) Growth stage
(iii) Maturity stage
(iv) Declining stage (06)
(b) State what is meant by the term Brand. What brand attributes are important for
creating a successful image of the brand in the market? (05)
Q.8 Discuss the relevant competitive environment in the context of Michael Porter’s
Five-Forces Model of Competition in each of the three scenarios presented below.
Substantiate your answer by stating the significant characteristics of competitive
environment facing the organisations in each of the scenarios.
(i) Ocean Ship Breaking Company is located in a country which has access to skilled
low-cost manpower, convenient berthing/ship-dismantling facilities, liberal tax
incentives and an expanding domestic market for sale of steel scrap. Despite the
above favourable factors, very few entrepreneurs have interest in this so called ‘dirty
and demanding’ business. On the other hand, the shipping industry is facing a surplus
of unserviceable vessels. These vessels have to be scrapped as early as possible due to
their high maintenance costs and port charges.
(ii) Two companies have developed genetically modified rice seeds after intensive
research at a considerable cost. These companies have also made substantial
investments in physical facilities for producing the seeds. These seeds have resulted in
unprecedented increase in per acre yields in the three countries in which these seeds
have been marketed to-date.
Both the companies expect phenomenal increase in their revenues and earnings after
they launch their products in other rice growing countries due to the envisaged
demand in these countries.
(iii) In Country PQR there are six cement manufacturers of similar strength and
resourcefulness. These manufacturers share among themselves 90 percent of the
aggregate market which is expected to remain stagnant due to lack of demand for new
housing and absence of plans for major infrastructure projects in the country in the
foreseeable future. (09)
Q.9 (a) Purex Limited (PL) has considerable experience in its particular line of business and
is considering making direct foreign investments in an African country. Besides the
political risks, state what other factors PL should consider while making a decision
regarding direct foreign investment in that country. (05)
(b) Nova Cosmetics Limited (NCL) considers that there are favourable business
opportunities for its assorted line of cosmetic products due to rise in income levels in
a number of countries. NCL realises that tax considerations can have far reaching
impact on its policies related to international business operations. List the types of
decisions relating to international business operations where NCL is likely to be
influenced by tax considerations.
Note: List the types of decisions only – explanations are not required. (04)
Q.10 Explain briefly the reasons why certain global corporations consider it essential to pursue
highly centralised decision making strategies to achieve their overall global objectives. (08)
(THE END)
Business Management
Suggested Answers
Ans.1 (a) The factors which may be responsible for the variances in the objectives stated in the
mission statements of companies and their culture, values and performance levels are
as follows:
(i) Mission statements of these organisations are primarily public relations

exercises and are not adopted with seriousness of purpose and commitment for
decision making and performance in the various tiers of the organisational
hierarchy.
(ii) Mission statements prepared without the participation and involvement of the
key management team may not elicit their whole-hearted support towards the
philosophy, purpose and beliefs enunciated in the mission statement.
(iii) A culture of short-termism permeates among the individual departments without
any concern for achievement of the overall long-term objectives of the company
as enunciated in the mission statement.
(iv) Mission statements may be formulated under the influence of statements of other
successful organisations but lack the requisite culture of work ethics and values,
human and physical resources and other core strengths to achieve the objectives
stated in the mission statement.
(v) Mission statements may be based on generalised expressions and perceptions or
‘wish lists’ and popular concepts with exaggerated objectives prepared by
individuals who are neither responsible nor accountable for achievement of the
objectives stated in the mission statement.
(b) Allcom’s management should implement the following measures to improve the
performance of its front-line customer care staff:
(i) The customer care personnel should have good soft skills and be able to handle
the difficult and demanding customers tactfully.
(ii) The personnel should be provided adequate training so that they are fully
conversant with the offerings of products/packages and can respond to the
customers queries satisfactorily.
(iii) The front-line customer care personnel should be delegated sufficient
discretionary powers and autonomy to resolve the routine problems faced by the
customers promptly.
(iv) The telephone conversations between the front-line customer care personnel and
the customers should be monitored to ensure that the quality of the services
provided to the customers are satisfactory and up to the required standards.
(v) Management should obtain feedback from customers to ascertain whether or not
the quality of customers care services are satisfactory. Appropriate corrective
actions should be taken to improve the skills of those individuals whose
customer-care performance feedback is not up to the mark.
Ans.2 The important stages involved in the Strategic Management process are:
Strategy Formulation:
This includes developing the organisation’s vision and mission, identifying the organisation’s
external opportunities and threats, determining internal strengths and weaknesses, establishing
long-term objectives and selecting the particular strategies to be pursued during a period of 3-5
years. Strategy formulation issues mainly include allocation of resources among the different
business segments and decisions whether to expand existing business lines or to pursue
diversification strategies.
Page 1 of 6
Business Management
Suggested Answers
Strategy Implementation:
Creating an effective organisational structure, directing marketing efforts, preparing budgets,
developing information systems and motivating the staff to create a culture to achieve the
objectives stated in the strategy formulation stage and aligning employee performance with the
target performance levels are activities involved in the strategy implementation stage.
Strategy Evaluation:
This process involves obtaining information to ascertain whether or not the strategy is working
as envisaged originally. It includes reviewing external and internal factors on the basis of which
the strategy was originally formulated, measuring performance and determining variances and
taking timely corrective actions including modification of the strategies due to changing external
and internal factors to ensure continuity of the organisation’s performance.
Ans.3 (a) Organisations prefer to outsource functions regarding recruitment of new employees to
private employment agencies and professional recruiters because :
(i) These organisations may not have adequately trained staff in their human resources
departments to prepare and place suitable advertisements in the media,
handling/scrutinizing the applications for identification of suitable candidates and
subsequent processing of their applications.
(ii) These organisations may not want to disclose to their competitors that they are in
the process of recruiting particular types of professionals as it may reveal the
direction of their expansion schemes.
(iii) These organisations may anticipate an overwhelming response to the advertised
position(s) and consider that it would be cost-effective to appoint professional
employment agencies to process and screen the large number of applicants and
short-list the most suitable applicants for final selection by the organisation.
(iv) These organisations may consider that placement of advertisements for recruitment
of personnel may provide clues to the rates of their employee turnover and create
negative perceptions of their human resource policies among their stakeholders and
rival competitors.
(v) Private employment agencies generally maintain databanks of potential candidates
from which the most suitable candidates can be identified readily if the particular
position has to be filled-in quickly.
(vi) Many senior level personnel may not consider it discreet to respond directly to
advertisements placed in the media as it would compromise the confidentiality of
their personal information to outsiders and disclosure of their interest in change of
jobs which may not materialise. These individuals would be comfortable in dealing
with the professional head-hunters who would match the suitable candidates and
the prospective employers prior to pursing the matter any further.
(b) The recruitment interviews may result in erroneous selection outcomes because of the
following shortcomings:
(i) Interviewers do not possess the requisite job knowledge and/or interviewing skills
to evaluate objectively the suitability of the candidates for the particular position.
(ii) Interviewer’s judgments may be influenced by the candidate’s affiliations with
educational institutions, racial backgrounds and political leanings.
(iii) Interviewers often make up their minds about a candidate within the first few
minutes of the interview on the basis of the candidate’s CV, mannerisms and
appearance and do not utilize the available time for objective evaluation.
(iv) Interviewers are not able to concentrate at the same level over prolonged periods
when they are required to interview several candidates in a single session.
Consequently all the candidates may not receive the same degree of attention and
discerning evaluative capability from the interviewers.
(v) In panel interviews individual interviewers often assign widely different marks on
the rating scale because of lack of specific criteria and on the basis of their own
perceptions.
Page 2 of 6
Business Management
Suggested Answers
Ans.4 (a) SCL must adopt and implement the following policies to achieve high performance work
systems in the manufacturing process:
(i) well-designed policies for recruitment, selection, training and development of the
workers involved in the manufacturing processes;
(ii) having properly aligned job descriptions and job specifications and ensuring that all
positions are filled-in by trained and skilled workers in the different stages of the
manufacturing processes;
(iii) having a congenial and safe working environment in which the workers are
provided proper tools and equipment to perform the task assigned to the different
individuals.
(iv) having both formal as well as open systems for sharing and exchange of information
between the workers at the floor levels and their supervisors.
(v) appropriate promotion and compensation systems for recognition and rewards to
achieve high levels of work performance .
(b) Internal Benchmarking is a method by which one operating unit or function is compared
with the other similar function within the same industry.
OR
is a method by which the best practices or functions are compared within the same
organisation.
Functional Benchmarking compares similar functions in one organisation with those of

other external entities who also perform that particular function regardless of the industry
in which these functions are performed.
Example of Internal Benchmarking: Gross profit percentage of one airline with gross profit
percentage of another airline.
Example of Functional Benchmarking: Compensation packages of the CEOs of a

pharmaceutical company and a company engaged in manufacturing of textile products.
Ans.5 (a) Aggressive marketing and promotion campaigns of consumer products launched
through repetitive TV advertisements, displays on billboards and advertisements in
newspapers and magazines are undertaken to achieve the following objectives:
(i) Pursuance of pull marketing strategies to appeal to customers to demand the

products.
(ii) Encourage the market intermediaries such as distributors, wholesalers and
retailers to build up inventories of new products/brands introduced in the
market.
(iii) Obtain trial purchases from customers in response to offerings of discount
prices/coupons for special offers, etc. to encourage first time purchases of new
products.
(iv) Counter competitive advertising and sales promotion campaigns to offset the
impact of competitors’ marketing and sales promotion efforts.
(v) Increase in consumption levels of the aggressively promoted products by
existing customers.
(vi) Enhance the image of the brand in the market to create and strengthen brand
equity.
(vii) Generating greater enthusiasm among the sales field force to promote sales of
redesigned or improved products.
(b) Test Marketing is a method of forecasting demand where a new product is marketed
in a limited geographical area to determine the consumer response to the product and
on the basis of the findings, sales are projected over a larger area.
Page 3 of 6
Business Management
Suggested Answers
Ans.6 The appropriate business strategy/policy/definition are:
(i) diversification/conglomeration
(ii) market penetration / market expansion/ market development
(iii) backward integration
(iv) performance based
(v) brand equity
(vi) polycentrism
(vii) proficiency tests
(viii) human capital
(ix) market challenger
(x) multilateral netting
Ans.7 (a) Marketers pursue the Promotional Strategies consumer for goods in the different
stages of their Product Life Cycles as follows:
(i) Introduction Stage

(i) inform and educate the potential customers of the existence of the product
(ii) encourage trial of product and create awareness of the benefits that would
accrue to the customers by using the product and how it should be used
(iii) secure distribution in leading retail outlets
(iv) place heavy emphasis on personal selling and promotion in trade shows
and exhibitions
(ii) Growth Stage

(i) stimulate demand in selected market segments and promote the particular
brand as competition increases
(ii) increase emphasis on advertising to capture a large share of the growing
market
(iii) enter new markets and expand coverage
(iv) identify new distribution channels
(v) shift emphasis from product awareness to the individual firm’s brand
preference through aggressive advertising
(iii) Maturity Stage

(i) focus on promotion and advertising to persuade the customers to purchase
the particular brand rather than to provide information about the product
(ii) selective promotion only as intense competition and increase in promotion
expenditures would result in lower profits
(iii) increase R&D budgets to improve product quality vis-a-vis competitors
(iv) extend product lines to meet niche customer demand.
(iv) Declining Stage

(i) reduce promotion expenses as the size of the market is shrinking
(ii) focus of promotion towards reminding remaining customers.
Page 4 of 6
Business Management
Suggested Answers
(b) Brand is the distinctive proprietary name, symbol or trade mark that differentiates a
particular product or service from other competing products and services available in
the market.
The important brand attributes for creating a successful image of the brand in the
market are that it should be :
(i) able to attract attention of the target market
(ii) easy to remember and communicate
(iii) reflective of the positioning of the product in the selected target market
(iv) distinctive and different from brands of other competing brands.
Ans.8 (i) Bargaining Power of Buyers

Ocean Ship Breaking Company enjoys an exceptionally strong bargaining position vis-à-vis the
ship-owners. OSBC can purchase ships at very low prices. Besides, OSBC has the significant
advantages of low ship dismantling costs, favourable tax policies and a ready market for sale
of steel scrap material combined with limited number of interested entrepreneurs in this line of
business which would strengthen its position vis-à-vis the ship owners
(ii) Potential Threat of Entry of New Competitors

Since the market for genetically modified rice seeds is expected to offer significant growth
prospects resulting in increase in revenues and lucrative profits by the two companies, there
would be a strong attraction for other resourceful research-oriented companies to enter this
market. Although the new entrants would have to incur huge R&D costs to develop the
specialized products, and make substantial investments in creation of production facilities yet
threats from potential competitors cannot be ruled out.
(iii) Rivalry among Existing Firms

Since six companies of equal size and strength are involved in competition in the market for
cement which is not expected to show any growth, the strategies pursued by only those
companies would be successful to the extent that they have competitive advantages over the
strategies of their rivals.
Price competition, campaigns for creation of perceptions of better quality of cement, free on-
site delivery to bulk buyers and aggressive promotional strategies would be common features
among the competing firms.
Ans.9 (a) PL should consider the following factors to determine whether or not it should make
investments in the African country:
(i) the legal, demographic, cultural and technological forces in the African country to
ascertain whether the environment is conducive for making investment in that country,
(ii) the availability of adequate infrastructure facilities in the African country to enable PL to
undertake its business operations satisfactorily,
(iii) the strengths and weaknesses of the local and other foreign competitors in the African
country to evaluate the nature of competition,
(iv) the monetary policies in the African country, availability and access to financial
facilities, stability of exchange rates and the regulations regarding repatriation of
profits,
(v) availability and reliability of economic and marketing data/statistics for estimating the
size of the market and potential for growth,
(vi) tax laws and foreign exchange regulations prevailing in the African country and special
incentives offered to the foreign investors.
Page 5 of 6
Business Management
Suggested Answers
(b) The different tax considerations which would influence and impact NCL’s international
business decisions are:
(i) Location of business facilities/operations in countries which offer tax exemptions or

low tax rates.
(ii) Operating forms of business whether to export, enter into licensing, franchising
arrangements, etc. to minimise tax liabilities.
(iii) Structuring of entities for international business operations by way of overseas
subsidiaries, branches or appointment of distributors to obtain tax advantages.
(iv) Policies for determining transfer prices for transactions among inter-group companies to
obtain tax advantages.
(v) Raising financing through equity or debt sources to minimise tax liabilities.
Ans.10 Certain global corporations pursue highly centralised decision-making strategies to achieve
the following objectives:
(i) They sell their products through coordinated market strategies and distribution
channels which consider the world as one market with no differences in consumer
tastes and preferences. These firms provide quality products at attractive prices to the
customers.
(ii) They launch coordinated financial strategies and implement standardised worldwide
financial controls systems.
(iii) They monitor closely the performances of the individual entities which have far-
reaching implications on the financial standing and profitability of the global
corporation.
(iv) They ensure maximum security and confidentiality of the manufacturing process
involving sophisticated technology which has been developed by the global
corporation.
(v) They ensure that the closely integrated subsidiaries perform according to their assigned
targets as shortfall in any one subsidiary can have adverse impact on the overall group
performance.
(vi) They comply with the stringent quality control requirements in highly
environmentally sensitive industries in which any lapse or mishap by any subsidiary
can adversely affect the standing and reputation of the global corporation.
(THE END)
Page 6 of 6
SUBJECT SESSION
General:
The performance in this attempt was much better than the previous many attempts. It was
observed that after several attempts the candidates had tried to cover the whole syllabus.
Consequently, a significant number of students were able to identify the key points. Further
improvement can be brought about if the candidates are able to improve their writing skills and
give more time in analyzing and understanding the exact requirements of the question.
Question-wise comments are as under:
Question 1(a)
The question required candidates to explain the factors because of which the objectives
expressed in the mission statements are different from the company’s culture, values and
aspirations. Though many candidates were able to produce organized and to the point answers
yet a significant number of candidates misunderstood the question and explained why
organizations fail to achieve objectives of mission statement or why the objectives expressed in
mission statements differ from organization to organization.
Question 1(b)
The requirement here was to identify the measures that a recently established internet services
provider should take to improve the performance of its front line customer care staff. The
overall performance here was above average; however, many candidates mentioned general
steps whereas they were required to focus on employees who are engaged in public dealing and
client facilitation.
Question 2
In this question, the candidates were required to explain the important stages of strategic
management process. It was an easy question straight out of the text-book. Majority of the
candidates identified the three stages i.e. strategy formulation, implementation and evaluation
correctly but their explanations were either incorrect or incomplete or contained unnecessary
details. Some candidates explained various levels of strategy including corporate, business and
operational strategy which were not required. A few candidates wasted time and effort by
unnecessarily giving detailed explanation of objectives, SWOT analysis, strategy option
generation and selection, which were also irrelevant in the context of this question.
Question 3(a)
In this part the candidates were asked to mention the reasons because of which organizations
may prefer to outsource the recruitment of new employees to private employment agencies.
Majority of the candidates could mention some of the more common reasons such as costs,
lack of expertise and saving time of senior executives. However, some very important points
like (i) preference for maintaining confidentiality as regards hiring/turnover of/in important
positions and (ii) because senior executives usually prefer to apply only through good reputable
Page 1 of 4
employment agencies instead of applying to the organizations directly were some of the
reasons which were mentioned by few candidates only. Moreover, some candidates went into
unnecessary details whereas many of the candidates wrote too brief answers giving 2-4 points
but with no explanation.
Question 3(b)
This question required the candidates to describe four shortcomings of the interviews process
which many result in erroneous selection. Though performance in this question was reasonable
yet many candidates focused on the personal shortcomings of the interviewer instead of
covering all aspects of the interview process.
Question 4(a)
In this question, the candidates were required to explain various practices that may be followed
in order to achieve high performance work systems in the manufacturing process. Significant
number of candidates performed well as they covered important areas like recruitment,
training, job description/specifications, working environment, communication, equitable
rewards/compensation system etc. However, some candidates highlighted points such as
procurement of high quality raw material (JIT) inventory control system and conducive
relationship with external suppliers etc. which were irrelevant. Some candidates mentioned
very general points like innovative thinking and hiring of consultants for system design, etc.
Moreover, some of the answers were too brief; for example, many students mentioned a point
just in two words i.e. ‘job description’ or ‘employee selection’ without explaining as to what
they wanted to say.
Question 5(a)
The requirement in this question was to explain the objectives of aggressive marketing and
promotional campaigns. A reasonable performance was witnessed, however, some candidates
could not understand the key aspect of the question and made the following types of errors:
 The general objectives of advertisements were quoted instead of the requirement of quoting
objectives of aggressive marketing campaigns.
 Some candidates gave separate objectives for different promotional mediums.
Question 5(b)
Approximately 50% of the students had no idea of test marketing. Some students gave
incomplete descriptions as they explained that test marketing is used to project sales but there
was no mention of the geographical area.
Question 6
This question contained 10 parts of one mark each in which the candidates were given
definitions of various business terms and were asked to correctly identify the described term.
Overall performance in the question was average as most of the students secured around
passing marks. Some students gave more than one choices. It must be noted that in case there
are more than one answers, all answers are cancelled.
Page 2 of 4
Question 7(a)
Here the students were required to provide brief comments on the promotional strategies which
are appropriate for different stages of the product life cycle. Generally, the students did well.
However, some students seemed confused and discussed in detail the various stages of the
product life cycle with very little emphasis on promotional strategies. Similarly, many
candidates restricted their discussion to media strategies like advertisement in the newspaper,
television, billboards, etc. and ignored the other promotional activities which may be carried
out at different stages of the product lifecycle.
Question 7(b)
The question called for definition of the term “Brand” and the attributes which are important
for creating a successful image of the brand in the market. Majority of the candidates were able
to provide correct definition of the term “Brand” but were unable to distinguish between
attributes and advantages of a Brand and mainly focused their answers on advantages rather
than attributes.
Question 8
In this question, three different scenarios were given and the candidates were required to
discuss the competitive environment prevailing in each case with reference to Michael Porter’s
Five-Forces Model of Competition. Instead of identifying the relevant competitive force in
each situation, significant number of candidates formulated their answers by applying and
substantiating each of the five competitive forces in all the three given scenarios which was
incorrect. Some of the other observations in each scenario are discussed below:
(i) Most of the candidates discussed Ocean Ship Breaking company’s competitive position
as a supplier whereas the company’s competitive position as a buyer was mostly ignored.
(ii) According to the given scenario two companies had developed a significantly improved
quality of rice seeds and intended to introduce them in many countries. In this case,
most of the students discussed bargaining power of the supplier which was incorrect.
Most of them could not identify threat of new entrants as the critical competitive force.
(iii) In this scenario regarding six cement manufacturers of similar strength and
resourcefulness, a large number of candidates identified bargaining power of buyer as
relevant competitive force, which was incorrect. The answer was intensity of
competition among the suppliers in a stagnant market environment.
Question 9(a)
In this part, the candidates were required to state the factors (other than political risks) that
should be considered while taking a decision as regards foreign direct investment in an African
country. Generally the replies were satisfactory and a number of candidates were able to obtain
good marks. However, some of the candidates did not try to understand the question and
offered vague replies. Some students also mentioned political risks like import quotas/tariffs,
law and order etc., whereas it was specifically mentioned in the question that political risks are
not required to be stated.
Page 3 of 4
Question 9(b)
In this part of the question, the candidates were required to list the types of decisions related to
international business operations which would be influenced by tax considerations. Very few
candidates could give satisfactory replies. Most students did not read the question carefully and
instead of identifying the types of decisions which are influenced by tax considerations, they
listed the various types of tax issues that are faced by multi-national companies e.g. double
taxation and transfer pricing, etc.
Question 10
The requirement was to provide brief explanation of the reasons because of which global
corporations may adopt highly centralized decision making strategies. Generally the students
could identify one or two reasons only. A large number of answers were rather vague,
generalized in nature and revolved around the advantages of centralized decision making
process in general rather than with reference to global corporations.
(THE END)
Page 4 of 4
Final Examination
Module E
The Institute of 4 December 2014
Chartered Accountants 3 hours – 100 marks
of Pakistan Additional reading time – 15 minutes
Business Management
Q.1 Rivalry among competing firms is usually considered to be the most powerful of Michael
Porter’s Five-Forces Model of competitive analysis. Identify and illustrate the
circumstances in which rivalry among the competitors would be intense.
Also identify any one business in Pakistan in which you consider rivalry among
competitors to be intense and give a reason for your choice. (09)
Q.2 (a) MNCs pursue policies of managing their foreign businesses through local nationals
of the countries in which the MNCs conduct their operations. Give four significant
advantages which the MNCs seek to achieve by appointing local staff in the countries
in which they conduct their business operations. (04)
(b) What are the advantages of having appropriately designed Job Application Forms? (03)
(c) Some organisations are moving towards policies of more frequent exercises of
Employee Performance Appraisal as compared to Annual Appraisals. Explain briefly
the main objectives of such shift in Employee Performance Appraisal policies. (05)
Q.3 (a) Alpha Enterprises, a partnership firm, intends to launch a major expansion program
for which a large number of employees would be recruited for appointment at
different tiers in the firm. As Manager Human Resources advise the partners of the
main advantages and shortcomings of recruitment tests. Also identify and state the
key features of any four types of recruitment tests. (08)
(b) Business entities often fail to realise that high rates of employee turnover not only
result in high operating costs but also have adverse repercussions on the overall
performance of the organisation.
Identify the different costs and disadvantages associated with high rates of employee
turnover. (07)
Q.4 Joint ventures and strategic alliances are popular modes of penetrating in foreign markets
to achieve synergies and augment competitive advantages. Despite the potential benefits of
these partnerships, the participants must be cognisant of the risks of these arrangements and
keep them within manageable proportions.
Identify and explain briefly the risks which should be considered while negotiating
agreements for joint ventures and strategic alliances. (08)
Q.5 (a) Identify the key stages involved in the process of conducting market research. (05)
(b) In the present business environment, consumer power is accorded more importance
by marketers than in the past. Explain briefly the factors which are responsible for the
increase in consumer power. (05)
Continued on next page......
Q.6 Identify the strategy/policy that the companies are pursuing in each of the scenarios given
below and state the important features/characteristics of the strategy/policy:
(i) Saaf Soap Company (SSC) is a manufacturer of washing soap for clothes whose
target market comprises of low income consumers. SSC’s strategy is highly focussed
and it successfully fulfils the needs of customers who want to economise on their
day-to-day household expenditures.
(ii) Wholesome Meat Company (WMC) is engaged in the business of selling meat and
caters to affluent customers who prefer to purchase good quality meat in a clean
environment. WMC’s prices are approximately 25 percent higher than the prices
charged by the traditional meat shops.
(iii) Strong Steel Limited (SSL), a manufacturer of steel billets, intends to acquire and
develop its own iron ore mines within the country. Shipments of imported iron ore
are often delayed due to transportation bottlenecks and besides, the foreign suppliers
manipulate prices during peak demand periods causing uncertainties for SSL.
(iv) Winall Appliances Company (WAC) is a leading manufacturer of refrigerators and is

rated among the four top players in the country. WAC is presently in the advanced
stage of establishing facilities for manufacture of air conditioners. (08)
Q.7 In your role as an internal human resource specialist, explain briefly the human resource
policies you would recommend for a learning organisation which pursues and implements
a system of efficient knowledge management at all levels of the organisational hierarchy. (09)
Q.8 (a) The edible oil industry in Pakistan is characterised by a large and expanding market
in which the leading players pursue aggressive ‘pull marketing strategies’.
Identify and explain briefly the main objectives and important features/characteristics
of the pull marketing strategies which might be pursued by these companies. (06)
(b) State the advantages which firms seek to achieve by developing ongoing relationships
with a base of loyal customers. (04)
Q.9 (a) A phenomenon witnessed in several progressive business groups is to own and
manage diversified businesses.
Identify and describe significant corporate level strategies which these groups pursue
for successful management and operations of their diverse business enterprises. (08)
(b) Quality is a strategic advantage which can be achieved by an enterprise through

long-term commitment to excellence in all areas of operations.
Identify the factors you consider to be most critical for achieving quality as a
sustainable strategic advantage. (04)
Q.10 (a) Certain companies prefer penetrating in foreign markets through licensing
arrangements in the target countries instead of exporting or making direct foreign
investments.
Describe briefly the advantages which companies seek to achieve by pursuing

strategies of entry in foreign markets through licensing arrangements. (04)
(b) Identify six major impediments in attracting foreign investments in an

underdeveloped country. (03)
(THE END)
Business Management
Suggested Answers
Ans.1 Rivalry among the competitors will be intense/high:

(i) if the number of competitors is high and they are equal in size, strength and capabilities.
(ii) in case the overall market is not expanding and the competitors resort to price cutting and
aggressive promotion to capture a larger share of the aggregate market.
(iii) if there is not much brand loyalty among the customers and it is easy and less costly for
them to switch suppliers.
(iv) in industries which have to incur substantial fixed costs. The competitors would strive hard
to manufacture and sell larger quantities to spread and recover their fixed costs from sale of
a large number of units.
(v) if the products are perishable or have limited shelf lives as the competitors would resort to
price cutting and aggressive promotion to dispose of their stocks.
(vi) when there are major exit barriers and alternatives uses of the assets are limited.
Example: Manufacturers of soaps/soft drinks/biscuits etc., mobile/telephone service providers.
Reasons: These are relatively low value-products and are purchased frequently by the customers
at convenient outlets. The customers can be persuaded easily to change their preferences and
hence their brand loyalties.
Ans.2 (a) MNCs seek to achieve the following advantages by appointing local staff in the countries
in which they conduct their business:
(i) The salary packages of local nationals are substantially less than the salary packages
and other allowances which would have to be paid to the expatriate staff in the host
countries.
(ii) The host countries look upon favourably towards MNCs who appoint local
managers as these individuals can have access to attractive job opportunities.
(iii) The local staff prefers to work with local managers because they can communicate
with them more easily and share common cultures.
(iv) The local staff are better capable of interpreting and dealing with local conditions
than expatriate staff.
(v) The expatriate staff would suffer career setbacks and poor morale in case of
unsatisfactory performance in their overseas assignments.
(vi) The host country staff who have work experience in foreign countries are conversant
with the norms and cultures of international business and can interface with the top
management of the MNCs easily.
(b) The following advantages can be derived by adopting appropriately designed Job
Application Forms:
(i) They facilitate obtaining information regarding the applicants in a specified format
which facilitates comparison of particulars of the various applicants.
(ii) They help to obtain comprehensive information regarding applicant’s age,
qualifications, previous work history, job related skills, general interests, etc.
(iii) They help in retaining a permanent record of the candidate for future reference.
(c) The main objectives of shift in policies towards more frequent Employee Performance
Appraisal exercises are as follows:
(i) They ensure that frequent employee performance appraisals for pay and promotions
are reflective of the full year’s performance rather than a single appraisal which
assigns greater weight to performance during the most recent few months.
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(ii) They help to identify deficiencies and training needs on a regular basis.
(iii) They help to improve performance by providing timely and regular feedback to the
staff.
(iv) They enable establishment of realistic performance standards and targets for the
employees.
(v) They ensure that the performance of the staff remains fully aligned with the
objectives of the strategic plans by taking timely corrective measures.
Ans.3 (a) The advantages of recruitment tests:

(i) They help to assess the behavioural and competency aspects of the applicants to
perform the assigned jobs
(ii) Well-designed recruitment tests provide reliable and valid results of the applicants
capabilities and skills on a consistent basis.
The shortcomings of recruitment tests:

(i) They may not be designed to measure the specific qualities which are essential for
the actual performance of the job
(ii) They may give unrealistic and spurious sense of accuracy to complex issues.
The different types of tests and their key attributes are given below:
(i) Psychological/personality tests – Psychological/personality tests are administered

by asking a series of questions to ascertain the applicant’s basic attitude and
temperament profile.
(ii) Intelligence tests – Intelligence tests are designed to assess the applicant’s intellectual
abilities of general knowledge and comprehension skills.
(iii) Proficiency tests – Proficiency tests are designed to ascertain the applicant’s ability
and competence level to perform the assigned work satisfactorily.
(iv) Aptitude tests – Aptitude tests are administered to obtain information about the
applicant’s overall mental and numerical abilities and physical dexterity.
(v) Psychometric tests –Psychometric tests are administered by asking questions and
obtaining applicant’s responses to enable the recruiters to measure the applicant’s
psychological characteristic such as intelligence, personal outlook and motivation.
(b) Business entities which experience high rates of employee turnover incur high costs and
also result in disadvantages for the organisations as follows:
(i) Administration costs of completing formalities of the leaving employees such as out-
of-turn preparation of salaries, calculation of benefits and completion of formalities
involved in the discharge of the employee.
(ii) Opportunity cost of time spent by line managers and other staff during the course of
recruitment, training and induction of the leaving employee.
(iii) Direct cost of recruiting replacements by way of advertisements, interviews,
administration of tests and reference checks.
(iv) Cost of training new employee to develop necessary skills for the performance of the
required job.
(v) Cost of loss of output before the replacement employee is adequately trained and
capable of assuming the necessary responsibilities.
(vi) High turnover may lead to key employees joining rival competitors and disclosing
company’s secret policies and working methods.
(vii) High turnover may be indicative of flaws in HR policies and would create negative
feelings amongst the existing employees.
(viii) Employees who leave on account of job dissatisfaction prove bad ambassadors
resulting in bringing disrepute for the organization.
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Ans.4 The risks which should be considered by the participants entering into joint
ventures/collaboration arrangements are:
(i) Lack of well defined strategy for the joint venture/strategic alliance arrangements –
The purpose and need of the joint venture/strategic alliance arrangement must be clearly
understood by the participants. In the absence of clearly defined benefits that would be
derived from the arrangements and their significance to the participants, the joint
venture/collaboration arrangement would not yield satisfactory results.
(ii) Inadequate knowledge of capabilities and resources of the participants – The participants
entering into the joint venture/strategic alliance must be aware of the strengths and
resources which each of them would bring to the joint venture/strategic alliance
arrangement and its synergy impact for achieving the desired outcome. Failure to correctly
ascertain the capabilities and resourcefulness of the participants would create friction and
result in unsatisfactory performance of the joint venture/collaboration arrangement.
(iii) Lack of clarity on issues of management and control – In joint venture/strategic alliance
arrangements the management and control of the assets are shared between the
participants. In the absence of well-defined arrangements for sharing of management and
control and strong support by the top management the joint venture/strategic alliance
would not be able to achieve its objectives.
(iv) Inability to recognize differences in cultures between countries – Companies in different
countries have different leadership styles and in some cultures authoritarian styles of
leadership/management may be the norm and in other cultures participative and
consultative style of management is considered to be the appropriate style. Failure to
recognize differences in the cultures and make necessary adjustments in the working styles
may result in working incompatibility and failure of the joint ventures/strategic alliance
arrangement.
Ans.5 (a) The key stages involved in the process of conducting market research are:
(i) defining the marketing problem and stating objectives of the research
(ii) determining the sources of information, whether data should be obtained from
primary or secondary sources
(iii) designing of strategy for collection of data – methodology of collection of data by
observation or personal interviews, etc. and ensuring the representative nature of the
data
(iv) actual collection of data
(v) analysis of data including editing, coding and tabulating the data
(vi) presentation of the market report in accordance with the objectives of the research.
(b) The increase in consumer power is attributable to the following factors:
(i) Better means of communications: The consumers are able to make well-informed
decisions based on the quality, product attributes and prices comparisons of different
products offered by the competing suppliers as they can access information from
several different sources.
(ii) Greater knowledge among the consumers: The consumers are now more
knowledgeable about their tastes and preference and have therefore become more
assertive regarding the quality standards in accordance with the specifications
proclaimed by the manufacturers /service providers.
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(iii) Greater flexibility to purchase goods at their convenience: The ability to make
online purchases of their choice of goods and services at their door steps have
strengthened the consumers powers as they can purchase the goods and services from
suppliers who more fully meet their requirements.
(iv) Effective consumer protection laws: Governments in several countries have
promulgated laws to safeguard the interests of the consumers and ensure that the
products do not cause injuries or result in any harmful affects to the users of the
products.
(v) Ready access to information: Consumer powers have increased considerably as they
are now in a position to make comparisons of goods easily at large departmental
stores and shopping malls which carry wide ranges of different products.
Ans.6 (i) Overall cost leadership strategy: SSC is pursuing a cost leadership strategy which creates a
low cost position vis-à-vis other manufacturers of washing soaps. Companies pursing this
strategy have to place emphasis on reducing the costs in the entire value chain to be able to
maintain the low prices for its target customers.
(ii) Differentiation strategy: WMC pursues a differentiation strategy of creating an impression

of superior quality of its products and services which the customers perceive to be of value
and are willing to pay premium prices.
OR
Niche marketing strategy: WMC is pursuing a niche marketing strategy as it caters to a
narrowly defined customer group seeking distinctive benefits of good quality meat in a
clean environment and for which they a willing to pay premium prices.
(iii) Backward vertical integration strategy: SSL intends to pursue a policy of backward
vertical integration as it intends to acquire ownership and control of its own sources of raw
materials within the country and thus reduce its dependence on imported iron ore.
(iv) Related/concentric diversification/horizontal integration strategy: WAC is pursuing a
policy of related diversification/integration by adding a new but related product line to its
business to seize advantages of related technical competencies, marketing insight and sales
of the products through its existing network of distributors.
Ans.7 As an internal specialist in a learning organisation, I would recommend the following human
resource policies for pursuing and implementing a system of efficient knowledge management at
the various levels of the organisational hierarchy:
(i) Designing an organisation structure which facilitates knowledge sharing through the
various channels of communication and promotes teamwork at all levels in the
organisation hierarchy
(ii) Adopting merit–based policies of recruitment whereby the organization is able to identify,
induct and retain employees who can contribute towards creation of knowledge and its
sharing in the organisation
(iii) Adopting result-based recruitment polices with well designed procedures to short list,
evaluate and select employees
(iv) Hiring professionally qualified and experienced HR manager and staff to manage the HR
functions
(v) Creating a culture of commitment and trust in which the values and norms emphasize
importance of sharing knowledge amongst the employees at various levels in the
organisation
(vi) Pursuing human resources policies with necessary flexibility for motivating and rewarding
employees who focus on personal achievement of knowledge and its sharing with
colleagues, systems thinking and team learning
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(vii) Encouraging training by participation in workshops, conferences and seminars to ensure

dissemination of knowledge amongst the employees
(viii) Developing IT systems for capturing and coding explicit and tacit knowledge for use by
employees at various levels from time to time.
Ans.8 (a) The main objectives and important features/characteristics of pull marketing strategies
designed to target the end users of edible oil are:
(i) launching aggressive advertising and promotional campaigns to strengthen the brand
loyalties of the existing customers and remind them that the use of the particular
brand of edible oil is essential for preparation of delicious and nutritious meals
which are enjoyed by a happy family
(ii) persuading customers of other competitive brands of edible oil to change their
loyalties and preferences in favour of the advertised brand of edible oil
(iii) offering incentives in the form of gifts, special discounts, extra quantity at the same
prices to increase sales to existing customers and attract new customers
(iv) emphasizing points of purity and necessary vitamins of the advertised brand to
differentiate it from other competing brands
(v) encouraging the distributors of edible oil to stock up the particular brand.
(b) The advantages which firms seek to achieve by developing ongoing relationship with a base
of loyal customers are:
(i) achieving sustainable revenues and higher profitability from a base of loyal
customers
(ii) serving costs associated with catering to existing customers are generally lower than
identifying and serving new customers
(iii) word of mouth positive information conveyed by satisfied customers can lead to
generation of sales revenue from new customers
(iv) strong customer preferences lock in retailers/dealers to ensure the availability of the
products in their stores.
Ans.9 (a) Business groups pursue following corporate strategies for successful management of their
diverse business enterprises:
(i) The groups continuously explore opportunities of acquisitions, mergers and strategic
alliances to achieve maximum competitive advantages.
(ii) The groups evaluate whether the different business entities are competing in the most
suitable businesses considering the opportunities and threats that are present in the
environment.
(iii) The groups consider whether they should realign strategies of related or unrelated
diversification and decide which businesses should be divested from their portfolio to
achieve optimum strategic fits.
(iv) They follow aggressive and proactive business policies and set high standards of
performances and continuous and critical evaluation thereof.
(v) The groups make concerted efforts to identify and attract top caliber individuals and
motivate their senior corporate executives to function as teams and manage the
various business risks in a prudent manner.
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(b) The critical factors for achieving quality as a sustainable strategic advantage are:
(i) Understanding the needs and preferences of the customers.

(ii) Paying attention to laid out specifications.
(iii) Striving to learn and improve continuously.
(iv) Giving importance to customer feedback.
(v) Stress on quality assurance in all stage of the value chain.
Ans.10 (a) The advantages of penetrating into foreign markets through licensing arrangements with
local entrepreneurs in foreign countries are:
(i) the licensor obtains the benefit of the expertise and contacts of the licensee in the
foreign market
(ii) entry in foreign markets through licensing arrangements can enable the licensor to
make rapid penetration in the markets in these countries
(iii) licensing arrangements are more attractive than exporting because high tariffs, quotas
or other import restrictions in overseas markets increase the costs of exports
(iv) licensing arrangements do not require substantial financial resources of the licensors
(v) licensing arrangements helps to minimize political risks because the licensee is
considered as a domestic entity in the licensee’s country
(b) The impediments in attracting foreign investment in an underdeveloped country are:
(i) poor infrastructure facilities of roads and communications and unreliable network of
utilities
(ii) absence of laws relating to patents, copyrights and intellectual properties
(iii) widespread corruption in the government and other social sectors
(iv) an unstable system of governance
(v) lack of education and absence of a skilled work force
(vi) absence of generally accepted accounting principles
(vii) uncertain economic and financial policies
(viii) non-availability of reliable economic and financial data
(THE END)
Page 6 of 6
SUBJECT SESSION
General:
Performance in this examination was not in accordance with the expectations. Selective
studies, lack of adequate grasp of the topics and attempting the questions without
comprehending fully the precise requirements of the questions are factors which are
responsible for the less-than-satisfactory performance. It appears that despite allocation of
extra time for reading the question paper, the students were not able to benefit from this
opportunity.
Comments on the replies to the individual questions are presented below:
Question 1
In this question pertaining to Michael Porter’s Five-Forces model of competitive analysis,

students were asked to identify and illustrate the circumstances in which the rivalry among the
competitors would be intense. Quite a number of the students did not adhere to the exact
requirement of the question and proceeded to describe the five forces model of competition. A
few students erroneously mentioned irrelevant points like pursuit of high profits, government
regulations, acquisitions and mergers, etc.
Question 2(a)
The candidates were supposed to mention the advantages which MNC’s seek to achieve by
managing their foreign businesses by employing nationals of the countries in which they
conduct their operations. A significant number of the students stated only two points i.e. that
the remuneration packages of the local staff are lower than the expatriate staff and that they are
conversant with the local conditions. Repetition of the above points using different words was
witnessed in quite a number of the instances. Other points such as companies that hire local
staff are looked at more favourably by the local authorities and that local staff is more at ease
while working with local managers were mentioned by few only.
Question 2(b)
This question regarding appropriately designed Job Application Forms elicited a significant
number of correct replies. A number of students correctly stated that standard formats of job
application forms ensure that all the requisite information is presented in a sequential order
which facilitates comparison of particulars of the job applicants. However, the point that the
job application forms help to retain permanent and standardized records of candidates for
future reference was missed by a large number of the students.
Question 2(c)
In this part of the question, the candidates were supposed to discuss the main objectives of a
policy whereby employee appraisals are carried out more frequently as against the normal
practice of having annual appraisals. Important points that frequent employee appraisals
facilitate taking of timely corrective measures for removal of deficiencies in performances of
Page 1 of 4
employees and aligning performances of employees with the corporate objectives and
standards were mentioned by a limited number of students only. A number of students who did
not read the question closely, highlighted the features of performance appraisal without
drawing any comparison between frequent performance appraisal and an annual appraisal.
Question 3(a)
Replies to the question regarding advantages and shortcomings of recruitment tests lacked
direction and exhibited poor knowledge of the topic. In a few cases, the students were not even
able to distinguish between the advantages and shortcoming of recruitment tests. However, the
features of different types of recruitment tests and their principal attributes were identified by
the majority of the students.
Question 3(b)
A good performance was witnessed in this question relating to the different costs and
disadvantages of high rates of employee turnover. However, a number of students offered
unspecific and vague replies, e.g. high operating costs, poor performance, lack of motivation,
etc.
Question 4
A considerable number of students were not able to comprehend correctly the risks which
should be considered by participants while entering into joint ventures/collaboration
agreements and keeping them within manageable limits. The replies, therefore, lacked
direction and revolved around issues of business failures, insolvency, political and foreign
currency risks. Other key risk factors in the context of entering into joint ventures/strategic
alliances arrangements namely, (i) lack of well-defined strategy based on the purpose and
need of the joint venture/strategic alliance, (ii) inadequate understanding of the capabilities and
resourcefulness of the participants, (iii) lack of clarity on vital issues of extent and modes of
management and control, (iv) and differences in leadership and management styles, cultures
and values of the participants were largely ignored. Usually the off-the-target replies revolved
around issues such as disputes relating to sharing of profits and joint venture partner becoming
competitor.
Question 5(a)
This question required identification of key stages in the process of conducting market
research. Generally the students performed well. Nevertheless, certain replies referred to
irrelevant issues like formulating marketing plans and their implementation and the role of
market research in the formulation of marketing plans and strategies.
Question 5(b)
The requirement of this part of the question was to briefly explain the factors that are
responsible for increase in consumer power. Most of the replies were reasonably satisfactory
and covered the essential points. However, some students seemed too confused and stated
increased resourcefulness of the business firms, market challenger postures of firms, building
long-term relationships with customers, etc. as the reasons for increase in consumer power;
which were obviously incorrect. Many students got stuck on the point of effective consumer
protection laws and repeated it by writing the same point over and over again with respect to (i)
government laws, (ii) consumer unions, (iii) awareness of consumer protection laws etc.
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Question 6
In this question, four business scenarios were presented and the students were required to
identify the related strategy/policy and highlight its important features/characteristics.
(i) Saaf Soap Company –This company pursues a cost leadership strategy and strives to
minimize its costs at every stage of its value chain to be able to meet the requirements of
its price conscious low income customers. A number of students stated market
penetration strategy which was not correct in the given context. The correct answer was
overall cost leadership strategy.
(ii) Wholesome Meat Company- This company pursues a differentiated marketing or a niche
marketing strategy to cater to the needs of customers who perceive quality of meat, shop
environment and customer service of value and are willing to pay a premium price. A
number of students incorrectly stated market/price skimming strategy where high price is
charged from a limited number of affluent class customers who can afford to purchase a
newly introduced product in the market and then the price is reduced to meet the
demands of the relatively less affluent and more wide segments of the market; which was
not the case in the given situation.
(iii) Strong Steel Limited – The correct reply of backward vertical integration and its essential
characteristics were highlighted by a significant number of the students.
(iv) Winall Appliances company – The correct answer is related/concentric diversification

strategy or a horizontal integration strategy by adding a new but related product line to
the existing business lines to avail related advantages of technical expertise, marketing
insight and selling through the same distribution channels. Most of the students answered
this correctly.
Question 7
The focus of the question was implementation of a system of efficient knowledge management
at all levels of the organizational hierarchy specifically in the context of a learning
organization. Majority of the students included a number of general points mainly revolving
around encouraging and rewarding knowledgeable employees. Areas such as promoting culture
of knowledge sharing and developing IT systems for capturing and disseminating information
were rarely discussed. The key point that the entity is a learning organization was not
illustrated at all in many replies.
Question 8(a)
Reply to this question regarding objectives and characteristics of pull marketing strategies
should have been tailored in the context of edible oil industry in Pakistan. In quite a few
instances, the issues of pull marketing strategy were stated in general terms without any
reference to the edible oil business. Some students mentioned strategies which do not from part
of the pull marketing strategy such as product customization or customer satisfaction.
Question 8(b)
This part required the advantages which firms seek to achieve by developing ongoing
relationships with a base of loyal customers and the performance of most of the students was
quite satisfactory. However, an important point regarding locking in retailers/distributors to
ensure uninterrupted availability of the products was mentioned by only a handful of students.
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Question 9(a)
In this question the students were required to identify and describe the corporate level
strategies pursued by management who own and manage diversified business entities. It
appears that this question could not be comprehended by a vast number of the students in spite
of the specific mention of ‘diverse business enterprises’ in the question. The replies, in most of
the cases, were based on highly confused and vague perceptions of the general issues of
business management. Irrelevant and meandering references in the areas of marketing,
business finance as well as human resource management, and global business operations were
stated by the students.
Question 9(b)
The critical factors for achieving quality as a strategic advantage was well responded by most
of the students. A considerable number of answers addressed the pertinent issues of
compliance with the stated specifications, paying attention to customers needs and preferences,
striving to learn and improve on a continuous basis, giving importance to customer feedback
etc.
Question 10(a)
This question regarding penetration in foreign markets through licensing arrangements

received satisfactory replies. The important points, viz. licensor’s low capital costs, taking
advantage of licensee’s local expertise and contacts, rapid penetration of the market and
elimination of political risks as the licensee is perceived as a domestic entity were mentioned
by a significant number of the students.
Question 10(b)
Impediments in attracting foreign investments in an underdeveloped country include poor

infrastructure facilities, absence of laws relating to patents and copyrights, widespread
corruption, unstable system of governance, non-availability of reliable economic and financial
data and lack of education and absence of a skilled work force. However, many students
referred to causes such as lack of investment opportunities, low profits, small markets etc.
which are not relevant in the case of most underdeveloped countries.
(THE END)
Page 4 of 4
Final Examinations
Module E
The Institute of 3 June 2015
Business Management
Q.1 Regal Motors Limited (RML) is a manufacturer of cars and caters to the requirements of the
mid-level segment of the market for automobiles. RML has manufacturing facilities in
several countries and achieved world-wide reputation for its cars which are both affordable
and durable and is one of the preferred brands as they meet the requirements of a significant
portion of customers in the target market. RML now intends to launch luxury cars for the
highly discerning customers for whom the brand of their cars reflect their social status.
Besides, features of ultimate luxury, high standards of reliability and safety of the cars are of
critical importance for these customers. RML considers that this niche market which is
presently dominated by 3-4 other car manufacturers would witness significant growth in the
foreseeable future.
Explain briefly the various factors which RML should consider to be important in
formulating its entry strategy to compete in this market which is presently the stronghold of
a few well-entrenched car manufacturers. (09)
Q.2 Strategy evaluation, as an essential element of the strategic management process, involves
reviewing changes in the environment during the implementation phase of the strategy,
comparing actual performance with the targets and taking timely corrective measures to
ensure that the operations remain on track.
Explain briefly the reasons why strategy evaluation has become a more challenging task in
the present rapidly changing global economic and political environment. (09)
Q.3 Major business corporations regularly pursue and review their global strategies of
acquisitions, mergers and sell-off/divesture. Explain briefly the different circumstances in
which these business corporations may consider it advisable to pursue strategies of
sell-off/divesture of a division or a distinct portion of their overall business operations. (06)
Q.4 (a) State the reasons why companies may consider that establishing manufacturing
facilities in foreign countries is more advantageous than exporting to these countries. (05)
(b) Multinational Corporations are classified as Ethnocentric, Polycentric and Geocentric
companies depending on the strategies and policies pursued by their top management.
List the distinguishing characteristics of each of the above types of multinational

corporations. (06)
Q.5 Until recently the affairs of Premier Associates (PA), a profitable family-owned business
enterprise, were managed by the family members. The old family members have now
transferred the management of the business to the new generation who are highly qualified
and have ambitious plans to expand the scope of the business and manage it professionally.
A Human Resources Manager has been appointed at a senior level with far-reaching powers
to formulate and implement organisational and HR policies to enable PA to achieve the
objectives set by the new management.
State and describe briefly the specific responsibilities which would be entrusted to the
Human Resource Manager who is involved in the task of formulation and implementation
of organisational and HR policies to enable PA to perform as a goal-oriented organisation. (10)
Continued on next page......
Q.6 Multinational Companies (MNCs) may at times adopt strategies of highly centralized
decision making at their corporate headquarters and delegate minimum powers to their
subsidiaries in different countries.
Explain briefly four factors which in your opinion are responsible for exercising policies of
centralized decision making by the MNCs. (08)
Q.7 (a) Vision Consultants (VC) is a partnership firm of four professional engineers which
provides comprehensive services for establishing major power generation units on a
turn-key basis. VC has a staff of twelve qualified engineers who are working at various
levels in the organisation. VC operates in an environment in which it has to face
numerous challenges of meeting stringent deadlines, keeping abreast of rapidly
changing technologies, interacting with demanding clients and complying with the
regulatory requirements.
Identify and briefly explain the policies which would enable VC to create and
encourage a good team environment in the firm. (07)
(b) Paragon Chemicals Limited has recently experienced a sharp increase in the number
of accidents in its factory. You have been appointed as a Safety Engineer to offer
recommendations for reducing the accident rates.
State the different human, environmental and mechanical/technical safety measures

which you would recommend to reduce the risks of accidents in each of these
categories. (06)
Q.8 What do you understand by the term Corporate Social Responsibility (CSR)? Explain briefly
any four types of initiatives which a business organisation may take towards fulfilment of its
CSR objectives. (06)
Q.9 (a) Due to changes in business environments, firms are forced to make far-reaching
changes in the organisational structures, corporate and business policies, processes
and procedures to achieve their corporate objectives. These changes invariably meet
strong resistance from existing employees at various levels.
(i) State five reasons why existing employees are averse to changes and offer strong
resistance. (05)
(ii) What measures, in your opinion, may be adopted by the management to reduce
resistance to change? (03)
(b) State four reasons (in each situation) why some businesses:
(i) give brand names to their products
(ii) do not give brand names to their products. (06)
Q.10 (a) List ten typical questions which may be included in the conduct of a comprehensive
market audit exercise. (05)
(b) Identify any six demographic variables for segmentation of the market for a new
magazine which would be published on a monthly basis. (03)
Q.11 Aroma Tea Limited (ATL) is engaged in an intensely competitive line of business in which
three powerful companies launch aggressive advertising and promotional campaigns to
retain and increase their share of the market. ATL has instituted a Marketing Intelligence
System to monitor the effectiveness of its advertising and promotional campaigns.
Briefly describe the different sources from which ATL would be able to obtain
information/data for its Marketing Intelligence System. (06)
(The End)
Business Management
Suggested Answers
Ans.1 RML should consider the following factors in the formulation of its strategy for entry in the
market for luxury cars which is presently dominated by 3-4 well-entrenched manufacturers :
(i) RML should assess the size of the market and the key segments of the market which it
plans to target such as key executives, business tycoons, etc.
(ii) RML should determine the optimum capacity of the plant based on the size of the target
market from the short-term and long-term growth perspectives.
(iii) RML should identify the most suitable location for establishing the car manufacturing
facilities to avail advantages of, availability of infrastructure facilities, skilled workers and
accessibility to the market.
(iv) RML should examine the strategies of the leading manufacturers to ascertain the critical
factors of product quality, distinctive luxury features, promotional policies, distribution
network and after sales service which have contributed to their success.
(v) RML should evaluate its particular strengths in terms of its car designing competencies,
plant and equipment, manufacturing processes and expertise of its workers and assess how
these can be utilized in the manufacture of luxury cars.
(vi) RML should identify the specific innovative features of design, engine power and luxury
it should incorporate in its cars to offer more attractive products and acquire a fair share of
the existing and expanding market.
(vii) RML should develop estimates of funding requirements for establishing facilities for
manufacturing luxury vehicles, advertising and promotion of its vehicles, development of
dealership network and staff to successfully market the luxury cars.
Ans.2 Strategy evaluation has become a more challenging task in the rapidly changing global economic
and political business environment due to the following reasons:
(i) Domestic as well as global economic environments have become more volatile which
affect the business operations due to sharp variations in prices of raw materials, disruptions
in sources of supplies, economic and political upheavals in major markets and changes in
financial regulatory policies.
(ii) Rapidly changing technologies and development of new and more innovative products
which result in short term product life cycles and obsolescence of established products.
(iii) Emergence of new and resourceful competitors who pursue aggressive promotional
marketing strategies to penetrate and capture the market held by existing suppliers.
(iv) Complex legislation such as those relating to environment, customer protection,
transparency and privacy.
(v) Rapidly changing political scenarios in which countries realign their economic and
political alliances and strategies resulting in upsurge in uncertainties for business entities.
Ans.3 Business corporations may pursue strategies of sell off/divesture in the following circumstances:
(i) The corporation may decide to restructure its operations and concentrate its efforts and
resources in areas in which it has core competencies and competitive advantages.
(ii) The corporation may decide to sell-off/divest a division which is incurring losses.
(iii) The corporation may need liquid resources for its business and does not consider it
advisable to obtain additional financing through debt or equity sources. The sell-
off/divesture may generate sufficient liquid resources for the requirements of its business.
(iv) The corporation may receive a lucrative offer from a prospective buyer for purchase of a
division which may lead to realisation of substantial profits.
(v) The corporation may consider a particular division as a ‘misfit’ in terms of the division’s
radically different management culture, values.
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Ans.4 (a) Companies may consider it more advantageous to establish manufacturing facilities in
foreign countries than exporting to these countries to:
(i) seize the advantages of low production costs in the foreign country
(ii) avoid high transportation costs, particularly for heavy and bulky goods
(iii) overcome the constraints of manufacturing capacity in their home countries (skilled
labour, raw materials, energy, etc.)
(iv) manufacture substantially modified products to better serve the needs and
preferences of customers in the host countries
(v) meet the requirements of governments in the host countries who discourage imports
by imposing high tariff and non-tariff barriers
(vi) cater to the preferences of customers who may prefer to buy locally manufactured
goods.
(b) Ethnocentric oriented companies follow policies that are primarily home-grown and the
management assumes that the practices which work in the headquarters or in the home
country are most suitable and should be adopted and pursued in all their international
operations.
Polycentric oriented companies follow the philosophy that the organization located in the
host country should be staffed by local individuals to the maximum extent as they are
expected to understand more closely their culture, work ethics and markets. Consequently,
subsidiaries in various countries operate under the directions of locals and are controlled by
the parent company through appropriate financial reporting systems.
Geocentric orientation is an approach in which the management considers that a world-

wide focus, both at the headquarters and also in the host countries, offers optimal
advantages. Competent individuals, regardless of their home or host country origin, should
be engaged to solve company problems. Major issues of headquarters and subsidiaries,
such as raising of funds, building of plants, research and development are viewed from the
entire global perspective.
Ans.5 The Human Resource manager who is involved in the formulation and implementation of
organisational and HR policies for Premier Associates would be entrusted with the following
responsibilities:
(i) Designing of an appropriate organisational structure to achieve the overall objectives of

PA. The organisational structure should optimize the internal strengths and remove
internal weaknesses for achievement of the objectives.
(ii) Communicating PA’s objectives and goals and ensuring that they are properly understood
by the employees at all levels.
(iii) Directing the managers at all hierarchical levels to make effective plans to achieve the
business and operational goals and targets assigned to their respective departments.
(iv) Defining the job descriptions and job specifications precisely and ensuring that these are
followed strictly by employees at all levels.
(v) Pursuing well-defined policies of recruitment, training, job rotations, career path and
succession planning which are implemented in an objective and fair manner.
(vi) Designing a reward system, based on a fair system of employee evaluation including
benefits and policies of promotion in order to achieve optimum employee performances at
all levels.
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(vii) Adopting non-monetary initiatives and measures to keep the employees fully motivated
and committed to achieve the business objectives. The employees should take pride and
feel that they have a role in the success of the PA.
(viii) Ensuring that the various departments work in close coordination to achieve the goals and
objectives of PA. Areas of friction and conflict which may undermine performance are
identified and rectified promptly at appropriate levels.
Ans.6 The factors which are responsible for the MNC’s strategies of exercising centralized decision
making are:
(i) Large size of the subsidiary companies and substantial capital investment – Due to the
large size of the individual entities and substantial investment by the MNCs the
performance of the subsidiaries can have far-reaching impact on the financial standing and
profitability of the MNC.
(ii) Access to technology and manufacturing process – The manufacturing technologies and
processes have been developed by the MNC at a very high R&D cost and the MNC would
not want to pass these to the subsidiaries.
(iii) Closely integrated and inter-dependent operations – When the operations of the various
subsidiaries are closely linked and interdependent that important decisions cannot be
delegated to the individual subsidiaries in isolation but have to be made after due
consideration of their implications for the group as a whole.
(iv) Stringent targets – If the products manufactured by the subsidiaries have to conform to
strict quality control specifications or if the operations are of a highly environmentally
sensitive nature, then the parent company would consider it important to exercise close
control of the subsidiaries.
(v) Reduce operating costs – MNCs strive to economize their overall financial and human
relations management and administration expenses by centralizing these functions at the
corporate headquarters rather than creating duplicate facilities at the individual
subsidiaries.
Ans.7 (a) VC would be able to create, develop and encourage a good working environment of
supporting individual and team effort by adopting the following policies:
(i) pursuing a leadership style and performance culture based on mutual consultation
(ii) recognising the professional competencies, experience and contribution of the
partners as well as the staff as highly valuable resources
(iii) integrating the efforts of the partners and the staff through open horizontal and
vertical communications to reach optimal solutions of the problems
(iv) ensuring commitment of the partners and the staff towards achievement of the tasks
through maximum input of individual knowledge and team efforts
(v) recruiting employees on the basis of their professional competencies and ability to
work in a team environment
(vi) evolving a system of sharing profits among the partners based on their respective
contribution and rewarding the employees on a fair and equitable basis.
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(b) Management should adopt the following measures to reduce the risks of industrial
accidents by adopting the following measures:
Human Factors:
 Pursuing a culture in which adherence to safety standards is considered to be
absolutely necessary and any deviation is strictly condemned.
 Ensure wearing of proper safety/protective equipment.
 Proper training of employees for operating the equipment.
 Avoid excessive overtime.
 Regular medical check-ups, especially of employees worked in hazardous jobs.
Environmental Factors:
 Good housekeeping.
 Maintain appropriate levels of cooling/heating.
 Adequate lighting/ventiliation.
 Safe storage of materials avoiding congestion.
 Noise control.
Mechanical/Technical Factors:
 Establishment of proper standards operating procedures.
 Safe handling of hazardous materials.
 Proper tools and equipment.
 Adequate protective equipment or mechanical guards.
 Firefighting equipment which is readily accessible and properly serviced/ guarded.
Ans.8 Corporate social responsibility is a form of a voluntary business approach that business firms
pursue to meet or exceed the expectations of its stakeholders by adopting social and
environmental initiatives. The goal of CSR is to make a positive impact through its activities on
the environment as well as its stakeholders for their sustainable benefit.
A business organisation may take the following initiatives towards meeting its corporate social
responsibilities by:
(i) providing funds, material contributions or other resources to help victims of floods,
earthquakes and other natural calamities
(ii) making contributions or donating a percentage of its revenues on product sales for a
specified period to support a specific charitable cause
(iii) sponsoring and supporting the creation and implementation of behavior change
campaigns intended to improve public health, traffic safety, etc. for the welfare of the
community
(iv) offering paid internships to students from educational institutions to help them acquire
hands-on exposure of a corporate business environment
(v) sponsoring health care facilities by providing special types of treatment/medical care to
employees and also to the poor and less privileged individuals
(vi) supporting social causes to improve community well-being by planting trees, providing
clean water to residents in adjoining areas, constructing of roads, etc.
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Ans.9 (a) (i) Existing employees are averse to changes and offer strong resistance because of the
following reasons:
 The employees may have concerns of financial insecurity due to loss of their
jobs or decline in their existing level of compensation.
 The employees may fear that they may lose their present position/status, power
and authority because of induction of new employees.
 The employees may anticipate that changes in work assignments, alterations in
work processes and transfers would threaten their present work routines,
patterns of social-on-the-job interactions and friendships.
 The employees may fear uncertainties in the new organizational design,
attitudes and working styles of new supervisors.
 The uncertainty or discomfort created by what is new or different is a
psychological process which causes resistance to change.
(ii) Management may adopt following measures to reduce resistance to change:
 Management must communicate to the employees in a convincing manner the

reasons and need for change to dispel any suspicions and apprehensions which
create resistance to change.
 Management can reduce resistance to change by empathizing with the
employees and recognizing their valid objections and taking steps to alleviate
their fears.
 Management can minimize the negative impact of change by implementing the

change in a manner which is perceived by the employees to be fair and
equitable.
(b) (i) Businesses give brand names to their products to:
 market, promote and advertise readily identifiable products

 assure customers of consistent good quality of the products
 benefit from the company’s reputation in the market
 help introduce different qualities/varieties of the same product in the market.
(ii) Businesses do not give brand names to their products because they:
 do not want to incur expenditures on promoting a particular brand

 are not in a position or willing to maintain consistent quality of the products
 sell low quality products which do not have to comply with regulatory
standards
 sell products which cannot be physically differentiated from the products of
competitors such as simple items of hardware (nails, nuts and bolts), ice, etc.
 sell low price products in the low-income segments of the market.
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Ans.10 (a) The following questions may be included in the conduct of a comprehensive market audit
exercise:
(i) Are markets segmented effectively?

(ii) Is the organization positioned well among competitors?
(iii) Has the firm’s market share been increasing?
(iv) Are present channels of distribution reliable and cost-effective?
(v) Does the firm have an effective sales organization?
(vi) Does the firm conduct market research?
(vii) Are firm’s product quality and customer service satisfactory?
(viii) Are the firm’s products and services priced appropriately?
(ix) Does the firm have an effective promotion, advertising, and publicity strategy?
(x) Are marketing, planning, and budgeting strategies effective?
(xi) Do the firm’s marketing managers have adequate experience and skills?
(b) The market for a new magazine which would be published on a monthly basis may be
segmented according to the following demographic variables:
(i) age group of the target readers

(ii) gender of the readers
(iii) occupations/professional affiliations of the target readers
(iv) income levels of the prospective readers
(v) education levels of the target readers
(vi) racial/ethnic affiliations of the target readers
(vii) religious backgrounds of the target readers
Ans.11 ATL would be able obtain information from the following sources for development of its
Marketing Intelligence System:
(i) Sales force that provide feedback regarding products/policies.

(ii) Distributors, retailers and other intermediaries who obtain important information and can
pass it to ATL.
(iii) Obtain feedback from customers by way of market feedback and surveys.
(iv) Participation in trade shows and exhibitions to obtain insight of competitors’ products and
their promotion strategies.
(v) Information from competitors’ published reports.
(vi) Published government statistics relating to population, incomes, imports of tea, etc.
(vii) Purchase of information from professional suppliers of data and information.
(The End)
Page 6 of 6
SUBJECT SESSION
General:
Overall it was an easy paper. Most of the questions were those which could have been
answered easily by students with general understanding of the business environment. However,
it created another issue whereby many students wrote unduly lengthy answers of questions
which they knew well and consequently, they were found struggling to complete the last
attempted questions. Good time management is very essential and the students at this stage
should realize that length of the answer has little bearing on the marks they obtain. The key
success factor is quality and a well thought out answer is far better than a lengthy answer with
irrelevant or repetitive stuff.
Question 1
In this question, the candidates were required to explain briefly the various factors, which
should be considered in formulating the entry strategy for launching luxury cars in a market
with 3-4 well entrenched manufacturers. Apparently, it was a simple question but somehow the
response received was not very good. Most of the candidates only stressed on valuing the cars
at a very high price without giving any justification thereof. Many students mixed up correct
points like study of the size of the niche market, identification of strengths in various areas of
manufacturing and selection of appropriate location for establishing manufacturing facilities
with irrelevant points such as distribution network and availability of parts and components.
Many students discussed Porter’s model of five competitive forces which was totally
irrelevant.
Question 2
In this question, the candidates were asked to explain briefly the reasons why strategy
evaluation has become a more challenging task in the present rapidly changing global
economic and political environment. It was a simple question and was well attempted by
majority of the candidates. However, a substantial number of candidates were unable to
comprehend the basic requirement of the question and stated advantages of strategy evaluation.
Some candidates mentioned organizational factors like changes in manufacturing process,
products and organizational structure which were not relevant. A few candidates highlighted
various competitive positioning strategies, which were also not required.
Question 3
In this question, the candidates were required to explain briefly the circumstances in which
major business corporations pursue strategies of sell-off/diversification of a division or a
distinct portion of their overall business operations. The replies were generally satisfactory.
The most common error was that some students discussed circumstances which result in forced
closure of business and are not a planned strategy; such as nationalization, operation of any law
and failure to compete in the market, etc.
Page 1 of 4
Question 4(a)
In this part of the question, candidates were required to state reasons why businesses prefer to
establish manufacturing facilities in foreign countries instead of exporting to these countries.
Most of the replies were reasonably good and more or less covered the important reasons.
However, some students did not read the question carefully and mentioned the problems
associated with establishment of manufacturing facilities. Many candidates repeated the same
points using different words and phrases.
Question 4(b)
In this part, the candidates were required to list the distinguishing characteristics of
ethnocentric, polycentric and geocentric types of multinational companies. About 30-40% of
the replies were satisfactory. However, 17% of the students did not attempt this question
probably because they were not familiar with these terms. The remaining candidates either
gave too lengthy answers in which each characteristic was discussed in detail or mixed up the
characteristics of the three types of multinational companies. Many candidates related
ethnocentric multinational company to a specific ethnic group and culture which was not
appropriate.
Question 5
In this question, the candidates were required to describe the specific responsibilities of an HR
manager who was entrusted the task of formulating policies in an organization which wanted to
transform itself from a family owned organization to a professionally managed organization.
The performance was average as candidates who performed well were accompanied by almost
an equal number of candidates who were unable to comprehend the basic requirement of the
question and delved into areas such as preparation of mission statement and setting
objectives/goals of the organization. Many candidates limited the role of HR to setting-up of an
equitable reward system. Some of them even discussed matters such as maintaining of
employees recruitment data, conducting exit interviews and corporate social responsibilities
etc. which were totally irrelevant in the given context.
Question 6
In this question, the candidates were required to explain four factors, because of which MNCs
prefer to follow policies of centralized decision making. This was an easy question and most of
the students welcomed this opportunity and gained high marks.
Question 7(a)
This was a scenario based question pertaining to a firm of engineers which was working in a
very challenging environment. The candidates were required to identify and briefly explain the
policies to encourage a good team environment in the firm. The question had a specific
dimension of involving highly qualified team members and challenging atmosphere which
majority of the candidates ignored. Students had no idea of ‘Creation of a good team
environment’. Most of the answers were given from the point of view of routine human
resource management practices, which did not fit the requirements of the question.
Page 2 of 4
Question 7(b)
In this part the candidates were required to state the different human, environmental and
mechanical/technical safety measures, to reduce the risks of accidents. The question had mark
allocation for each of these categories. Most of the candidates acquired good marks as their
replies were satisfactory and covered more or less the important measures in each category.
However, a number of students were unable to differentiate between the human, environmental
and mechanical factors. They mixed up the measures in different categories or ignored the
categorization altogether and wrote a general policy outline of a safety plan.
Question 8
This question required the definition of the term ‘Corporate Social Responsibility’ (CSR) and
the types of initiatives that a business organization may take towards the fulfillment of its CSR
objectives. The performance was average. Most of the students were unable to give correct and
complete definition of Corporate Social Responsibility. The basic point which most of the
candidates missed was that it is a voluntary business approach and such activities are
undertaken to make a positive impact on the society and the environment.
The various CSR initiatives were mostly identified correctly although some students also
included steps such as healthcare for employees and building a congenial work environment
which were not correct.
Question 9(a)
This was a frequently tested topic whereby candidates were required to state reasons for
resistance to change by the existing employees and the measures which can be adopted by the
organization to reduce the resistance to change. Most of the replies were reasonably good and
more or less covered the important points.
However, in many cases, the steps to reduce resistance were restricted to the issue of proper
communication which was stated repeatedly in two, three or even four points whereas the other
important steps were missed.
Question 9(b)
This was a challenging question which tested the students’ knowledge as regards branding of
products but in a somewhat unique manner as the candidates were required to specify four
reasons because of which companies prefer to introduce branded products and also four
reasons because of which some businesses may prefer not to give brand names to their
products. The overall performance was average as most of the students stated the reasons for
giving brand names correctly but very few were able to give proper reasons for dealing in
products without a brand name.
Question 10(a)
In this part of the question, the candidates were asked to list the typical questions, which may
be included in the conduct of a comprehensive market audit exercise. The performance was
quite poor as very few students seemed to understand the term ‘market audit’. A substantial
number of candidates were unable to comprehend the basic requirement and stated the
questions that form part of a market survey of the consumers. Some candidates raised general
questions as regards strengths, weaknesses, opportunities and threats which were not
appropriate in the given situation.
Page 3 of 4
Question 10(b)
This question required the candidates to list the demographic variables of market segmentation
for a monthly magazine. The performance in this part was good as majority of the candidates
were able to list down the relevant demographic variables such as age group, gender,
occupation, education level, etc.
Question 11
The question was regarding the sources that can be used for obtaining information/data for
Marketing Intelligence System. It was an easy question and most of the students were able to
perform well and a significant number of candidates obtained full marks.
(THE END)
Page 4 of 4
Final Examinations
Module E
Business Management
Q.1 Gee Phone (GP) is a service provider and offers a wide range of electronic communication
services to its customers. GP operates in a business environment which is dominated by
four resourceful service providers who are continuously striving to defend and increase
their share in an expanding market. GP has created a dedicated environment scanning unit
to monitor the emerging events and develop alternative strategic options to meet the
challenges from its competitors.
Describe the different parameters which GP’s environment scanning unit should monitor
closely and the possible actions that GP may take on the basis of findings of the monitoring
exercise. (10)
Q.2 (a) Discuss the advantages which prominent manufacturers of fast moving consumer
goods achieve by pursuing strategies of competing in diversified product lines. (06)
(b) Empirical studies show that a large number of business entities use external data for
monitoring competition and business intelligence, providing credibility to research
projects and presentation of reports to management.
State the inherent limitations which should be kept in perspective while using
external data. (05)
Q.3 (a) Zypher Refinery Limited (ZRL) is in the advanced stage of establishing a major oil
refinery in the country. The newly appointed director of human resources is
presently involved in the formulation of a comprehensive human resource plan
which would be presented to the board of directors for approval. The HR report
would be of considerable importance and would include the various aspects of
human resource planning process for ZRL’s operations.
Discuss the various aspects of the HR planning process which should be included in
the report to enable the board to reach a well-considered decision and accord its
approval. (09)
(b) Highly responsible organisations adopt practices and values of integrity-based

ethical approach in all aspects of their internal and external relationships. Identify
the common characteristics which are visible in the culture of such organisations. (03)
Q.4 (a) Hi-fi Garments (HG) are manufacturers of a wide range of designer garments for the
affluent segments of the market. HG has established its own retail outlets in the
leading malls in various cities involving substantial capital investments as well as
recurring management and other expenses.
State briefly five reasons why HG may have followed the policy of
marketing/selling of fashion garments through its own outlets rather than through
independent retailers. (05)
(b) Explain briefly what is meant by product positioning strategy.
Give one practical example of a product and its brand and mention the particular
customer need that is stressed while pursuing product positioning strategy. (04)
Q.5 (a) Shalimar Dairies Limited (SDL) is engaged in the business of producing, processing
and marketing of packaged milk. SDL has excess milk processing capacity and is
considering launching an aggressive marketing penetration strategy to increase its
sales and share of the growing market.
Explain briefly the factors which SDL should consider prior to launching of
aggressive market penetration strategy. (06)
(b) Placed below are products A, B, C and D along with their characteristics:
Products Growth Rate Market share

A low small
B high high
C low high
D high small
In the context of Boston Consulting Group matrix, identify the categories to which
the above products pertain. (04)
Q.6 (a) In June 2011, Jaleel Ahmed was appointed human resource manager of
Bliss Entertainment Limited, a holiday resort, which provides a wide range of rest
and recreation facilities to customers. Jaleel Ahmed is of the opinion that the human
resource performance of the company has improved significantly during the
preceding 4 years.
Identify and briefly explain the significance of any four human resource
performance indexes/indicators which should be incorporated in Jaleel’s report to
the management to substantiate his viewpoint. (06)
(b) Evaluation of a firm’s strengths and weaknesses includes comparison of the

efficiency of its value chain vis-à-vis those of its competitors.
State the specific measures which a firm should take if it is faced with a situation in
which weak linkages in its value chain create cost disadvantages and impair its
competitive position. (05)
Q.7 (a) Assume you are Manager Recruitment of a leading company which is in the process
of recruiting personnel at the middle management level in the organisational
hierarchy. You are required to draft an advertisement in an appropriate format, to
be placed in a widely-circulated national newspaper inviting applications from
prospective candidates. The advertisement should contain information to elicit
interest of suitable candidates to send their applications to match with the
requirements of the position. You may make any assumptions that you consider
important in the advertisement. (08)
(b) Briefly explain the advantages of introducing a Formal Succession Planning Scheme
in a large organisation. (05)
Q.8 (a) What is meant by short-termism? State why in your opinion certain companies are
averse to policies of short-termism. (03)
(b) Identify two practical business situations in which the policy of short-termism may
have adverse impact on the prospects of a company. (02)
Q.9 (a) ‘Going global acting local’ is often the proclaimed slogan of multinational
corporations who actively pursue strategies of global expansion.
State briefly five different actions by which multinational corporations can

demonstrate that they are implementing the strategy of ‘going global and acting
local’ in their overseas businesses. (05)
(b) LLC Group, a European multinational company, producing an assorted range of

chocolate products, is considering to establish manufacturing facilities in Zenya, an
underdeveloped country which is a leading producer of cocoa.
List eight factors that may create impediments and negatively influence LLC
Group’s decision to establish manufacturing facilities in Zenya. (04)
Q.10 (a) The prime purpose of international strategic alliances is to co-operate to achieve
mutually beneficial business objectives of the participants whilst retaining their
individual autonomy and flexibility. However, there are numerous instances where
the strategic alliances are not able to establish durable relationships and have
resulted in their breakdown.
Explain briefly the reasons which result in failure of strategic alliance arrangements. (06)
(b) List the reasons why foreign individuals and institutional investors choose to invest
in the capital markets of developing countries. (04)
(THE END)
Business Management
Suggested Answers
Ans.1 The environment scanning unit of GP should closely monitor the different parameters and on the
basis of findings of the monitoring exercise take possible actions to meet the challenges of its
competitors as follows:
(i) Projection of demand for electronic communications services – The demand for electronic
communication services is dependent on the expansion of business opportunities in the
country, increase in population and level of economic development. GP would have to
expand its network capacity as it anticipates increase in the demand for its services and also
to explore new markets for its services.
(ii) Technological changes – Changes in electronic communication technology and variations

in customers’ requirements would have considerable impact on GP’s business prospects.
GP would have to keep abreast of these changes and focus on its R&D capabilities and
introduce necessary modifications in its range of products. This would involve substantial
R&D expenditures and investments in additional equipment.
(iii) Threat of entry of new competitors – GP is presently operating in a lucrative line of

business and earning attractive returns on investments. Therefore, the threat of new entrants
who may pose competitive challenges to GP is always present. GP should be prepared to
meet the threat of new entrants and adopt appropriate measures to maintain its competitive
advantages by keeping close contact and relationship with its customers and creating entry
barriers of switching costs.
(iv) Competitive rivalry and prices of competing products – GP would have to create
significant competitive advantages in terms of quality of its products over its competitors. It
should therefore take cognizance of the strategies of its rivals who would want to upgrade
their services and may offer competitive prices to attract GP’s customers. GP should adopt
appropriate strategies to monitor these threats and counter them effectively.
Ans.2 (a) The advantages which prominent manufacturers of fast moving consumer goods achieve by
competing in diversified product lines are as follows:
(i) Meet threats from competitors – If a company relies on one product line for success,
a competitor can enter the market, undercut the price, and capture the market share.
A company with more diversified product lines can meet threats from competitor’s
aggressive actions more effectively than a company which has a single product line.
(ii) Achieve economies in utilisation of resources – Diversified product lines enable

these companies to make optimum utilisation of resources by spreading operating
and marketing costs over a range of products to reduce these costs for all its products.
(iii) Offset seasonal fluctuations in sales – Companies which offer products with marked
seasonal variations in demand pursue diversified product lines to counter declines in
sales during the off-peak seasons.
(iv) Achieve positive market impact – Diversified product lines enable a company to
create a positive impact in the market. A company offering diversified lines of fast
moving consumer goods is often more important to both consumers and the
distribution channels.
(v) Promotional campaigns of multiple products – Customers can be locked-in by
special promotional campaigns which may on purchase of any one product offer
another product at a substantial discount to promote sales of multiple products e.g.
on purchase of a bag of washing powder for clothes, a bottle of dish washing liquid
can be purchased at half of its normal price.
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(b) The limitations of external data are:

(i) The intervals in the collection of data, units of measurement and proper cross-
comparison may not be appropriate as the data has not been collected from
representative samples.
(ii) The external data may have been gathered to present information more favourably for
certain specific users.
(iii) Data from international sources may be presented in a foreign language and
translations may distort their correct interpretation.
(iv) The data may have copyrights and its use without prior permission can lead to legal
complications.
(v) The data may be outdated and inaccurate due to changes in environment and
technology.
Ans.3 (a) The various aspects of human resource planning process which should be incorporated in
the report to be submitted to the board are as follows:
(i) Identifying the environment for availability of suitably qualified and experienced
personnel sources and the extent of competition for hiring their services by
prospective employers.
(ii) Complete investigation of the various tasks to be performed in ZRL, contents of the
jobs and the required skills for these positions at different levels in the organizational
hierarchy.
(iii) Developing recruitment plans for the number of personnel to be hired, sourcing of
these personnel, their qualifications, work skills and competencies.
(iv) Documenting authorities and responsibilities of the employees at various levels to
achieve efficiencies and ensure smooth day-to-day working.
(v) Formulating remuneration packages, including fringe benefits to attract, retain and
motivate the most suitable employees.
(vi) Training of employees as persons with requisite skills in sufficient numbers may not
be readily available.
(b) The most visible traits of integrity-based ethical behaviour which can be observed in
responsible organisations are:
(i) adhering to the principles of transparency and fair play in their internal and external
relationships
(ii) creating a reputation of reliability and predictability in dealing with all stakeholders
(iii) creating an environment of absolute trust of superiors in their subordinates and of
subordinates in their superiors.
Ans.4 (a) HG may have followed the policy of selling its products in its own outlets in the major
malls in the various cities rather than through independent retailers to achieve the
(i) The shops/outlets of the independent retailers would not be of the standard which
would attract the affluent class of customers which is the target market of HG.
(ii) HG would like the products to be displayed in fashionable company-owned outlets in
malls to attract the affluent customers.
(iii) The independent retailers would seek liberal credit terms resulting in blocking of
funds with external parties and entail risks of defaults.
(iv) The designer garments are sold at high profit margins at the retail stage and HG may
not want to pass these lucrative profits to the independent retailers.
(v) HG may pursue a policy of price skimming and sell the new designs at high prices
and then reduce prices by clearance sales to dispose of the slow moving inventories.
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(vi) The retailers would also carry inventories of other manufacturers which would not be
in line with the latest fashions and quality products of HG. This would adversely
affect the image of HG amongst its prospective fashion-conscious customers.
(vii) All the self-owned outlets would have attractive and uniform configuration of shop
designs and displays to facilitate customers to recognize HG’s distinct identity.
(viii) The salesmen at the outlets would be appointed after careful selection process and
would be provided training to guide and serve the customers.
(ix) The staff at the outlets would obtain feedback from the customers to create fashions
and designs which meet the requirements of the customers.
(b) Product positioning strategy envisages to identify the specific needs of a select class of target
customers and fulfil their particular need(s) more effectively relative to the other competing
products available in the market.
Examples:
 Head and Shoulder Shampoo for users who have dandruff.
 Mercedes vehicles for customers who have achieved a high status in their careers/lives.
 Rolex watches for affluent customers who have discerning tastes, insist for superior
quality products and ‘value their time’.
 Junaid Jamshed Sherwanis for rich fashion-conscious bridegrooms to create an
impression on the invitees.
Ans.5 (a) The factors which should be considered carefully by SDL prior to launching aggressive
market penetration strategies are as follows:
(i) Responses from competitors – Market penetration strategies of offering packaged

milk at low prices or highly aggressive promotional campaigns can result in
competitors also pursuing policies of matching responses to retain their share of the
market.
(ii) Perception of quality of milk in the minds of the customers – Pursuance of an

aggressive penetration strategy by lowering the prices may convey an impression in
the minds of the customers of unwholesome quality of milk.
(iii) Subsequent price increases – Customers expect the prices to remain low for
prolonged periods and in the event of subsequent increase in prices they may switch
to competitors products which would result in loss of market share gained previously.
Keeping prices low for a long period may involve high costs.
(iv) Brand loyalty – Market penetration strategies should take into consideration the fact
that customers who have loyalties and strong brand preferences for competitors’
products would not necessarily switch to the company’s brand. Aggressive
penetration policies usually attract customers who seek bargains of low prices.
(b) The products can be classified according to their characteristics as per the BCG matrix as
follows:
Products Category as per BCG matrix

A Dog
B Star
C Cash cow
D Problem child or question mark
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Ans.6 (a) The following indexes/indicators of human resource performance and their significance
should be incorporated in HR manager’s report to the management:
(i) Lower employee absenteeism rate – Comparative figures of lower employee
absenteeism rates to demonstrate that the employees are now more committed and
motivated and work with greater dedication.
(ii) Lower employee turnover rate – Comparative figures of employee turnover rates in
the years prior to 2011 and subsequent to Jaleel’s appointment to show that the
employees are now more satisfied with their jobs and have less tendency to seek
alternative opportunities elsewhere.
(iii) Decline in rate of accidents and injuries – The staff are now more vigilant and
trained in the maintenance and handling of the various equipment and facilities in
the resort resulting in greater safety of customers, staff and equipment.
(iv) Lower rate of customer complaints – Decline in the rates of customer

complaints/negative feedback during the preceding four years which reflects the
efficiency and high morale of the employees as they render more attentive and better
customer care services to the visitors.
(v) Increased internal promotions from within the company – The employees are now
more competent and perform their duties with dedication with the result that a high
proportion of the next level job openings are filled internally by the employees. This
results in greater employee motivation, reduced time to fill in jobs and lower
recruitment costs.
(b) A firm may take the following measures if it is faced with a situation of weak linkages in its
value chain which create cost disadvantages and impair its competitive position:
(i) Identify activities in the value chain which are either unnecessary or inefficient.
(ii) Re-engineer work processes to achieve greater productivity.
(iii) Introduce more efficient equipment to reduce wastages, achieve economies in labour
costs and energy consumption rates.
(iv) Eliminate expensive work activities in the value chain by introducing cost-saving
technologies and automation.
(v) Relocate high-cost activities to those geographical areas where they can be
performed at low costs.
(vi) Outsource activities to vendors or external service providers who can offer these
services at lower costs.
Ans.7 (a) No suggestion
(b) The main advantages which would accrue by introducing a Formal Succession Planning
Scheme are :
(i) It would enable the company to anticipate HR requirements in advance and avoid
unforeseen problems arising due to delays in identifying and recruiting suitable
employees from external sources to fill-in key vacancies.
(ii) It would enable the company to identify high-potential employees at an early stage
whose career paths can be planned for promotion to higher levels in the organization
hierarchy.
(iii) It would align the HR function of career path planning of employees with the overall
corporate and strategic planning objectives.
(iv) It would provide internal promotion opportunities for the employees resulting in
increased level of motivation and commitment towards the company.
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(v) It would reduce the risk of inducting employees from external sources at higher levels
who may not be able to assimilate in the company’s corporate culture to work in a
cohesive team environment.
(vi) It would result in savings of recruitment costs which would otherwise have to be
incurred in placement of advertisements inviting applications from candidates, time
and effort in the conduct of interviews of candidates and reference checks of selected
candidates.
Ans.8 (a) Short-termism is an approach to business that places reliance on short-term performance
and results rather than pursuance of long-term objectives. Companies that want to retain
their competitive advantages and maximization of their long-term wealth on a sustainable
basis are averse to the policies of short-termism because they believe in the principle that it
is not possible to achieve their objectives by maximizing incomes during short-term periods.
(b) Examples:
A pharmaceutical company may not incur expensive R&D costs and be satisfied with its
existing line of products which are accepted by the medical doctors. Although such a policy
would result in high profits in the short-term, the long-term performance would suffer as
new and more effective medicines are introduced in the market by the competitors.
A high profile biscuit manufacturing company which holds a substantial share of the
aggregate market may choose to defer advertising and promotion expenditures to reduce its
costs and report high profits. However, in the long-run, the company may lose the efficacy
of its brands and competitive advantage to other more aggressive competitors.
Ans.9 (a) Multinational corporations can demonstrate that they are pursuing the strategy of ‘going
global acting local’ in true perspective by taking the following actions:
(i) Being a good corporate citizen in the countries in which they operate by respecting
their cultures, customs, traditions and languages.
(ii) Transferring their manufacturing technologies and procedures to their companies
located in foreign countries.
(iii) Keeping the number of expatriates to the minimum level and providing the local
nationals with the training and skills to assume positions of responsibilities.
(iv) Developing R&D facilities in the overseas companies to enable them to manufacture
products according to the tastes and preferences of the local customers.
(v) Being responsive to the environmental concerns of the host countries by conserving
energy, reducing pollution and disposing effluents and wastages properly.
(b) The impediments which may negatively influence LLC Group’s decision to establishing
manufacturing facilities in Zenya are as follows:
(i) poor telecommunication and transportation infrastructure
(ii) high costs of energy and its unreliable availability
(iii) lack of education and skilled workforce
(iv) prevailing risks of political, economic and social instability
(v) high level of corruption in governmental and other social sectors
(vi) uncertain long term financial and economic policies
(vii) absence of generally accepted accounting principles
(viii) weak compliance with laws relating to patents, trademarks and copyrights
(ix) high rates of customs duties and unfavourable taxation policies
(x) policies relating to repatriation of profits
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Ans.10 (a) International strategic alliances often result in failure due to the following reasons:
(i) The participants in the strategic alliance do not have matching capabilities and
resources with the result that the weak partner is not able to make the expected
contribution on an ongoing basis as were envisaged which results in differences and
consequent breakdown of the strategic alliance arrangement.
(ii) In the absence of full commitment and support of the top management of the
participants, the strategic alliances often face operational and working problems of
inadequate authority, responsibility and guidance from the higher levels which results
in poor performance and failure of the arrangement.
(iii) The strategic partners have major differences in terms of their products, technologies,
and markets with the result they are not able to dove-tail their activities and provide
any tangible advantages to each other and ultimately consider that the relationship
does not serve much purpose.
(iv) The cultures values, leadership styles, business experiences and size are too diverse to
establish sound working relationships among the participants which results in the
breakdown of the strategic alliance arrangements.
(b) Foreign individuals/institutional investors choose to invest in the capital markets of

developing countries for the following reasons:
(i) To obtain high returns on investments based on higher interest rates in the capital
markets in these countries as compared to the developed countries
(ii) To avail the benefits of high growth rates in economies of developing countries as the
developed economies are facing situations of low or no growth.
(iii) To obtain benefits of investing in companies which possess strategic assets or exercise
control over critical businesses in the developing countries.
(iv) To diversify the investment portfolio among different countries and regions.
(v) To obtain tax benefits offered by the developing countries.
(The End)
Page 6 of 6
SUBJECT SESSION
General
The overall performance was much below than the results achieved in the previous attempts.
Students were not able to perform well in questions which involved application of knowledge.
Lack of ability to read and understand the exact requirements of the question was another
reason for poor performance.
Question 1
In this question the candidates were asked to describe the different parameters that are
monitored by the environment scanning unit of a company involved in providing
communication services and the possible actions that may be taken on the basis of the findings
of the scanning unit, to meet the challenges from the competitors. Performance of majority of
the students was not satisfactory as they just explained in detail the PESTEL factors without
giving due consideration to the business environment of the specific industry. Some students
gave answers with respect to fast moving consumer goods. Such students suggested changing
the design and production of the goods and spending more on the advertisement which
obviously was incorrect. Many replies unnecessarily revolved around Michael Porter’s five-
forces of competition or focused on issues such as recruitment, training, employees’ welfare,
corporate social responsibility and adopting merger/acquisition strategies. Further, many
candidates identified the parameters but did not suggest any action.
Question 2(a)
This was a very simple question from the textbook regarding advantages which prominent
manufacturers of FMCG achieve by competing in diversified product lines. A large number of
students were able to perform well. However, a number of students identified general
advantages such as enhancement of management expertise, increase in profitability and market
share, etc. which were not appropriate in the given context.
Question 2(b)
This part of the question on limitations of using external data was answered well too. Most of
the relevant points were duly covered.
Question 3(a)
This part of the question required candidates to discuss the various aspects of HR planning
which can be included in the Human Resource Plan to be prepared by the HR director of a
company which was in the advanced stage of establishing a major oil refinery. The
performance of the candidates was not good as most of the candidates ignored the context in
which the question was framed. They were not able to focus on the planning aspect and
discussed general HR policies of an organization. Consequently, important points such as
source of hiring, tasks to be performed and number of employees to be hired at different levels
and their qualifications and experience, etc. were quite often missed.
Page 1 of 4
Question 3(b)
This part of the question required stating of common characteristics of highly responsible
organizations who adopt practices and values of integrity-based ethical approach. A poor
performance was witnessed as majority of the students were not able to distinguish between the
integrity-based and compliance-based ethical behavior. Further, instead of mentioning the
characteristics of the organizations, candidates offered suggestions about adopting various CSR
initiatives. Many candidates talked about personal ethical values which were not relevant.
Question 4(a)
This question required mentioning the reasons because of which an organization would prefer
to follow the policy of marketing/selling through its own outlets rather than through
independent retailers. This part of the question was attempted well and majority of the
candidates were able to gain good marks. However, some students included general points such
as increasing profits and market share, etc. which were not appropriate in the given situation.
Question 4(b)
This part required brief explanation of product positioning strategy and one example of a
product with its brand and the particular customer needs which are stressed while pursuing
product positioning strategy. Majority of the candidates seemed to understand the concept of
product positioning to some extent but had difficulty in explaining it properly. Most candidates
failed to convey the main idea, i.e. creation of a perception among the customers about the
particular need which the product would fulfill. Many candidates were totally misguided and
defined product positioning as placing the products at prominent places in the shop. Many
candidates showed their lack of understanding by using the term ‘position’ instead of
‘positioning’.
Question 5(a)
In this part of the question, the candidates were required to explain the factors that should be
considered prior to the launching of an aggressive market penetration strategy. Majority of the
candidates failed to notice that those factors were asked which are considered prior to
launching the market penetration strategy and instead, they tried to identify factors which are
considered in the development of a market penetration strategy. Further, many candidates
ignored the fact that the organization was already in business and stated points related to the
start of a new business such as market analysis, demographic characteristics, survey of the
customers’ needs, etc. Many candidates suggested that the company should see whether it has
excess capacity whereas it was already stated in the question.
Question 5(b)
This part of the question was based on Boston Consulting Group matrix. The candidates were
asked to complete the matrix for which they needed to identify the categories to which each
specified product belonged, by considering the growth rate and market share, which was
provided in the question. This was the best attempted question as majority of the candidates
were able to identify all the four categories correctly.
Page 2 of 4
Question 6(a)
In this part of the question, the students were required to briefly explain any four human
resource performance indicators. Majority of the candidates performed well. However, a large
number of candidates were not able to comprehend the basic requirement of the question and
stated the various human resource management functions including recruitment, training and
employee development and welfare activities. Many candidates did not seem to understand that
performance indicators must be specific and clearly measurable and stated general indicators
such as lower level of supervision, increase in revenue, decrease in costs, full utilization of
resources, increased cohesion amongst the employee, etc.
Question 6(b)
The requirement in this part was to specify the measures that are to be taken if a company is
faced with a situation of weak linkages in its value chain. The performance was below average.
A significant number of students were confused between the concepts of Supply chain and
Value chain and gave answers from the point of view of Supply chain only. Many students
discussed about cost of raw materials and dealing with distributors only and ignored all other
factors. Outsourcing was a valid point but instead, many candidates mentioned hiring of
contractual employees and/or downsizing which was not appropriate.
Question 7(a)
In this part of the question, the students were required to draft an advertisement for the
recruitment of personnel at the middle management level in an organization. Performance was
generally satisfactory in majority of the cases as the students covered most of the essential
components of the advertisement and incorporated the required information/criteria for the
prospective applicants, thereby securing good marks. However, many candidates failed to
produce an appropriate format of the advertisement. Two important things which were missed
by most of the candidates were (i) last date of submission of application and (ii) how and to
whom the application had to be sent. Many candidates did not write anything about the
company and its business. Surprisingly, some candidates produced letter format and wrote
terms like ‘yours truly’ & ‘best regards’, etc.
Question 7(b)
In this part of the question, the requirement was to specify advantages of formal succession
planning. The response was generally satisfactory. Majority of the students had a clear idea of
the main advantages which would accrue by introducing a formal succession-planning scheme.
However, many students gave very general points such as better quality of output, innovative
ideas, gaining competitive advantage, etc. which were not appropriate in the given context.
Question 8
In this question, the candidates were asked to define ‘short-termism’ and specify why
companies are averse to policies of short-termism and give two examples about adverse impact
of short termism. The overall response was satisfactory but somehow, many students did not
attempt this easy question which was a bit surprising.
Page 3 of 4
Question 9(a)
This part of the question required the candidates about the different actions by which
multinational corporations can demonstrate that they are implementing the strategy ‘of going
global and acting local’ in their overseas businesses. The overall response was satisfactory.
However, most of the students who scored passing marks could not obtain high marks as two
important points, i.e. being responsive to the environmental concerns and transferring of
technology, were not mentioned by them.
Further, quite a few students only focused on the aspect of going global and ignored the acting
local part and consequently their answers revolved around matters such as centralized policy
making, standardization, etc. whereas some such students gave advantages of following a
global approach.
Question 9(b)
This question required identification of factors which create impediments and negatively
influence a multinational company’s decision to establish manufacturing facilities in an
underdeveloped country. This part was attempted well and majority of the candidates scored
high marks. However, very few candidates could raise issues such as ‘weak compliance with
laws relating to patents, trademarks and copyrights’ and ‘policies relating to repatriation of
profits’. Many candidates again made a very common mistake, i.e. to achieve the tally of eight
points, they broke down the political factor into a number of points whereas they have been
advised quite often to avoid repetitions and mention distinct points only.
Question 10(a)
In this part of the question, the students were required to explain the reasons of failure of
international strategic alliances. The overall performance was average. A large number of
candidates were unable to understand the essence of the question and mentioned totally
irrelevant reasons like hidden agenda, lack of corporate strategy, commitment of fraud, dispute
on profit sharing, etc. which were not appropriate in the given context. The students are
advised to seek guidance from ICAP’s suggested answer about broader strategic issues that
were required to be covered.
Question 10(b)
In this part, the candidates were required to give the reasons which motivate institutional
investors to invest in capital markets of developing countries. The overall response was below
average. Only those students who keep themselves abreast about the key features of the global
economy and the investment climate, were able to produce relevant answers. A large number
of students mentioned reasons in the context of overseas manufacturing like availability of
cheap labor/raw material, loans at low interest rate, etc. which were not appropriate in the
given context.
(THE END)
Page 4 of 4
Final Examinations
Module E
Business Management
Q.1 Platinum Limited (PL) is planning to set up a business as internet service providers. PL has
carried out a market survey which shows that the internet services provided by the existing
firms are rated as unsatisfactory by a significant number of customers. PL has therefore
plans to target customers who are willing to pay premium rates in return for the highly
efficient services.
Explain briefly the factors which would enable PL to adopt quality as a strategic variable
and offer superior services to its customers. (06)
Q.2 Established in the year 2006 in Karachi, Good Food Restaurants (GFR) has achieved
remarkable growth and presently owns and operates a chain of ten restaurants in Karachi,
Lahore and Islamabad. GFR’s operations have been highly profitable because it has a
significant base of loyal customers who are not only a source of repeat business but they also
promote its image through word-of-mouth advertisement.
Identify the strengths, weaknesses, opportunities and threats for GFR. (Mention any four
points in respect of each)
Note: Only list the parameters – explanations are not required. (08)
Q.3 What is meant by the term distribution/marketing channel? Describe briefly the different
matters which a manufacturer must take into consideration while selecting/designing a
distribution/marketing channel for marketing of its products. (10)
Q.4 In the present rapidly changing and highly competitive environment, strategic management
has become an extremely challenging task for business leaders.
Explain the key factors/actions, which in your opinion are important for ensuring that the
functions of strategic planning and management are performed in a coordinated manner to
achieve the pre-determined goals set in the strategic plans. (09)
Q.5 Ahmed Limited follows a policy of periodically introducing employee incentive schemes to
motivate the employees and ensure high levels of performance.
Describe briefly the considerations which management must keep in perspective for
successful implementation of employment incentive schemes. (06)
Q.6 Meridian Limited has recently been incorporated for establishing large manufacturing
facilities in three major cities with plans to induct 15,000 employees of diverse skills in
various cadres.
As Director of Human Resources, identify six types of human resource professional staff
that you would hire for performing specific human resource activities on sound professional
lines and briefly describe their particular roles. (06)
Q.7 Identify the types of expansion/integration strategies pursued by the companies in the
following scenarios:
(a) ABC Limited, a manufacturer of a wide range of confectionary products has merged
with XYZ Confectioners. It is envisaged that the proposed merger would offer
significant economies of scale and further consolidate its competitive advantages. (01)
(b) Coolair Fan Company, a Gujranwala-based manufacturer of ceiling fans presently
markets its products in Punjab and KPK. The company has decided to promote its
products in Sindh and Baluchistan and has appointed distributors for marketing its
products in these two provinces. (01)
(c) Superior Sugar Mills Limited has developed its own plantations for growing sugar
cane to ensure steady supply of good quality sugar cane. (01)
(d) Climax Pipes Limited, a manufacturer of PVC pipes has established facilities for
manufacture of auto rickshaws. (01)
(e) Household Appliances Company a manufacturer of home appliances has sold the
division for manufacture of vacuum cleaning machines because it involved wholly
different manufacturing competencies and marketing efforts which did not blend well
with the company’s overall strategies. (01)
Q.8 (a) What do you understand by the term competency-based reward system? (02)
(b) As the Director Human Resource of a recently established listed company, what types
of managerial competencies would you seek while hiring managers for your company? (08)
Q.9 (a) Global companies are ‘stateless corporations’ who view the whole world as a single
market. State any five important strategic and leadership attributes of global
companies. (05)
(b) State the advantages an MNC would seek to achieve by pursuing a highly
decentralised strategy in the management of its overseas business operations. (04)
(c) State four reasons why MNCs prefer to enter into international collaboration
arrangements with companies in foreign countries. (04)
Q.10 (a) Explain briefly the purpose of each of the following types of recruitment tests which
are administered to candidates in the selection process.
(i) Intelligence Tests
(ii) Proficiency Tests
(iii) Aptitude Tests
(iv) Psychometric tests (06)
(b) Identify three different steps which a firm may take subsequent to the successful
interview and prior to the issuance of appointment letter to a candidate. (02)
Q.11 Astute marketers pursue different strategic approaches depending on the type of their
orientations towards the customers or competitors.
(a) Briefly explain the difference between customer oriented and competitor oriented
market approaches with one practical example of each. (03)
(b) List four characteristics which, in your opinion, would determine the direction of
marketing strategies in each of the above types of marketing orientations. (06)
Q.12 Write short notes on the following:
(a) Concept of Business Ethics and reason for its increasing importance (03)
(b) Market research and why it is conducted (04)
(c) Steps involved in the process of decision making (03)
(THE END)
Business Management
Suggested Answers
A.1 The factors which would enable PL to adopt quality as a strategic variable and offer superior
service to its customers are as follows:
(i) Equipment – top of the line quality of equipment, high speed internet, minimum
breakdowns.
(ii) Highly skilled and trained technical staff – Ability to ensure efficient performance of the
equipment and ancillary services.
(iii) Systems and procedures for quality-assurance – Implementation of procedures for
monitoring the quality of services and maintenance of required service standards.
(iv) Competent customer care personnel – knowledgeable, trained and empowered personnel.
Ability to promptly provide guidance to customers.
(v) Effective communication with the customers – easily accessible website, ability to provide
all facilities with minimum personal interaction.
A.2 Strengths: Weaknesses

 strong customer loyalty  Does not hold price leadership position in the
market
 use of superior quality basic  rising costs of operations and food ingredients
ingredients
 efficient and courteous customer  difficulties in procurement of good quality
service food ingredients
 good location of restaurants  heavy investments required in maintaining the
existing facilities
 consistent high quality of food  inconsistent quality of food at the different
restaurants
Opportunities Threats
 increase in number of prospective  loss of trained staff to competitors
affluent customers
 increase in number of working families  changes in eating habits of health conscious
who prefer to eat out customers
 introduction of home delivery services  aggressive competition from existing
restaurants
 addition of more facilities/ services like  entry of new competitors
free internet, children play area, etc.
 market penetration in other cities.
A.3 A distribution/marketing channel comprises of individuals/firms which are hired/engaged by

the manufacturer to carry out transportation, storage, display and sale of the manufacturer’s
products.
Matters to be taken into consideration while selecting/designing a distribution/marketing

channel
(i) Customers – their number, spread of locations and buying habits

(ii) Product characteristics – comprise of prices of products, volume/bulk of products,
perishability of the products, and technical services to be provided to the customers
(iii) Characteristics of distributors i.e. wholesalers, retailers, sole distributors/agents, or
manufacturers self-owned outlets
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(iv) Resources/facilities to be provided by the marketing channel – i.e. transportation,

warehousing, finances and technical knowledge to customers
(v) Relationship of distribution/marketing channels with the competitors – whether it
would be advisable to select those distribution/marketing channels which also serve the
rival competitors
(vi) Basis of compensating the distributor – i.e. value/volume of sales, separate compensation
for individual facilities, fixed time based payments, reimbursement of expenses etc.
A.4 The key factors actions which are important for ensuring that the functions of strategic planning
and management are performed in a coordinated manner to achieve the pre-determined goals set
in the strategic plans are as follows:
(i) Commitment from top management in terms of overall support and required resources.
(ii) Involving the employees in the strategic planning exercise to ensure their ownership stake.
(iii) Considering the strategic planning process as a continuous and integrated effort at all levels
rather than an isolated one time exercise.
(iv) Giving due importance to the roles of operational level managers.
(v) Integrating and co-ordinating the various management and operational functions.
(vi) Implementing sound control systems and procedures to measure actual performance and
its comparison with the targets.
(vii) Taking timely corrective measures.
A.5 Management must keep in perspective the following considerations for successful
implementation of employee incentive schemes:
(i) Benefits offered are attractive for employees to motivate them to make extra efforts.
(ii) Quality standards are maintained and not compromised.
(iii) Standards of performance should be achievable and rewards are linked with performance.
(iv) Incentive plan should be easy to understand and acceptable to the employees as being fair.
A.6 The types of the HR specialist staff and their particular roles would be as follows:
(i) Recruitment specialists – identify and induct suitable job applicants.
(ii) Job analysts – prepare job descriptions/specifications
(iii) Compensation managers – develop salary packages and employee benefits
(iv) Training specialists – plan, implement and coordinate training activities
(v) HR development specialists – make plans for formulation and implementation of
employee development schemes
(vi) Employees welfare officers – handle employee welfare activities such as canteen,
transport, first aid, etc.
(vii) Industrial relations specialists – implement HR policies according to prevailing labour
laws/rules.
A.7 (a) Horizontal integration

(b) Market development
(c) Vertical or backward integration
(d) Conglomerate expansion/diversification
(e) Divesture/Disinvestment strategy
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A.8 (a) In a competency based reward system, the employees are paid for the range and depth of
their skills, and demonstrable characteristics of attitude in their work performance and
responsibilities.
(b) While recruiting managers, I would examine and seek the following managerial
competencies:
(i) Communication Competency: The ability to effectively transmit and exchange

information.
(ii) Planning and Administrative Competency: The ability to plan and organize
activities and make decisions especially related to resource allocation, costs, etc.
(iii) Teamwork Competency: The ability to build a team environment and work
efficiently in team settings.
(iv) Strategic Action Competency: The ability to understand the overall corporate
mission and strategies.
(v) Global Awareness Competency: Ability to understand the global trends and their
impact on the business.
(vi) Self-management Competency: Have a sense of integrity/good ethics and

willingness to accept responsibilities.
A.9 (a) The important strategic and leadership attributes of global companies are as follows:
(i) develop and implement globally competitive strategies
(ii) pursue strategies of integration to consolidate competitive advantages
(iii) high research and development expenditures
(iv) possess substantial financial resources to seize business opportunities in different
countries
(v) hiring of best talent and offering attractive salaries and benefits to retain motivated
employees
(vi) use of transfer pricing to their advantage
(vii) obtain maximum advantages of tax and other concessions offered in various
countries.
(b) The advantages which an MNC would seek to achieve by pursuing a highly decentralised
strategy of managing its overseas operations are as follows:
(i) Decisions are made by local staff who are fully conversant with the local situation.
(ii) High level of management initiative and enthusiasm.
(iii) Prompt actions/decision by the management.
(iv) Management assumes full responsibilities and is accountable for the performance of
the overseas operations.
(c) MNCs prefer to enter into international collaboration arrangements with companies in
foreign countries to achieve the following objectives:
(i) Outsourcing/transfer of work to low-cost locations.
(ii) Obtaining advantages of local know-how and contacts.
(iii) Keep investments and personnel exposures at minimum levels in politically risky
environments.
(iv) Quick entry into foreign markets.
(v) Mitigate the level of competition in the foreign country.
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Suggested Answers
A.10 (a) The purpose of different types of tests administered to the prospective candidates are:
(i) Intelligence tests: To measure the candidate’s ability to think logically and make
rational decisions.
(ii) Proficiency tests: To evaluate the candidate’s ability to perform a particular task.
(iii) Aptitude Tests: To ascertain the candidate’s behavioural attributes to work with
others in a team environment, handle work-related stress and cope with the demands
of the job.
(iv) Psychometric Tests: To quantify psychological dimensions of the applicants in terms

of their intelligence, personality and motivation levels.
(b) A firm may take the following steps subsequent to the successful interview and prior to the
issuance of appointment letter to the candidate:
(i) Conduct of medical tests.
(ii) Verification of degrees and certificates.
(iii) Checking of references furnished by the successful candidates.
A.11 (a) Customer oriented approach – focus of attention are the customers e.g. a company selling
expensive designer watches.
Competitor oriented approach – focuses on strategies, plans and actions of the important
competitors e.g. bottlers of beverages
(b) The characteristics of competitive strategies and directions in each of the different
categories of business are :
Customer orientation
 strong commitment towards customers/satisfaction of customers
 creation of value for customers
 understanding of customer needs
 providing after-sales services.
Competitor orientation
 emphasis on obtaining competitors information
 prompt response to competitors actions
 frequent internal discussions of competitors strategies and tactics
 offering of discounts and other sales incentive schemes from time to time.
A.12 (a) Business ethics encompass a system of moral principles which provides guidelines for
acceptable behaviour in strategy formulation and conduct of day-to-day operations.
Reasons for growing importance of business ethics in past few years are:
(i) close scrutiny by the regulators
(ii) assertive outlook adopted by customers/customer activists groups
(iii) exposure by social media
Page 4 of 5
Business Management
Suggested Answers
(b) Market research involves the activities of collecting information about customers, their
needs, market trends and the competitors.
Purpose of market research

(i) identify market opportunities and problems and determine the need for changes in
marketing plans
(ii) obtain information about consumers preferences and seek their suggestions
(iii) analyze marketing strategies of competitor and their impact on the firm’s business
(iv) formulating strategies of product development, pricing, promotion and distribution.
(c) The important steps involved in the process of decision making are as follows:
(i) have a clear perspective of the objectives/goals to be achieved

(ii) analyze nature of the problem in sufficient detail
(iii) examine the various available options and related constraints
(iv) weigh the consequences of selection of any one or combination of actions.
(The End)
Page 5 of 5
SUBJECT SESSION
General:
Performance in this paper was below expectations. Lack of ability to comprehend the precise
requirements of the questions and consequently framing meandering and irrelevant replies was
apparent in a number of cases. It was also observed that many students had confined their
preparations to selective topics only and had not covered the entire syllabus.
Question-wise comments are stated below:
Question 1
This scenario-based question required explanation of the factors which would enable Platinum
Limited, a prospective provider of internet services, to adopt quality as a strategic variable and
offer superior services to its customers. Performance in this question was poor. A large number
of students did not read the question carefully and instead of focusing on quality as a strategic
variable, they explained marketing techniques which would enable PL to attract more
customers. Many students gave the ultimate objectives or too generalized recommendations
such as improve service to customers, network speed, etc. instead of explaining the factors that
would enable the company to achieve these objectives.
Question 2
In this scenario-based question regarding SWOT analysis of a chain of Restaurants. The

overall performance was satisfactory as the students were generally able to identify a number
of pertinent points. However, a number of students could not draw distinctions between
‘weaknesses and threats’ and ‘strengths and opportunities’. These students repeated the same
point for weaknesses and threats and for strengths and opportunities. Many students framed
their points in the form of suggestions rather than threats and opportunities. Some students
gave long explanations of each point which were not required. In a number of cases, totally
irrelevant points were mentioned such as dishonest employees, high tips received, etc.
Question 3
In this question, students were required to (i) define the term distribution/marketing channel
and (ii) describe the different matters which a manufacturer must take into consideration while
selecting a distribution/marketing channel for marketing of its products.
A number of the students were able to define the term distribution/marketing channel correctly.
However, some students incorrectly defined distribution channel as the media responsible for
advertising and marketing of the products. Some of the candidates mentioned the meaning of
distribution instead of distribution channel. Some of them gave definitions of different
intermediaries such as distributors, retailers, etc.
In the question regarding matters which should be considered by manufacturers while

selecting/designing a marketing/distribution channel, many students erroneously described the
functions performed by the marketing channels and the role of electronic and print media
channels for advertising and promotion of the products/services.
Page 1 of 4
Question 4
In this question, students were required to explain the factors/actions which would enable an
organization to achieve optimum co-ordination between functions of strategic planning and
strategic management to achieve the goals set in the strategic plans. Performance in this
question was quite poor as many students could not comprehend the question correctly and
discussed matters such as strategic analysis, selection of strategies and their implementation
which had no relevance to the requirements of the question. The students are advised to seek
guidance from ICAP’s suggested answer about the interactions of the strategic issues that were
required to be covered in this question.
Question 5
This question required the students to describe the considerations which management ought to
keep in perspective for successful implementation of employment incentive schemes. The
performance in this question was average. Many students failed to comprehend the direction of
the question and instead of focusing on the strategies for the successful implementation of
employment incentive schemes, they described how to formulate employment incentive
scheme.
Question 6
This was a ‘pointed’ human resource question requiring students to identify and describe the
types of human resource staff for performing the various human resource functions on sound
professional lines in a newly incorporated manufacturing organisation with plans to induct
15,000 employees. Overall performance of the students was below average. The commonly
observed errors were as follows:
 Most of the students were able to identify only 3 types of HR specialists, i.e. recruitment
specialists, compensation managers and training specialists. HR Development specialists,
Employees Welfare Officers and Industrial Relation Specialists were mentioned by few
candidates only.
 Many students identified one or two correct types of HR specialists and repeated their
features with different phrases and words. For example, recruitment specialists was
identified along with specialists for conducting interviews, collecting and evaluating CVs,
etc.
 Many students did not read the requirements of the question carefully and spent precious
time in describing the various types of departments/divisions in a manufacturing
organisation and types of personnel required for their industrial departments/divisions.
Question 7
This question in which the candidates were required to identify the applicable
expansion/integration strategies in five different situations elicited a significant number of
correct replies and most of the students were able to score good marks.
Question 8(a)
The overall performance in this question regarding the term competency-based reward system
was below average and showed lack of clarity among a number of students. Many such
students just re-framed the wordings of the question and stated that the employees are paid on
the basis of their competency. The basic element that the employees are paid for the range and
depth of their skills and demonstrable characteristics of attitude in their work performance and
responsibilities was generally missed.
Page 2 of 4
Question 8(b)
In this part of the question regarding managerial competencies to be considered while

recruiting managers for a newly established company, the vital points of communication,
planning and administrative competencies, teamwork and strategic competencies were
mentioned by a number of students. However, these points were not elaborated further which
would have enabled the students to earn maximum marks. Some of the important points such
as global awareness and self-management competencies were mentioned by only a handful of
students. Few students did not comprehend the question and spent time and effort in discussing
the recruitment process which was not required.
Question 9(a)
Replies to the question pertaining to strategic and leadership attributes of global companies
were average. Many students performed well but an equally large number of candidates did not
grasp the essence of the question and mentioned general characteristics of the global
companies such as large size, good management, etc.
Question 9(b)
In this part of the question regarding advantages which MNCs seek to achieve by pursuing
highly decentralized strategies of managing their overseas operations, the performance was
average. The point that the decisions are made by the local staff which are conversant with the
local conditions was stated repetitively in different forms. Two important advantages, i.e. high
level of management initiatives and enthusiasm and assumption of full responsibility were
mostly missed.
Question 9(c)
The question pertaining to reasons why MNCs prefer to enter into international collaboration
arrangements in foreign countries was responded satisfactorily by a significant number of
students.
Question 10(a)
This was a well attempted question which required explanation of the purpose of different
types of recruitment tests. However, few students instead of explaining the purpose of the tests
mentioned how different types of tests are conducted and what do those tests contain.
Question 10(b)
The students were required to identify three steps which a firm may take subsequent to the
successful interviews and prior to issuance of appointment letters to the candidates. The overall
performance in this part of the question was satisfactory. Although the steps of checking of
references furnished by the successful candidates and verification of degrees and certificates
were stated correctly, the conduct of medical tests was missed by a number of students. Some
students mentioned rechecking of ratings given by the interviewers, which was not correct as
the candidates had already been declared successful in the interview.
Question 11(a)
The part of the question pertaining to the differences between customer oriented and
competitor oriented market approaches elicited satisfactory replies from most of the students.
Page 3 of 4
Question 11(b)
Replies to the characteristics of strategies in customer orientation approaches were generally

well-focused. However, some answers included points such as age and incomes of customers
and their buying habits which were not relevant. The performance with regard to
characteristics of competitor orientated approaches was below average as a large number of
candidates mentioned inappropriate or general points such as low prices, cut throat
competition, etc. A very common point was that in competitor oriented approach, the
organizations strive to achieve market leadership status which was not correct as only few of
the many competitors really strive for such a position.
Question 12(a)
There were two requirements of this part of the question, i.e. concept of business ethics and
reasons for its increasing importance. The first requirement was generally fulfilled but as
regards reasons for increasing importance of business ethics, close scrutiny by regulators,
adoption of assertive approach by the customers and customers activist groups and role of
social media were missed by a number of the students. Some students mentioned the
advantages which accrue to organisations which pursue policies of business ethics in their
dealings with the internal and external stakeholders which was not required.
Question 12(b)
The term market research was defined quite well. However, while discussing the purpose
thereof, irrelevant or too generic points were frequently observed such as capturing
opportunities, facing competition, achievement of targets, etc.
Question 12(c)
The performance in this part of the question requiring steps involved in the process of decision
making was above average. However, some students did not read the question carefully and
offered replies which described the steps subsequent to the ‘implementation of the decision’
such as evaluation of the decision and obtaining feedback of the decision.
(THE END)
Page 4 of 4
Certified Finance and Accounting Professional Stage Examinations

Business Management and Strategy

Q.1 (a) Robust Tyres Limited (RTL) is engaged in the business of manufacturing and
marketing of tyres for cars, trucks and tractors. Recently, Eagle Tyre Limited (ETL)
has offered to sell its company to RTL because of serious internal conflicts among the
principal owners.
Consultants appointed by RTL to conduct an examination of the affairs of ETL have

given satisfactory report regarding the quality of assets, competence of the staff,
manufacturing processes, marketing and distribution network, and financial position
of the company. The consultants have further stated that the asking price by ETL is
high but not too unreasonable.
Discuss what other matters of significance should RTL consider in evaluating the
proposal of ETL. (06)
(b) Leading organisations articulate their key objectives through clearly and concisely
stated Mission and Vision statements.
State the distinctive ingredients of ‘Mission’ and ‘Vision’ Statements. (03)
Q.2 (a) Valley Bank Limited (VBL) is pursuing a strategy of promoting its products such as
credit cards, car loans and bank lockers and has hired 20 customer services
representatives to contact prospective customers on telephone. Although VBL offers
emoluments which are slightly higher than the prevailing market, it is experiencing a
very high turnover among the customer services representatives. Identify any five
possible reasons for the high turnover rate. (05)
(b) Describe briefly the reasons why senior human resource managers have assumed
increasingly important roles and responsibilities in the formulation and
implementation of corporate level strategies of leading organisations. (05)
Q.3 Identify the degree of the risk probability and impact factor in each of the following
scenarios and state the reason for your answer.
(a) A major fire in the facilities of Paragon Oil Refinery Limited would have disastrous
consequences for the company. Therefore, the company has implemented most
stringent fire control procedures and systems and offers fire-fighting training to its
employees from time-to-time. (02)
(b) Work in Sun Shipbreaking Company is hazardous as strenuous manual working

methods are involved in dismantling of old ships. Preventive measures of workforce
training and protective safeguards are almost non-existent A major accident may
result in loss of lives of a large number of workers. (02)
(c) Workers in Highland Marble Factory face continuous exposure to fine dust particles
which cause respiratory diseases. The factory requires 120 workers. 10-15 per cent of
workers leave each year to seek jobs elsewhere in more conducive work environments
although the company provides them adequate protective facilities. (02)
Business Management and Strategy Page 2 of 3
Q.4 Study the following scenarios:
(i) Established as a family business in 2005, Star Confectionary Limited has expanded its
operations significantly due to the sustained efforts of family members and substantial
reinvestment of earnings in the business.
(ii) Management of Ajax Limited intends to make far-reaching changes in its employee
compensation policies. A questionnaire is sent to the staff to elicit their viewpoints to
be able to reach a well-considered decision. The responses are tabulated and results
are circulated among the staff. The staff members are then asked to review the issues
on the basis of the cumulative inputs received and offer their revised viewpoints. The
series of rounds are repeated until the management is able to incorporate all the inputs
and reach a meaningful decision.
(iii) An employee in an industrial organisation believes that the supervisor is creating
hindrances and preventing him from achieving something which he considers to be
important.
(iv) A major corporate restructuring exercise has been carried out in the organisation,
which would have far-reaching impact on the objectives of the organisation and the
individuals working in it.
(v) There is concentration of inter-connected facilities and ancillary service organisations

in that region which offer value-creation advantages to all the firms located in it.
(vi) Mateen is keen to improve his performance by adopting new ideas and concepts and
receiving objective feedback on his performance.
(vii) The quantities of non-renewable raw materials and resources used and wastages and
emissions created by an undertaking in the manufacture of products or providing
services.
Match each of the above scenarios with any one of the following concepts/principles.
(i) environmental footprint (ii) change management

(iii) transformational change (iv) organic growth
(v) activists (vi) clusters
(vii) career progression (viii) ethical manufacturing
(ix) Delphi method (x) sustainable reorganisation
(xi) conflict (xii) queuing theory
(xiii) horizontal growth (xiv) pragmatist (07)
Q.5 Diligent Enterprise Limited (DEL) is a highly progressive multinational company and has
subsidiaries in several countries. DEL considers Akmal Khan as an exceptionally talented
employee and has identified him for assuming a senior management position.
Discuss briefly four employee development methods which DEL may adopt to enable
Akmal Khan to assume a senior management position in the group. (08)
Q.6 Superb Tiles Limited (STL) is a manufacturer of ceramic tiles and has over the years
established a reputation for the quality and durability of its products. Recently, a new
competitor has entered the market and has launched an aggressive market penetration
strategy to make inroads in the market held by STL. Shafiq Ahmed, Marketing Director of
STL has proposed a strategy of reducing the prices to counter the threats from the
competitor.
Identify and explain briefly some of the weaknesses of price cutting strategy which the
management of STL must consider prior to making a final decision in this regard. (08)
Q.7 Critical Success Factors are those elements of strengths in which a firm must excel to
outperform its competitors. State any six Critical Success Factors which in your opinion
would be most important for a nationwide courier company to retain its market leadership
position. (06)
Q.8 (a) Briefly describe the concept of ‘Balanced Scorecard’ and discuss the main benefits
which the management of a progressive organisation seeks to achieve by adopting a
Balanced Scorecard approach. (07)
(b) Explain briefly the characteristics of a fragmented industry/business. Give two

examples of such an industry/business. (04)
Q.9 (a) Define the term ‘Whistleblowing’. (03)
(b) Explain briefly three reasons why professionals such as auditors, lawyers and medical
practitioners have to carry the burden of special obligations and fiduciary
responsibilities towards their clients. (06)
Q.10 (a) Define the term ‘Sustainable Development’. Also give one example of an industry in
which sustainable development is of particular importance along with the reason
thereof. (03)
(b) Delightful Toy Company (DTC) is in the process of establishing a factory for
manufacturing of an assorted range of toys for infants between the ages of 12-24
months.
Describe briefly the measures which DTC should take as a socially responsible
company to conform to the high standards of safety for the infants. (05)
Q.11 (a) Swat Mountain Resorts (SMR) have appointed you to design an online marketing
website to persuade holiday makers to visit their facilities. State any eight design
features that may be incorporated to make the website attractive for the prospective
customers. (06)
(b) Briefly describe ‘Decision Support System’. State the important features which should
be incorporated in a well-designed Decision Support System. (05)
Q.12 (a) Describe briefly the important functions of Customer Relationship Management
software. (04)
(b) Computer viruses are programs designed to deliberately corrupt computer systems.
Viruses are classified into different types based on their effects and the damages that
they cause. Briefly explain how the following types of viruses can corrupt the
computer systems:
(i) Trojan horse

(ii) Worm
(iii) Logic bomb
(iv) Time bomb (03)
(THE END)
Suggested Answer
Certified Finance and Accounting Professional – Winter 2016
Ans.1 (a) RTL’s management should carefully examine the following important matters while
evaluating the proposal of ETL for sale of its company:
(i) The prospects of achieving significant synergies. (Increase in sales, economies in

expenses, etc.)
(ii) The prospects of growth in demand. (Local as well as international)
(iii) The availability of sufficient financial resources for acquisition. (Its short and long
term impact on RTL)
(iv) Differences between the cultures of the two organizations. (Impact of such
differences on the merged entity)
(v) Organisation structure of the merged entity. (The financial and motivational aspects
of such changes)
(b) Mission Statement
A mission describes the organization’s basic function in society, in terms of the products
and services it produces for its customers (Mintzberg).
Vision Statement
A vision statement represents a desired optimal future state of what the organization wants
to achieve over time.
Ans.2 (a) The high rate of employee turnover of customer services representatives of Valley Bank
Limited may be attributable to the following reasons:
(i) The customer services representatives are not trained properly to deal with
demanding customers and are increasingly under pressure.
(ii) Low success ratios in closing deals with new customers demotivate the customer
services representatives.
(iii) The products of VBL are not attractive for customers vis-à-vis those of the
competitors.
(iv) Uncomfortable office environment.
(v) Unprofessional organizational culture
(vi) The individuals making the selection are not trained in or do not have the necessary
skills to select candidates who are able to perform in a fast paced environment
(b) Senior human resource managers have now assumed increasingly important roles and
responsibilities in the formulation and implementation of corporate level strategies of
leading organisations due to the following reasons:
(i) Senior Human Resource managers are responsible for management of employees
who are the vital assets of leading organisations and therefore deserve closer
attention.
(ii) Senior Human Resource managers are specially trained and possess expertise to
develop cohesive organisational structures to achieve the overall strategic objectives
of the company.
(iii) Senior Human Resource managers are responsible for formulating strategies of
reward systems and promotions in the organisations. The perceived fairness and
equity in the development of these policies play a vital role in employee induction,
motivation and productivity at all levels.
(iv) Senior Human Resource managers formulate and implement fair and objective
policies of career path and succession planning for employees to ensure that the
senior management positions are filled-in by competent personnel at all times to
achieve the corporate objectives.
Page 1 of 6
Suggested Answer
Ans.3 a) Low probability and High impact. Paragon Oil Refinery Limited implements strict fire
control systems and its workers are highly trained, therefore the probability of a major fire
is rather remote. However, the occurrence of a major fire can result in huge losses because
of inflammable fuel stocks which would rapidly engulf all the facilities.
b) High probability and High impact. The workers who break/dismantle the ships are not
given proper training and work with minimum protective safeguards in hazardous working
conditions; therefore the probability of accidents is quite high. A major accident resulting
in loss of many human lives may lead to heavy fines or even cancellation of shipbreaking
license and closure of the business.
c) i Health Risk: Low probability and Low impact.

The workers are continuously exposed to dust but the probability of their suffering from
respiratory diseases is low because the company provides them adequate protective
facilities, consequently, its impact on company’s business is low in terms of incurring
health costs for the workers.
ii Worker turnover Risk: Low to moderate probability and impact

The worker turnover risk is low to moderate due to their perception of having respiratory
diseases however, its impact on the company’s business is again low to moderate as the
worker turnover is not expected to result in major setback/loss for the company because of
abundant availability of workers.
Ans.4 (i) organic growth (ii) Delphi method

(iii) Conflict (iv) transformational change
(v) Clusters (vi) Pragmatist
(vii) environmental footprint
Ans.5 Diligent Limited may adopt the following employee development methods to enable Akmal
Khan to assume a senior management position:
(i) Job rotation: Job rotation would allow Akmal Khan to gain knowledge of work involved
in the different jobs and a broad range of experience.
(ii) Postings in group companies: Postings in group companies located in different countries
would allow Akmal Khan to gain experience of working in different work environment
with staff of diverse cultures and backgrounds.
(iii) Deputizing for senior managers: This would provide him opportunities to understand the
broader challenges and issues pertaining to the group and give him experience of matters of
strategic importance.
(iv) Delegation of responsibilities: Akmal Khan may be given additional responsibilities with
authority to take decisions.
(v) Management Development Courses: DL may nominate Akmal Khan to participate in

executive development training courses in prestigious institutions to upgrade his
management skills and keep abreast with the latest concepts/theories of management.
Page 2 of 6
Suggested Answer
Ans.6 STL must evaluate the following factors prior to implementing a price cutting strategy:
(i) A sharp reduction in prices of products by STL would result in decline in the profit
margins and returns on investment. This may adversely affect the company’s ability to
meet the expectations of its stakeholders such as shareholders, employees, suppliers etc.
(ii) Ceramic tiles are ‘shopping goods’ and are purchased less frequently and to fulfill very
specific needs. Hence, price is only one of the several factors that affect the customers’
decision.
(iii) STL has a well-established reputation for superior quality of its products. Reduction in
prices may adversely affect that perception. The adverse perception of products and market
positioning of its brand may not be easy to change in future.
(iv) It may not be easy to increase the prices again in the near future, whereas STL may not be
able to sustain the low profitability/loss incurring market penetration strategy in the long
run. Consequently, STL should assess the resourcefulness of the competitor as long price
war may be unsustainable.
(v) Low prices of STL’s products may have adverse effect on the dealers/distributors if their
commissions/profits are also reduced.
Ans.7 The Critical Success Factors for a nationwide courier company to enable it to retain its market
leadership position are as follows:
(i) Highly competent and aggressive management team and motivated staff who are trained
and empowered to respond to customer needs.
(ii) A highly reliable system which ensures delivery of the consignment within the designated
time from the point of collection to the point of delivery at its destination.
(iii) Location of collection offices at convenient commercial points as well as facilities for
collection of parcels at the premises of important customers.
(iv) A network of procedures and systems which can promptly trace the location of each
parcel/package at any point from collection to its delivery at the final destination.
(v) Generation of Management Information Reports to enable the management to monitor the
timely delivery of packages to the consignees.
(vi) Appropriate systems and customer-care staff to investigate any delays/errors or causes of
customer complaints/dissatisfaction and adopt corrective measures.
(vii) An alert telephone answering system which is capable of responding promptly to queries of
customers who seek any information regarding the company’s products.
(viii) A deeply enshrined culture in the organisation which treats the customers as important
stakeholders and employees strive hard to outperform the competitors.
(ix) Cordial relationships with transportation providers locally and globally.
Ans.8 (a) (i) The Balanced Scorecard is a strategy evaluation and control tool which enables
management to measure and manage an organisation’s progress towards
achievement of its long-term strategic objectives.
(ii) The Balanced Scorecard contains a combination of key strategic and financial
objectives tailored according to the needs of the particular type of activities of the
business.
(iii) The Balanced Scorecard approach enables management to establish goals and
targets from the following perspectives:
 financial performance
 customer knowledge
 internal operational processes and
 learning and growth.
(iv) A Balanced Scorecard offers the advantages of evaluation of a firm’s strategies from
both the quantitative and qualitative standpoints and integrate vital information of
financial and non-financial parameters.
Page 3 of 6
Suggested Answer
(v) The Balanced Scorecard approach enables management to take cognizance of the
shareholder value and establish linkages between short-term profitability and the
issues of long-term strategic perspective of the organisation.
(vi) The Balanced Scorecard approach offers a more comprehensive evaluation and
control mechanism than the traditional measures of performance such as business
ratios and productivity analysis which offer only a narrow view of an entity’s past
performance.
(b) A fragmented industry/business is an industry/business in which no single enterprise is a

major player to be able to influence the industry. The individual market segments for a
fragmented industry/business are relatively small and are not considered to be attractive
for an organisation of significant size. The mode of entry/exit in a fragmented business is
easy and the requirements of investment are small with the result that a large number of
such businesses are established in close proximity to each other.
Examples of a typical fragmented industry/business are: bakeries, laundry shops, hair

cutting salons, vegetable and fruit retailers and meat shops.
Ans.9 (a) ‘Whistleblowing’ means encouraging reporting of any malpractice/misconduct

/corruption/illegal behaviour to the concerned authority within or outside the
organisation. Whistleblowing usually becomes necessary in case of unethical behaviour of
the employees in top managerial positions.
(b) Professionals such as auditors, lawyers and medical practitioners have to carry the burden
of special obligations and fiduciary responsibilities towards their clients due to the
following reasons:
(i) Individuals in these professions have special obligations to act with intelligence and
diligence and protect their customers’ interests and this entails ‘knowing’ them and
their behaviour and saving them from any harm that they may cause to themselves
or to others.
(ii) These professionals are expected to set for themselves high standards of conduct and
their responsibilities/obligations towards their customers which are spelled out in
their respective codes of ethics. Any lapse of judgment or improper ethical behavior
may bring disrepute to their respective professional bodies. The overseeing
professional bodies therefore take strict action against the delinquent members.
(iii) The laws and judicial systems recognize the special obligations/status of these
professionals because they have obtained their status on the basis of extensive
learning and knowledge and it is on the basis of such learning and knowledge that
they are allowed to practice in their respective fields.
Ans.10 (a) Sustainable development means manufacturing products and offering services to meet the
present needs of the customers without compromising the ability of the future generations
to meet their needs.
Example:
Manufacture of Paper – Develop forests/plant trees in the areas in which trees have been
cut to mitigate adverse effects of changes in environment.
OR
Deep Sea Fishing – Encourage fish farming to avoid overfishing and depleting the
resources in the seas.
Page 4 of 6
Suggested Answer
OR
Power Generation - Develop renewable sources of energy, viz. wind power, solar power
and hydro resources to reduce dependence on non-renewable fossil fuels.
(b) As a socially responsible company, DTC should take the following measures to
manufacture toys which are absolutely safe for infants:
(i) The materials used in the manufacture of toys should be safe and free from any toxic
elements as the infants may place them in their mouth or chew them.
(ii) The packages of the toys should contain instructions/directions for the parents of
possible hazards, if any, for the infants.
(iii) The toys should be manufactured under stringent quality control conditions and
should be subjected to regular inspections during the manufacturing processes.
(iv) The design features of the toys should be tested carefully to ensure that they meet the
highest standards of safety as they would be handled by the infants.
(v) DTC should have a system to recall the toys from the distributors and consumers in
the unlikely event of any report that the toy has caused injury or accident to any
child.
Ans.11 (a) The website of SMR should include the following design features to make it attractive for
the customers:
(i) It should provide a good idea of the picturesque location of SMR.
(ii) The icons should be clearly located and readily accessible/easy to navigate.
(iii) The screens should be visually attractive and zooming features should allow
enlargement of the images of the facilities of SMR and the surrounding mountains
and rivers.
(iv) It should facilitate easy access to all information which is frequently required by the
users.
(v) It should be available to users at all times with minimum downtime.
(vi) It should be updated periodically to show any special features/offerings to make it
attractive for the prospective customers.
(vii) The website should contain reviews of customers who have visited the SMR facilities
and written about their experiences.
(viii) It should provide assurance to the users that it is absolutely secure to access it.
(ix) The website should provide information of the procedure of online reservation and
mode of payment.
(x) It should contain a separate section for FAQs.
The website should be designed in such a way as to attract users towards additional
facilities provided by SMR such as rent-a-car and local guides.
(b) Decision Support System is a computer based system which helps managers to make
complex or unstructured decisions. This system includes a range of forecasting, statistical
analysis and linear programing models to make decisions. These models can also be used
for scenario testing.
The important features which should be incorporated in a well-designed Decision Support

System are as follows:
(i) it should be flexible and user-friendly
(ii) it should be able to integrate data with analytical models/data analysis tools
(iii) it should have greater analytical power than the routine MIS systems.
Page 5 of 6
Suggested Answer
Ans.12 (a) The important functions of Customer Relationship Management software system are to:
(i) Collect information for identifying individual customers according to their
purchasing behaviour and update the information on a regular basis.
(ii) Earmark customers in different marketing segments and develop appropriate
strategies for customers in these marketing segments according to their buying
behaviour.
(iii) Render special services to important customers on the basis of information readily
available on the CRM data profile.
(iv) Monitor the number and types of customers’ complaints to address the issues which
result in more frequent complaints.
(b) (i) Trojan Horse

It is type of virus that is disguised and often hidden within other software or files.
Whilst the user believes that the system is carrying out a program, the Trojan Horse
secretly spreads the virus.
(ii) Worm
This is a version of corrupt data that replicates itself within the system and moves
from one file or program to another.
(iii) Logic bomb

Logic bomb is designed to start working, i.e., corrupting data or affecting data
processing, when a certain event occurs.
(iv) Time bomb

Time bomb is designed to start working, i.e. corrupting data or affecting data
processing on a specific date.
(The End)
Page 6 of 6
SUBJECT SESSION
Business Management and Strategy Certified Finance & Accounting
Professional (CFAP) Examination -
Winter 2016
General:
Performance in this paper was below expectations. The past trend of preparations being
confined to studies of selected topics was apparent in a large number of answer scripts. Lack of
ability to frame answers according to the scenario and the requirements of the questions was
also witnessed quite frequently. Writing unnecessarily lengthy answers without considering the
marks allocation was another reason for poor performance as the time thus wasted seemed to
create time pressure. If the students go through the suggested answers published by the
Institute, they would note that they are to the point and on average, about 2 to 3 lines are
enough to earn each mark. The remaining time including the 15 minutes reading time should
be utilized in planning the answers so as to include all but relevant points only.
Comments on the replies to the individual questions are presented below:
Question 1(a)
The overall performance in this part was poor as most of the candidates failed to read and
understand the requirement of the question which was to discuss the matters of significance in
the given scenario, other than those which were already mentioned therein. Consequently they
repeated the same points as were already discussed in the question.
Question 1(b)
Replies to the question regarding ingredients of mission and vision statements were quite
satisfactory. However, many students offered long-winded explanations to this three mark
question resulting in inefficient utilization of valuable time.
Question 2(a)
This question required possible reasons for high rate of turnover of Customer service
representatives of a Bank despite the fact that it was offering above market salaries and
emoluments. The answers were mostly satisfactory although in this question also many
students discussed lower salaries as one of the reason. An important point i.e. lack of training
of the representatives was rarely mentioned.
Question 2(b)
In this part of the question, the candidates were supposed to discuss the reasons for increasing
importance of senior executives of HR in the formulation of corporate level strategies. The
overall performance was below average. Several replies were off-the-mark. A sizeable number
of the students were not of aware of the critical roles that senior HR managers perform at the
highest echelons of management in overall management and development of human resources,
i.e. developing cohesive organizational structures according to the objectives of the business
entity, formulating strategies for reward systems and policies for career path development and
succession planning. Many students highlighted basic human resource functions and
responsibilities which are performed by the lower level staff, which were totally irrelevant.
Page 1 of 4
Examiners’ Comments on Business Management and Strategy – CFAP Examination Winter 2016
Question 3
This question consisted of three scenarios and in each case, the candidates were required to
identify the degree of risk probability and the impact factor. The question was quite easy but a
mixed performance was witnessed. Students with clear concepts easily scored high marks.
However, quite a number of students did not seem familiar with the terms risk probability and
impact factor and wrote irrelevant answers which mostly included measures to mitigate the
risks and the importance of risk management.
Question 4
In this question seven brief scenarios and the candidates were required to match these with
appropriate concepts/principles which were also mentioned separately in the question. The
performance was good. A common error was in part (vi) regarding a person who was keen to
improve his performance by adopting new ideas and concepts and receiving objective feedback
on the performance. The correct answer was ‘pragmatist’ but surprisingly, quite a number of
students stated ‘activists’.
Question 5
The overall performance in this question pertaining to the role of employee development
methods in the career path planning of talented employees for assumption of senior
management positions, was below average. A substantial number of students didn’t have any
idea and wrote totally irrelevant things such as how to motivate employee, how to retain them
etc. Most of the other students were able to identify correctly only few of these employee
development methods or were not able to offer meaningful explanations of the roles of these
methods. There was undue stress on the point of training with very little coverage of the
remaining points.
Question 6
In this question the requirement was to discuss some of the weaknesses of price cutting
strategy to counter competition. This was an easy question based on a very straight forward
scenario but quite surprisingly, the overall performance was quite poor. The pertinent facts
that Superb Tiles Limited enjoyed a good reputation for the superior quality and durability of
its products and the competitor was a new entrant in the industry were not considered by a
large number of the students. Besides, the demand for tiles is not highly elastic because
customers purchase tiles only when they ‘need’ them and do not increase the frequency of their
purchases merely due to their availability at low prices. Many candidates were of the view that
price cutting strategy would necessarily result in lowering of the quality of tiles which showed
inadequate understanding of the price cutting strategy in the context of the question.
Important aspects such as lowering of profit margins, sustainability of the strategy in the long
run, etc. were rarely discussed.
Question 7
The response to this question regarding Critical Success Factors for a nationwide courier
company was average. Most of the answers were based on ‘general awareness’ of the
operations of courier companies. Many students mentioned irrelevant point because they did
not take into consideration the vital point that the company was already a market leader.
Page 2 of 4
Question 8(a)
Performance in the question regarding Balanced Scorecard was disappointing. It was quite
clear that most of the students had not read the topic even once. About 17 percent of the
students did not attempt this question whereas a further 25% of the students could not secure
any mark. Even those students who did attempt this question were mostly able to list only the
four perspective points of Balanced Scorecard approach viz. financial performance, customer
knowledge, internal operational processes and learning & growth.
Students are advised to refer to the suggested answers published by ICAP to seek guidance
regarding this question.
Question 8(b)
Replies to the question regarding characteristics of fragmented industry/business were also not
on track. Replies such as an industry which has facilities at several locations and industries
which have different and distinct fragments indicate lack of awareness of the concept and
selective study on the part of the students. In this case also, the students are advised to refer to
the suggested answers published by ICAP.
Question 9(a)
Replies to the question regarding ‘whistle-blowing’ were satisfactory. However, a number of

students missed the vital points that the malpractice/misconduct/corruption or illegal behavior
may be reported within or outside the organization and whistle-blowing is mostly resorted to
when the erring individual(s) occupy position of authority.
Question 9(b)
The candidates were required to explain why professionals such as auditors, lawyers and
medical practitioners owe greater fiduciary responsibilities and special obligations to their
clients. The overall performance was quite poor. Instead of sticking to the exact requirement of
the question, a large number of candidates discussed/mentioned irrelevant material such as
importance of moral and ethical values and their role in getting more business.
Question 10(a)
The performance in this part of the question was below average. A number of students
misinterpreted the term ‘sustainable development’ and linked it either with corporate social
responsibility or with a firm achieving sustainable long-term profitability through research
efforts. In fact, sustainable development means offering of products and services to fulfill
current needs of the society without compromising the needs of the future generations. Many
students did not seem to have any idea about it and probably, this was again due to selective
studies.
Question 10(b)
This question pertained to measures which a socially responsible organization should take for
manufacturing safe toys for children. The response was better and several students gave
satisfactory replies. However, many students did not interpret the requirements of the question
correctly and highlighted points such as refraining from polluting the environment or
employing child labour and giving free toys to poor children. The point that the manufacturer
should have in place a system to recall the toys from the distributors in the unlikely event of
any report that the toy has caused injury to a child was rarely mentioned.
Page 3 of 4
Question 11(a)
Most of the students were able to state correctly the eight design features to make an attractive
website for Swat Mountain Resorts and scored good marks. Some students repeated the same
points by mentioning them in different words.
Question 11(b)
In this question regarding Decision Support System, a number of students wrongly stated that it
facilitates in the making of routine and operational decisions, whereas, in fact, DSS facilitates
making of complex and unstructured decisions. The important points that DSS is a computer-
based system and can also be used for scenario testing were missed by a number of students.
The features of DSS viz. that it should be flexible and user-friendly and also integrate data with
analytical models and analysis tools were highlighted by several students but the vital feature
of DSS that it has greater analytical power than routine MIS system was mentioned by only a
handful of students.
Question 12(a)
In this question regarding Customer relationship management software system the candidates
generally mentioned correctly that it collects information for identifying particulars of
individual customers such as addresses, contact numbers and purchasing trends. The other
pertinent points such as the CRM software system classifies customers in different marketing
segments, facilitates rendering special services to important customers and monitors
customers’ complaints to address the issues which result in more frequent complaints were
stated by almost 50% of the students.
Question 12(b)
In this question the candidates were required to explain how files are corrupted by four
different viruses i.e. Trojan Horse, Worm, Logic bomb and Time bomb. The answers were
mostly satisfactory. In the case of Logic Bomb, a number of stated that it corrupts files based
on a specified logic. This type of answers which use a term or part of it to explain the same
term are not considered appropriate. Further, many students were confused as regards the
difference between a Trojan Horse and a worm and gave similar explanations.
(THE END)
Page 4 of 4
BUSINESS MANAGEMENT AND STRATEGY
Summary of Marking Key
Certified Finance and Accounting Professional Examination – Winter 2016
Note regarding marking scheme:

The marking scheme is given as a guide. However, markers also award marks for alternative
approaches to a question and relevant/well-reasoned comments/explanations. Moreover, the
available marks in a question may exceed the total marks.
Mark(s)
A.1 (a) 0.75 mark for mentioning each significant matter to be considered by
RTL while evaluating the proposal of ETL for sale of its company 3.0
0.75 mark for explanation of each of the above matters 3.0
(b) Up to 01 mark for identification of each attribute of mission and vision

statements 3.0
A.2 (a) 01 mark for identification of each possible reason of high rate of turnover of
customer services representatives of a Bank 5.0
(b) Up to 1.5 marks for explanation of each reason for the increasing importance
of roles and responsibilities of senior human resource managers in
formulation and implementation of corporate level strategies of leading
corporations 5.0
A.3 In each part i.e. (a), (b) & (c):

0.25 mark for identification of the extent of probability of risk 0.5
0.75 mark for stating the reason for the appropriate extent of the risk factor
and its impact in the given scenario 1.5
A.4 01 mark for correct matching of the concept/principle with each given scenario 7.0
A.5 0.5 mark for mentioning each development methods to prepare a talented
employee to assume a senior management position 2.0
1.5 mark for elaboration of each of the above employee development
methods 6.0
A.6 02 mark for identification and explanation of each weakness of pursuing a price
cutting strategy under the given scenario 8.0
A.7 01 mark for mentioning each Critical Success Factor by a nationwide courier
company for retaining its market leadership position 6.0
A.8 (a) Explanation of the concept of Balance Scorecard 3.0

Up to 1.5 mark for discussing each advantage of pursuing a Balanced
Scorecard approach 4.0
(b) 0.5 mark for each characteristic of a fragmented industry/business 3.0

0.5 mark for each example of a fragmented industry/business 1.0
Page 1 of 2
Mark(s)
A.9 (a) Definition of the term ‘whistleblowing’ 3.0
(b) 02 marks for each reason because of which professionals have special
obligations and fiduciary responsibilities towards their clients 6.0
A.10 (a) Definition of the term sustainable development 2.0

0.5 mark for example of an industry in which sustainable development
is important and 0.5 mark for the reason thereof 1.0
(b) 01 mark for each measure to be adopted by a socially responsible

organisation for ensuring safety of toys manufactured for infants 5.0
A.11 (a) 0.75 mark for each design feature to be incorporated in the website of Swat
Mountain Resorts for making it attractive for customers 6.0
(b) Description of the Decision Support System 2.0

01 mark for each feature to be incorporated in a well-designed Decision
Support System 3.0
A.12 (a) 01 mark for each important function of Customer Relationship Management
Software 4.0
(b) Up to 01 mark for explanation of the working of each type of virus 3.0
(THE END)
Page 2 of 2
Certified Finance and Accounting Professional Stage Examination


Q.1 (a) Best Limited (BL) has been incorporated recently with the objective of establishing the
business of manufacturing and marketing of fast moving consumer goods. The
company realises that it would have to compete in a highly challenging business
environment.
Discuss briefly why it would be essential for BL to give high degree of importance to
the strategic planning process for achievement of its corporate objectives. (08)
(b) Explain briefly what you understand by the term ‘emergent strategy’. Give examples
of four situations in which an organisation may consider adopting an emergent
strategy. (06)
Q.2 (a) Firms which pursue cost leadership strategies in intensely competitive markets make
continuous efforts to achieve economies in their manufacturing and operating costs as
pressures for cost reductions emanate from internal as well as external stakeholders.
Identify six operational/strategic actions which would enable a firm pursuing cost
leadership strategy to maintain and strengthen its competitive advantage. (06)
(b) Identify four operational risks which may adversely impact the operations of a
shipping company which is a bulk cargo carrier of dry goods such as coal, iron ore,
cement, wheat, etc. (03)
Q.3 (a) Experienced marketing strategists are mindful of the fact that success of
new/innovative products cannot be taken for granted and several new products fail in
the market on their launching or disappear from the market within a period of 3-4
years.
Explain briefly any four factors which are responsible for failure of new/innovative
products in the market. (06)
(b) Explain the term ‘sponsorship’ in the context of product promotion. State two reasons
why companies prefer to promote their products/services through sponsorship. (05)
Q.4 (a) ABC Limited is a recently established organisation. The sponsors and management of
ABC Limited believe in a culture of strict adherence to high standards of ethical
conduct.
State five specific measures/practices which ABC Limited may take in pursuance of a
culture of adherence to high standards of ethical conduct. (05)
(b) Briefly state four different ways in which a company may demonstrate that it operates
as a responsible corporate citizen. (04)
Q.5 (a) Central Telecommunication Company (CTC) is operating in an environment of

intense competition. Abdul Hakeem, General Manager Marketing of CTC has
resigned recently and the management intends to short-list candidates to fill the vacant
position.
Identify four types of competencies which the management should assess in recruiting
a suitable replacement. (06)
(b) State three different reasons why a candid discussion of the performance appraisal
report between the employer and the employee is beneficial for the employee. (03)
Q.6 (a) Discuss briefly the reasons why leading companies use brand names and expend
resources and make efforts to promote their brands. (03)
(b) Zeal Limited deals in three types of products, viz. soaps, edible oil and UHT milk.
The company markets each product under three different brand names. Give two
reasons why Zeal Limited may be pursuing the policy of marketing and promoting the
products under different/individual brand names. (03)
Q.7 Study the different situations and the information given below and select the most
appropriate option. Each multiple choice question carries ONE mark. (05)
(i) Rivalry among the suppliers will not be intense when:
(a) the rival firms are of equal size and strength
(b) the switching costs of the loyal customers are high
(c) the fixed costs are a small proportion of the total costs
(d) the market is experiencing a high rate of growth
(ii) A company engaged in the manufacture of cement is planning to launch ventures in

earth moving equipment and motor cars. The company is pursuing a policy of:
(a) vertical/forward strategy
(b) synergy optimisation
(c) conglomerate expansion or diversification
(d) horizontal integration
(iii) Solid Steel Limited operates a captive furnace oil based power generation plant and
compares its fuel efficiency with the performance of similar plants in the fertiliser and
paper manufacturing units. The company is conducting an exercise of:
(a) external benchmarking
(b) operational benchmarking
(c) competitive benchmarking
(d) efficiency evaluation
(iv) An organisation in which individuals influence decisions on the basis of their

knowledge and skills rather than their positions in the organisation is called:
(a) organic organisation
(b) linear organisation
(c) mechanistic organisation
(d) missionary organisation
(v) Which of the following is not a primary activity of the value chain:
(a) operations
(b) marketing and sales
(c) inbound logistics
(d) procurement
Q.8 Platinum Limited encourages active workplace learning at the factory floor level as the
management is of the opinion that this learning process results in optimum benefits for the
organisation as well as the employees.
Explain briefly any four factors which in your opinion contribute towards the success of
active workplace learning process among the participants. (06)
Q.9 (a) What do you understand by the term Key Performance Indicators (KPIs)? List any six
KPIs for a commercial bank assuming necessary details. (08)
(b) State briefly the concept of Triple bottom line reporting system. Identify any three
performance measurement indicators under each aspect of performance discussed in
Triple bottom line reporting system. (07)
Q.10 (a) Describe briefly any four measures which would ensure the effectiveness of password
as a control. (06)
(b) (i) E-business has gained a significant share of the market for various goods and
services at the global level. However, growth of e-business is subject to various
challenges.
Identify and explain briefly any four barriers which are impediments in the
operation of e-business. (06)
(ii) Explain briefly the important features of Intranet. (04)
(THE END)
Suggested Answers
Certified Finance and Accounting Professional Examination – Summer 2017
Ans.1 (a) It would be essential for Best Limited to give high degree of importance to the
strategic planning process to achieve the following objectives:
(i) It would enable BL to identify, prioritize and grasp opportunities for

achieving its objectives.
(ii) It would enable BL to identify business risks in the environment and adopt
appropriate measures to mitigate these risks.
(iii) It would provide a framework for coordination and control of various
activities at the corporate, business and functional levels.
(iv) It would enable BL to make optimum utilization of its financial, human and
all other resources.
(v) It would enable BL to create alignment between long-term, medium-term and
short-term objectives.
(b) Emergent Strategy - Emergent strategy is the revised strategy or a change in

strategy which is developed due to the changes in the business conditions.
Emergent strategy is adopted without prior formal approval. The emergent strategy
must be consistent with the organisation’s strategic intent and objectives.
A firm may adopt an emergent strategy due to various reasons which may include:
(i) to take advantages of new opportunities in the environmental conditions such

as discovery of new natural resources, etc.
(ii) modification in manufacturing processes due to changes in pollution control
laws;
(iii) to curtail production due to loss of major markets caused by
catastrophes/political changes in countries which constitute important export
markets;
(iv) to counter challenges posed by new competitors;
(v) to manufacture new products to cater to the changes in customer tastes and
preferences.
Ans.2 (a) The operational/strategic actions which would enable a firm to achieve economies
in production and operating costs to maintain and strengthen its competitive
advantage are as follows:
(i) explore alternate sources of cheaper raw materials and components;

(ii) negotiate with existing suppliers of raw materials and components for more
favourable terms;
(iii) relocate facilities to areas which have lower costs;
(iv) improve capacity utilization to achieve economies of scale;
(v) re-engineer processes to eliminate activities to achieve cost reductions;
(vi) consider hiring of contract workers with the objective to reduce labour costs;
(vii) outsource processes/manufacture of components to low cost suppliers;
(viii) implement efficient inventory management practices such as just-in-time
Page 1 of 6
Suggested Answers
(b) The operational risks which may adversely impact the operations of a shipping
company which carries bulk cargo of dry goods are as follows:
(i) accident at the point of loading or discharge of the cargo;

(ii) strikes by dock workers at the seaports;
(iii) piracy/high jacking of ship during transit;
(iv) jettisoning of cargo due to sea storm;

(v) acts of wars/major political disruptions in the countries of loading/discharge
of cargo or in the shipping lanes;
(vi) stringent emission control regulations which may not be adhered due to
malfunction/failure of equipment.
Ans.3 (a) The factors which are responsible for failure of new/innovative products in the
market are as follows:
(i) The innovating companies did not have understanding of customers’ needs
and designed new products which did not fulfill the needs and wants of the
prospective customers.
(ii) The innovating companies were not able to create awareness amongst the
customers of the new products and promote understanding of how these
products would meet their particular needs and be of value to them.
(iii) The innovating companies were not able to identify the specific market
segments for the new products and therefore were not able to tailor
appropriate marketing strategies for these products.
(iv) The innovative companies did not market the new products to the customers
through appropriate distribution channels.
(v) The innovating companies did not give due attention to efficient
manufacturing and cost control measures which rendered the products
uncompetitive in the market.
(b) Sponsorship in the context of product promotion involves creating greater

awareness of the company and its product(s)/brand through specific events such as
TV/radio shows, sports and musical programs or health-related matters.
Sponsorship promotion events are generally led by celebrities and renowned
specialists/personalities who have achieved prominence in their respective fields
and enjoy popularity among the audience.
Companies prefer sponsorship promotion of their products/services to achieve the

(i) Associating the name of the promoting company or its brand with the specific
event helps to elicit focused customer attention to create optimum impact on
the audience which may not be achieved through advertisements launched in
TV/printed/billboard media due to clutter impact.
(ii) Sponsorship with selected theme of the event enables the promoters to target
their communication and promotional efforts to specific interest/lifestyle
groups or geographic regions of a segmented market and be able to create
maximum impact within a limited time-frame.
(iii) Glamorous events and celebrities/renowned personalities serve as a link
between the company’s products and its customers.
Page 2 of 6
Suggested Answers
Ans.4 (a) The following measures may be implemented by the management of ABC
Company Limited in pursuance of a culture of strict adherence to high standards of
ethical conduct:
(i) A copy of the code of ethics approved by the board of directors is provided to
all the employees.
(ii) All new employees are informed of the high standards of ethics practiced in
the company and the policy of the management in this regard.
(iii) Training sessions/workshops on ethics are conducted from time to time with
the active participation of the senior management.
(iv) A system of reporting whereby non-compliance of ethical conduct is brought
to the notice of the management.
(v) All external stakeholders such as suppliers, contactors and customers are
provided a policy memorandum of compliance for dealings with the
employees.
(vi) All internal policies/rules and the prevailing laws are observed in letter and
spirit and instances of deviations and findings are reported to the ethics
committee.
(b) A company may demonstrate that it operates as a responsible corporate citizen by:
(i) improving the efficiency and sustainability of its business activities and
products by reducing electricity consumption, greenhouse gas emissions,
water use and waste;
(ii) ensuring that its external contractors conform to regulatory requirements and
meet the required Health, Safety and Environment (HSE) standards;
(iii) establishing goals and strategies for the enterprise and reporting publicly of its
performance;
(iv) integrating HSE practices consistent with the company’s management system
into all aspects of the business and ensuring legal compliance.
Ans.5 (a) The management of CTC should assess the following competencies in recruiting a
suitable replacement for the position of General Manager Marketing:
(i) Communication Competency

Ability to communicate effectively with senior management and subordinates
as well as other stakeholders, including customers.
(ii) Planning and Administrative Competency:

The ability to plan and organise activities and make rational decisions
specially in matters of pursuing marketing strategies to counter policies of the
competitors.
(iii) Teamwork Competency:

The ability to complete the tasks through co-ordination with senior members
of the management team as well as the subordinates.
(iv) Strategic Action Competency:

The ability to understand the overall mission and strategies of the
organization and be able to achieve the objectives of CTC.
(v) Self-management Competency:

The individual should have a sense of integrity and good ethics and be willing
to accept responsibilities.
Page 3 of 6
Suggested Answers
(b) A candid discussion of the performance appraisal report between the employer and
the employee would be beneficial for the employee from the following standpoints:
(i) The employee would receive an objective feedback of performance and level
of competence in the current assignment.
(ii) The employee would be in a position to assess future career growth prospects
in the organisation.
(iii) The employee would obtain an objective rationale for award of salary
increase/rewards on the basis of performance.
(iv) The discussion would help to identify the employee’s weaknesses and training
needs to improve/upgrade the individual’s work skills.
Ans.6 (a) Leading companies use brand names and expend resources and make efforts to
promote their brands to achieve the following objectives:
(i) Brands distinguish the products of the promoting company from the
alternative products which are sold by the competitors.
(ii) Brands create a perception of security and familiarity of the quality of the
branded products among the customers.
(iii) Brands may have attributes/connotations for the buyers in terms of
prestige/satisfaction associated with the use/possession of a particular
branded product.
(b) Zeal Limited may prefer to market its different products under different brand
names to achieve the following advantages:
(i) If a particular product is not successful in the market or has a perception of

poor quality, it would not adversely affect the company’s name or reputation.
(ii) If the markets for the products comprise of different segments in terms of age,
incomes and tastes/preferences of customers, etc. it may be advantageous for
each product to have a different brand name to create appeal to the different
market segments.
(iii) If the strategy is to launch a new product to make inroads in the market held
by the market leader, it may be advisable to create and promote a new brand
which challenges the basic strength/appeal of the brand of the market leader.
Ans.7 (i) the switching costs of the loyal customers are high
(ii) conglomerate expansion or diversification
(iii) operational benchmarking
(iv) organic organisation
(v) procurement
Ans.8 The factors which contribute towards the success of active workplace learning process at
the factory floor level are as follows:
(i) Real work situation

(ii) Informal Two way communication in an open environment/ sharing of knowledge
and experiences of participants.
(iii) Commitment from the participants.
(iv) Involvement of senior management
Page 4 of 6
Suggested Answers
Ans.9 (a) Key Performance Indicators are quantifiable measures for evaluating the
performance of the critical success factors of an organisation in achieving its
strategic business targets against its set objectives.
The Key Performance Indicators for a commercial bank may include:
(i) Total Deposits per Branch (Total Deposits ÷ No. of Branches)

(ii) Non-performing Loan Ratio (Non-performing loans ÷ Total Loans)
(iii) Capital Adequacy Ratio (Total equity ÷ Total weighted risk assets; This is
expressed in terms of percentage).
(iv) Advances – Deposit ratio (Total Advances ÷ Total Deposits; This is
(v) Revenue per employee (Total revenue ÷ Total employees).
(vi) Spread between cost of deposits and income on advances (Rate of interest
earned on advances less rate of interest paid on deposits; This is expressed in
absolute terms).
(vii) Branch Efficiency Ratio (Total non-interest expenses incurred ÷ Total
Revenue (interest + non-interest income) generated; This is expressed in
terms of percentage).
(viii) Percentage increase in credit/debit cards issued during the year.
(ix) Number of new bank branches opened during the year.
(x) Number of new loans/advances given during the year.
(b) Triple bottom line reporting system involves assessment of actual performance in
terms of economic/financial, environmental and social indicators in the business
organisations’ operating models and reporting systems.
The Triple bottom line reporting system comprises of a company’s overall

performances pertaining to:
Economic/Financial indicators:
(i) sales revenue
(ii) profits, and earnings per share
(iii) dividends per share
(iv) production (units)
Environmental indicators:
(i) energy intensity (Revenue per unit of energy consumed)
(ii) release of toxic materials/pollutants
(iii) usage of recycled materials
(iv) use of renewable resources.
Social indicators:
(i) donations to communities and sponsorships of schools/welfare schemes
(ii) percentage of employees comprising males and females
(iii) percentage of employees from minority groups
(iv) percentage of physically challenged employees
(v) employee satisfaction, based on feedback of employee opinions.
Page 5 of 6
Suggested Answers
Ans.10 (a) The measures to ensure the effectiveness of password control are as follows:
(i) Passwords should not be easy to guess or difficult to remember.

(ii) Appropriate controls for setting of passwords should be adopted to avoid use
of weak passwords. For example, it must contain alphabets, numbers and
special characters and must not be less than a specific length, say eight
characters.
(iii) Password settings should include maximum and minimum age e.g., there
should be a forced password change policy to change password, say, after 30
days. Also there should be a minimum age of passwords, e.g. 10 days before
which passwords cannot be changed.
(iv) Password settings should retain password history so that users may not be
allowed to reuse any of their last, say, five passwords.
(v) Password policy should include appropriate account lockouts, e.g. user
account may be locked after specified number of unsuccessful attempts and
the subsequent unlocking process should be done by the administrator after
compliance with the investigation procedure.
(vi) First passwords should be communicated in a secure manner and system
should force users to change their passwords after first login.
(vii) Passwords must be stored in irreversible encrypted format.
(b) (i) The barriers which are impediments on the growth of e-business are as
follows:
 Set-up costs – It is expensive to establish a website for sale of products
and receiving payments by credit/debit card, interswitch or PayPal and
maintaining records of customers debit/credit cards.
 On-going operating costs – The website has to be updated from time to

time to retain user interest and also make special offers to encourage
customers to revisit the site.
 Time required to establish the system – It takes time to establish a

website that customers are aware of and would prefer to visit.
 Lack of in-house skills – A company might not be in a position to

employ skilled individuals for maintenance of a website due to cost
constraints.
 Nature of products – Certain products and services are easier to sell on

the internet than others. Non-standardized goods such as fashion
clothing/jewelry items pose difficulties when sold ‘by catalogue’.
Companies that sell such items by internet earmark substantial budgets
for sales returns.
(ii) Intranet involves use of internet technology within an organisation to

facilitate its employees to communicate with each other. Intranet allows the
employees to share in-house information relating to products, policies and
procedures and company newsletters. Intranet also uses public
communications network and is therefore exposed to the risks of
unauthorised access to files and software by the users of internet. Access to
intranet can be secured against unauthorized access by firewall hardware and
software.
(The End)
Page 6 of 6

Examiners’ comments and Suggested answers
Certified Finance and Accounting Professional (CFAP) – Summer 2017
Examinations
Overall General Comments:
The overall performance much better than the previous attempt and 26.72% candidates
passed as compared to 11.56% in the previous attempt. As in most previous attempts,
questions on strategy were poorly attempted. Moreover, most of the candidates gave
lengthy answers in which they included many points which were not relevant with regard
to the question. Failure to read the question carefully was evident in a number of cases as
would be discussed in the question wise comments.
Question-wise comments:
Question 1
General comments:
08.50% candidates secured passing marks in this question.
Part (a)
Common errors:
 Too generalized points were given mostly revolving around achievement of high
profits and achievement of other objectives.
 Irrelevant things were mentioned like determining the size of business, co-ordination
between the top and mid-level management, achieving targets, etc.
 Strategy implementation was discussed rather than strategic planning.
Suggested answer:
It would be essential for Best Limited to give high degree of importance to the strategic
planning process to achieve the following objectives:
(i) It would enable BL to identify, prioritize and grasp opportunities for achieving its
objectives.
(ii) It would enable BL to identify business risks in the environment and adopt
appropriate measures to mitigate these risks.
(iii) It would provide a framework for coordination and control of various activities at
the corporate, business and functional levels.
(iv) It would enable BL to make optimum utilization of its financial, human and all
other resources.
(v) It would enable BL to create alignment between long-term, medium-term and short-
term objectives.
Page 1 of 13
Examiners’ comments and Suggested answers on Business Management and
Strategies, CFAP Examination Summer 2017
Part (b)
Common errors:
 Importance of continuous review of the existing strategy was emphasized which was
not relevant.
 While mentioning the situations where the need for emergent strategy arises, incorrect
points were given like change in management, acquisition/merger, etc.
Suggested answer:
Emergent Strategy - Emergent strategy is the revised strategy or a change in strategy

which is developed due to the changes in the business conditions. Emergent strategy is
adopted without prior formal approval. The emergent strategy must be consistent with the
organisation’s strategic intent and objectives.
A firm may adopt an emergent strategy due to various reasons which may include:
(i) to take advantages of new opportunities in the environmental conditions such as

discovery of new natural resources, etc.
(ii) modification in manufacturing processes due to changes in pollution control laws;
(iii) to curtail production due to loss of major markets caused by catastrophes/political
changes in countries which constitute important export markets;
(iv) to counter challenges posed by new competitors;
(v) to manufacture new products to cater to the changes in customer tastes and
preferences.
Question 2
General comments:
Part (a)
Common errors:
 General points or measures adopted in all circumstances were included such as

preparation of budgets and budgetary controls instead of restricting to measures
related to economies of scale.
 Totally inappropriate points were mentioned such as redesign the product, use cheap
raw material, etc.
 The various levels of strategies were explained i.e. strategic, tactical, operational,
which was not relevant.
Page 2 of 13
Suggested answer:
The operational/strategic actions which would enable a firm to achieve economies in

production and operating costs to maintain and strengthen its competitive advantage are as
follows:
(i) explore alternate sources of cheaper raw materials and components;

(ii) negotiate with existing suppliers of raw materials and components for more
favourable terms;
(iii) relocate facilities to areas which have lower costs;
(iv) improve capacity utilization to achieve economies of scale;
(v) re-engineer processes to eliminate activities to achieve cost reductions;
(vi) consider hiring of contract workers with the objective to reduce labour costs;
(vii) outsource processes/manufacture of components to low cost suppliers;
(viii) Implement efficient inventory management practices such as just-in-time
Party (b)
Common errors:
The most common error was that students tried to complete the required tally of four
operational risks by mentioning various types of accidents such as fire, flooding, damage
of goods by water, etc. which actually represented a single risk; and ignored the other
risks.
Suggested answer:
The operational risks which may adversely impact the operations of a shipping company
which carries bulk cargo of dry goods are as follows:
(i) accident at the point of loading or discharge of the cargo;

(ii) strikes by dock workers at the seaports;
(iii) piracy/high jacking of ship during transit;
(iv) jettisoning of cargo due to sea storm;
(v) acts of wars/major political disruptions in the countries of loading/discharge of
cargo or in the shipping lanes;
(vi) stringent emission control regulations which may not be adhered due to
malfunction/failure of equipment.
Question 3
General comments:
19.54% candidates secured passing marks in this question. However, most of the
candidates were able to secure at least 3 to 4 marks.
Page 3 of 13
Part (a)
Common errors:
 The term innovation was considered as linked to technology only and points related
thereto were repeated such as product becoming obsolete because of introduction of
new technology, failure of software, poor operating system, lawsuits due to use of
pirated technology, accidents due to use of inappropriate technology, loss of
technically skilled personnel, etc.
 Too simple and generalized reasons were given such as failure to sell the product, sub-
standard quality, poor packing material, incompetent management, etc.
 Points such as lack of innovation, old design, etc. were mentioned probably because of
not reading the question carefully.
Suggested answer:
The factors which are responsible for failure of new/innovative products in the market are
as follows:
(i) The innovating companies did not have understanding of customers’ needs and
designed new products which did not fulfill the needs and wants of the prospective
customers.
(ii) The innovating companies were not able to create awareness amongst the
customers of the new products and promote understanding of how these products
would meet their particular needs and be of value to them.
(iii) The innovating companies were not able to identify the specific market segments
for the new products and therefore were not able to tailor appropriate marketing
strategies for these products.
(iv) The innovative companies did not market the new products to the customers
through appropriate distribution channels.
(v) The innovating companies did not give due attention to efficient manufacturing and
cost control measures which rendered the products uncompetitive in the market.
Part (b)
Common errors:
 How the company’s name is projected in the sponsored event i.e. in TV

advertisements, billboards, event tickets, etc. was explained which was totally
irrelevant.
 It was stated that it is a cheaper way of advertisement.
 Examples of major companies sponsoring events in Pakistan were given which was
totally irrelevant.
 It was stated that sponsorship is a better way of advertising without offering any
further explanation.
Page 4 of 13
Suggested answer:
Sponsorship in the context of product promotion involves creating greater awareness of

the company and its product(s)/brand through specific events such as TV/radio shows,
sports and musical programs or health-related matters. Sponsorship promotion events are
generally led by celebrities and renowned specialists/personalities who have achieved
prominence in their respective fields and enjoy popularity among the audience.
Companies prefer sponsorship promotion of their products/services to achieve the

(i) Associating the name of the promoting company or its brand with the specific event
helps to elicit focused customer attention to create optimum impact on the audience
which may not be achieved through advertisements launched in
TV/printed/billboard media due to clutter impact.
(ii) Sponsorship with selected theme of the event enables the promoters to target their
communication and promotional efforts to specific interest/lifestyle groups or
geographic regions of a segmented market and be able to create maximum impact
within a limited time-frame.
(iii) Glamorous events and celebrities/renowned personalities serve as a link between
the company’s products and its customers.
Question 4
General comments:
45.30% candidates secured passing in this question.
Part (a)
Common errors:
 Matters related to CSR were emphasized which have little or no connection with
ethics.
 Examples of unethical conduct were given which were not relevant.
 Totally inappropriate points were included such as payment of high salaries and
treating the employees well.
 Words mentioned in the question were repeated i.e. that the company should promote
a culture of adherence to ethical standards.
Suggested answer:
The following measures may be implemented by the management of ABC Company

Limited in pursuance of a culture of strict adherence to high standards of ethical conduct:
(i) A copy of the code of ethics approved by the board of directors is provided to all
the employees.
(ii) All new employees are informed of the high standards of ethics practiced in the
company and the policy of the management in this regard.
Page 5 of 13
(iii) Training sessions/workshops on ethics are conducted from time to time with the
active participation of the senior management.
(iv) A system of reporting whereby non-compliance of ethical conduct is brought to
the notice of the management.
(v) All external stakeholders such as suppliers, contactors and customers are provided
a policy memorandum of compliance for dealings with the employees.
(vi) All internal policies/rules and the prevailing laws are observed in letter and spirit
and instances of deviations and findings are reported to the ethics committee.
Part (b)
Common errors:
The most common error in this part was that the candidates repeated the points related to
ethical conduct only, in different ways.
Suggested answer:
A company may demonstrate that it operates as a responsible corporate citizen by:
(i) improving the efficiency and sustainability of its business activities and products by
reducing electricity consumption, greenhouse gas emissions, water use and waste;
(ii) ensuring that its external contractors conform to regulatory requirements and meet
the required Health, Safety and Environment (HSE) standards;
(iii) establishing goals and strategies for the enterprise and reporting publicly of its
performance;
(iv) integrating HSE practices consistent with the company’s management system into
all aspects of the business and ensuring legal compliance.
Question 5
General comments:
Part (a)
Common errors:
The most common error in this part was that the candidates did not focus on the level of
the vacant position i.e. General Manager Marketing and mentioned competencies with
regard to middle level managers such as requisite qualification, marketing experience,
ability to meet deadlines, etc.
Suggested answer:
The management of CTC should assess the following competencies in recruiting a

suitable replacement for the position of General Manager Marketing:
Page 6 of 13
(i) Communication Competency
Ability to communicate effectively with senior management and subordinates as
well as other stakeholders, including customers.
(ii) Planning and Administrative Competency
The ability to plan and organise activities and make rational decisions especially in
matters of pursuing marketing strategies to counter policies of the competitors.
(iii) Teamwork Competency
The ability to complete the tasks through co-ordination with senior members of the
management team as well as the subordinates.
(iv) Strategic Action Competency
The ability to understand the overall mission and strategies of the organization and
be able to achieve the objectives of CTC
(v) Self-management Competency
The individual should have a sense of integrity and good ethics and be willing to
accept responsibilities.
Part (b)
Common errors:
 It was stated that the benefit derived by the employee from discussion on performance
appraisal report was that the employee would be able to get promotion and higher
increment which was totally incorrect.
 Benefits to the employers were stated rather than the employees such as avoiding
conflicts, presentation of management’s point of view, demonstrating un-biasedness of
the management, learning about employees’ problems, etc.
 Advantages and importance of performance appraisal report were stated which was
totally irrelevant.
Suggested answer:
A candid discussion of the performance appraisal report between the employer and the
employee would be beneficial for the employee from the following standpoints:
(i) The employee would receive an objective feedback of performance and level of
competence in the current assignment.
(ii) The employee would be in a position to assess future career growth prospects in the
organisation.
(iii) The employee would obtain an objective rationale for award of salary
increase/rewards on the basis of performance.
(iv) The discussion would help to identify the employee’s weaknesses and training
needs to improve/upgrade the individual’s work skills.
Question 6
General comments:
Page 7 of 13
Part (a)
Common errors:
The answers contained too generalized points such as creating awareness about the
product, creating demand, etc. which are the objectives of any marketing strategy and are
not necessarily linked to the use of brand names.
Suggested answer:
Leading companies use brand names and expend resources and make efforts to promote
their brands to achieve the following objectives:
(i) Brands distinguish the products of the promoting company from the alternative
products which are sold by the competitors.
(ii) Brands create a perception of security and familiarity of the quality of the branded
products among the customers.
(iii) Brands may have attributes/connotations for the buyers in terms of
prestige/satisfaction associated with the use/possession of a particular branded
product.
Part (b)
Common errors:
The most common reason for errors in this part of the question was that the students did
not read the question carefully and presumed that different brand names are being used in
respect of soaps, edible oil and UHT milk whereas the question clearly stated that three
different brand names were being used in respect of each product.
Suggested answer:
Zeal Limited may prefer to market its different products under different brand names to
achieve the following advantages:
(i) If a particular product is not successful in the market or has a perception of poor
quality, it would not adversely affect the company’s name or reputation.
(ii) If the markets for the products comprise of different segments in terms of age,
incomes and tastes/preferences of customers, etc. it may be advantageous for each
product to have a different brand name to create appeal to the different market
segments.
(iii) If the strategy is to launch a new product to make inroads in the market held by the
market leader, it may be advisable to create and promote a new brand which
challenges the basic strength/appeal of the brand of the market leader.
Page 8 of 13
Question 7
General comments:
Common errors:
Part (i) (d) was marked as the correct answer instead of (b).
Part (iv) Most poorly attempted part and all the incorrect answers were mentioned.
Part (v) (a) and (c) were commonly marked as the correct answer instead of (d).
Suggested answer:
(i) the switching costs of the loyal customers are high

(ii) conglomerate expansion or diversification
(iii) operational benchmarking
(iv) organic organization
(v) procurement
Question 8
General comments:
Common errors:
 Too generic points were mentioned such as quality of trainer and training material,
motivation of employees, etc.
 Advantages of training were mentioned which were totally irrelevant.
 Steps which should be taken to obtain maximum benefit post training were stated
which were also not relevant.
 Answers included discussion on learning curve effect.
Suggested answer:
The factors which contribute towards the success of active workplace learning process at
the factory floor level are as follows:
(i) Real work situation

(ii) Informal Two way communication in an open environment/sharing of knowledge
and experiences of participants.
(iii) Commitment from the participants.
(iv) Involvement of senior management
Page 9 of 13
Question 9
General comments:
Part (a)
Common errors:
The examples which were given mostly showed that though the students had learned the
definition, they had little understanding of the main characteristics of KPIs. In most of the
cases, the examples included purely qualitative aspects such as customer satisfaction,
reliability of online transactions, quality of employees, level of diversity, etc. Moreover,
too remote issues were identified such as number of hits on the web, reduction in number
of frauds, number of new hirings, etc.
Suggested answer:
Key Performance Indicators are quantifiable measures for evaluating the performance of
the critical success factors of an organization in achieving its strategic business targets
against its set objectives.
The Key Performance Indicators for a commercial bank may include:
(i) Total Deposits per Branch (Total Deposits ÷ No. of Branches)

(ii) Non-performing Loan Ratio (Non-performing loans ÷ Total Loans)
(iii) Capital Adequacy Ratio (Total equity ÷ Total weighted risk assets; This is
(iv) Advances – Deposit ratio (Total Advances ÷ Total Deposits; This is expressed in
terms of percentage).
(v) Revenue per employee (Total revenue ÷ Total employees).
(vi) Spread between cost of deposits and income on advances (Rate of interest earned
on advances less rate of interest paid on deposits; This is expressed in absolute
terms).
(vii) Branch Efficiency Ratio (Total non-interest expenses incurred ÷ Total Revenue
(interest + non-interest income) generated; This is expressed in terms of
percentage).
(viii) Percentage increase in credit/debit cards issued during the year.
(ix) Number of new bank branches opened during the year.
(x) Number of new loans/advances given during the year.
Part (b)
Common errors:
 Totally incorrect replies were given. Some examples are given below:
o It is a system whereby three years data is given.
o Triple bottom line means gross profit, operating profit and net profit.
o In this system reporting is made to three levels of management.
Page 10 of 13
 The candidates had cursory knowledge and produced vague answers containing the
following types of statements:
o In this system performance is evaluated from three different angles.
o In this system of reporting more importance is given to non-financial aspects of
performance.
 Incorrect and vague examples were given such as percentage of wastage, number of
schemes launched to improve environment, fringe benefits to employees, etc.
Suggested answer:
Triple bottom line reporting system involves assessment of actual performance in terms of
economic/financial, environmental and social indicators in the business organisations’
operating models and reporting systems.
The Triple bottom line reporting system comprises of a company’s overall performances
pertaining to:
Economic/Financial indicators:
(i) sales revenue
(ii) profits, and earnings per share
(iii) dividends per share
(iv) production (units)
Environmental indicators:
(i) energy intensity (Revenue per unit of energy consumed)
(ii) release of toxic materials/pollutants
(iii) usage of recycled materials
(iv) Use of renewable resources.
Social indicators:
(i) donations to communities and sponsorships of schools/welfare schemes
(ii) percentage of employees comprising males and females
(iii) percentage of employees from minority groups
(iv) percentage of physically challenged employees
(v) employee satisfaction, based on feedback of employee opinions.
Question 10
General comments:
Part (a)
Common errors:
 Too elementary points were enumerated such as passwords should not be written on
desk or diary, password should not be disclosed to anybody, etc.
 Too generic points were mentioned such as implement strict controls, ask the
employees to be careful about their passwords, train the employees in the use of IT,
etc.
Page 11 of 13
Suggested answer:
The measures to ensure the effectiveness of password control are as follows:
(i) Passwords should not be easy to guess or difficult to remember.

(ii) Appropriate controls for setting of passwords should be adopted to avoid use of
weak passwords. For example, it must contain alphabets, numbers and special
characters and must not be less than a specific length, say eight characters.
(iii) Password settings should include maximum and minimum age e.g., there should be
a forced password change policy to change password, say, after 30 days. Also there
should be a minimum age of passwords, e.g. 10 days before which passwords
cannot be changed.
(iv) Password settings should retain password history so that users may not be allowed
to reuse any of their last, say, five passwords.
(v) Password policy should include appropriate account lockouts, e.g. user account
may be locked after specified number of unsuccessful attempts and the subsequent
unlocking process should be done by the administrator after compliance with the
investigation procedure.
(vi) First passwords should be communicated in a secure manner and system should
force users to change their passwords after first login.
(vii) Passwords must be stored in irreversible encrypted format.
Part (b)(i)
Common errors:
 Various types of incorrect points were mentioned such as high delivery costs, weak
internet connections, risk of litigation, etc.
 In many cases where the impediments were identified correctly, the explanation was
inappropriate. For example, in the case of start-up costs, long list of costs was given
whereas the reason start-up costs act as an impediment were not specified.
 Unlawful activities of suppliers using e-marketing were highlighted which cannot be
termed as an impediment.
Suggested answer:
The barriers which are impediments on the growth of e-business are as follows:
Set-up costs – It is expensive to establish a website for sale of products and receiving
payments by credit/debit card, interswitch or PayPal and maintaining records of customers
debit/credit cards.
On-going operating costs –The website has to be updated from time to time to retain user
interest and also make special offers to encourage customers to revisit the site.
Time required to establish the system – It takes time to establish a website that
customers are aware of and would prefer to visit.
Lack of in-house skills – A company might not be in a position to employ skilled
individuals for maintenance of a website due to cost constraints.
Nature of products – Certain products and services are easier to sell on the internet than
others. Non-standardized goods such as fashion clothing/jewelry items pose difficulties
when sold ‘by catalogue’. Companies that sell such items by internet earmark substantial
budgets for sale returns.
Page 12 of 13
Part (b)(ii)
Common errors:
 Instead of specifying the features of intranet, only its advantages were highlighted.
 Incorrect points were given such as it is a cheaper way of communication,
communication through intranet is very secure, etc.
Suggested answer:
Intranet involves use of internet technology within an organization to facilitate its

employees to communicate with each other. Intranet allows the employees to share in-
house information relating to products, policies and procedures and company newsletters.
Intranet also uses public communications network and is therefore exposed to the risks of
unauthorised access to files and software by the users of internet. Access to intranet can be
secured against unauthorized access by firewall hardware and software.
(THE END)
Page 13 of 13

available marks in a question may exceed the total marks.
Mark(s)
A.1 (a) Up to 02 marks for explanation of each objective of the strategic planning
process 8.0
(b) Explanation of the term ‘emergent strategy’ 2.0

01 mark for each situation in which an organization may consider
adopting an emergent strategy 4.0
A.2 (a) 01 mark for identification of each operational/strategic action to be adopted

for maintaining and strengthening competitive advantage 6.0
(b) 0.75 mark for identification of each operational risk factor which may
adversely impact the operations of a shipping company 3.0
A.3 (a) 1.5 marks for explanation of each factor which may be responsible for failure
of new/innovative products in the market 6.0
(b) Explanation of the term ‘sponsorship’ in the context of product

promotion 2.0
1.5 marks for explanation of each reason why companies prefer to
promote their products / services through sponsorship 3.0
A.4 (a) 01 mark for stating each specific measure to be implemented in pursuance of a
culture of adherence to high standards of ethical conduct 5.0
(b) 01 mark for each attribute that will demonstrate that a company is operating as
a responsible corporate citizen 4.0
A.5 (a) 0.75 mark for identification of each type of competency and 0.75 for its
explanation 6.0
(b) 01 mark for explanation of each benefit resulting from a candid discussion with
employees on their appraisal 3.0
A.6 (a) 01 mark for explanation of each reason for use of brand names 3.0
(b) 1.5 marks for explanation of each reason of promoting products under different
brand names 3.0
A.7 01 mark for identification of correct answer of each MCQ 5.0
A.8 1.5 marks for mentioning each factor contributing towards the success of active
workplace learning process at the factory floor level 6.0
Page 1 of 2
Mark(s)
A.9 (a) Explanation of the term Key Performance Indicators (KPIs) 2.0
01 mark for identification of each KPI of a commercial banking
institution 6.0
(b) Explanation of the concept Triple Bottom Line (TBL) reporting system 2.5
0.5 mark for mentioning each TBL performance measurement indicators
under economic/financial, environmental and social indicators 4.5
A.10 (a) 1.5 marks for mentioning each measure to ensure the effectiveness of password
control 6.0
(b) (i) 0.5 mark for identification of each barrier which may be an
impediment to the growth of e-business 2.0
01 mark for explanation of each barrier 4.0
(ii) 01 mark for explanation of each important feature of Intranet 4.0
(THE END)
Page 2 of 2


Q.1 Pioneer Limited (PL) is engaged in the business of manufacture of wide range of personal
products. The new management in PL is seeking strategies for sustaining competitive
advantage over rival firms and their products and services.
Required:
(a) Identify and discuss the strategies that PL may pursue to attain sustainable competitive
advantage. (06)
(b) Discuss any two risks associated with the strategies identified under (a). (06)
(c) Recommend the optimal strategy for PL giving two reasons to support your point of
view. You may assume necessary details in this regard. (02)
Q.2 Fashionista by Agha Ansari is considering growth opportunities for its organisation which has
the following divisions:
Salon:
This division was a brainchild of Agha Ansari. It was established in early 1990s and got
immediate recognition and appreciation because of state-of-the-art design and highly qualified
stylists. This division has a dominant position having substantial market share. Although
overall market is maturing and has low growth rate, this division has been earning high
returns on investment.
Cosmetics:
This division was established six years ago. The cosmetic industry has been emerging;
however, presently this division has low market share.
Required:
According to the Boston Consulting Group Matrix:
(a) Identify and discuss the quadrants in which above divisions fall. (05)
(b) Discuss any two strategies that Fashionista may adopt for each of its divisions. (06)
Q.3 (a) ‘We Connect’ is the leading mobile network operator in the country. One of its
packages ‘all you desire four’ has garnered considerable customers’ interest. This
package allows customers to select a latest smartphone, customized internet data usage
package, customized local on net and off net minutes and mobile insurance. The
package is for a term of 12 to 36 months and customer has to pay low initial and equal
monthly payments. However, discontinuation of the package prior to the agreed term
involves high cost for the customer.
Required:
Identify and discuss the strategy being followed by ‘We Connect’ in respect of this
package. (04)
(b) In today’s fast-paced world, global market has become hypercompetitive. The variety
and speed of changes in the behaviours of competitors, consumers, regulators etc., are
making strategies short-lived.
Required:
Discuss the measures that may be taken by organisations to survive in a
hypercompetitive market. (06)
Q.4 The Coffee Hub (TCH) is a newly established chain offering gourmet blend coffee in a variety
of flavours in a state-of-the-art customer friendly coffeehouses. It imports the highest quality of
coffee beans from suppliers around the globe. Besides own operated coffeehouses, it has issued
operating licences to other stores as well. TCH also offers packaged coffee to online
customers.
Required:
List the activities to be carried out by TCH in respect of its primary value chain based on the
classification suggested by Porter. (08)
Q.5 Rising Star, sports goods manufacturer and retailer has gained country-wide recognition. It
intends to expand its business globally by franchising its business.
Required:
Briefly discuss the matters that Rising Star should consider before entering into the franchising
business. (07)
Q.6 Fantasy Trip Limited (FTL) is about to commence an online business as the agent of various
hotels, travelling agencies, car rentals, recreational activities, etc. It is in the process of
designing a website to attract customers.
Required:
Briefly discuss the factors that FTL should consider while designing the website. (09)
Q.7 Sweet Tooth Factory (STF) are well-established bakers offering designers’ and customized
cakes for special occasions and festivities. To gain product differentiation and recognition of
brand identity at a wider spectrum, STF is considering marketing its product through internet.
Required:
(a) What do you understand by the term ‘brand identity’? Give one example. (02)
(b) Briefly discuss four strategies with examples that STF may consider for successful
e-branding of its products. (06)
Q.8 Fatima Fawad has recently been promoted as Accounts Supervisor in place of her ex-boss
who has resigned. Shortly after taking over, she started to receive complaints concerning
Jawad Shah who was recruited as Accounts Assistant last year. On probing, she has gathered
the following information:
(i) Jawad Shah is a fresh graduate with distinction from a well-known university.
(ii) He has been assigned various responsibilities from time to time. Although his
performance in the first assignment was satisfactory, it has deteriorated subsequently as
he often fails to meet deadlines and his work contains number of errors.
(iii) He does not pitch-in in any work which he considers beyond his responsibilities.
(iv) He does not get along well with his colleagues.
Required:
(a) Identify and discuss the probable reasons that might have contributed to the poor
performance of Jawad Shah. (05)
(b) As the supervisor of Jawad Shah, what steps Fatima may take to address the situation? (05)
Q.9 The person specification is an important part of the recruiter’s toolbox. A well-designed
person specification assists in attracting the right candidate for the job.
Required:
Draft a ‘Person Specification’ for the position of Marketing Manager containing one essential
and one desirable attribute in respect of each of the categories prescribed by Alec Rodger. (08)
Q.10 Sameer Khan, the CEO of Trendsetters Limited (TL) has recently attended a seminar on
‘integrated reporting’. He learned that traditional financial reporting as the sole measure of a
company’s performance is not sufficient and businesses need a reporting environment that
allows them to explain how their strategy drives performance and leads to the creation of
value over time. He intends to introduce integrated reporting for his organisation.
Required:
(a) Briefly discuss the guiding principles for developing an ‘integrated report’. (04)
(b) List the benefits that TL might enjoy by ‘integrated reporting’. (02)
Q.11 Khadija Tariq, a fresh qualified chartered accountant has recently joined UltraCare, a
consultancy firm as financial analyst. One of the firm’s clients has requested for advice on
future prospects of automobile industry in Pakistan. Her supervisor told her to copy the recent
research work of another firm with minor changes and issue the advice under firm’s name
without citing the source. Khadija believed that it was an unethical act and showed her
concern but the supervisor told her that research work of the other firm is not copy righted.
Khadija believes that not following supervisor’s instructions would adversely be reflected in
her appraisal.
Required:
Advise Khadija as to how she can resolve this conflict by assessing the relating threats and
safeguards. (09)
(THE END)
Suggested Answers
Ans.1 (a) There are three strategies that may be pursued by PL to attain sustainable
competitive advantage:
(i) Cost leadership strategy

Organisation seeks this strategy where it sets out to become the lowest-cost
producer in the market. The aim is to produce a product or service at lower
operating costs than the competitors, to be in a position to gain competitive
advantage. This enables the organisation to sell goods or offer services at the
same price as of the competitors and make a larger profit or sell at a lower
price than competitors and still make a high profit by increasing market
share.
This strategy is associated with large-scale businesses offering standard

products with relatively little or no differentiation that are readily acceptable
to the majority of customers.
(ii) Differentiation strategy

Organisation seeks this strategy where it is in a position to provide a product
or service which the customer perceives to be of a higher value than those
offered by the competitors due to certain unique features. The customers
consider that the additional cost of purchasing the particular product or
service is well below what the product or service is worth as compared to the
other available alternatives.
Product or service may be differentiated in terms of design, features, brand

image, customer services, etc.
(iii) Focus strategy:

Organisation seeks this strategy where consumer markets are segmented and
organisation selects one or more particular segment as target market for its
products or services. A competitive advantage may be established by
focusing on a particular niche which could be specific buyer group, segment
of the product line, geographic market, etc.
Within a market segment, a business entity might seek competitive

advantage through:
 Cost leadership; or
 Product differentiation
(b) (i) Cost leadership strategy Risks:

 Relatively low prices may be perceived as of low quality
product/service in the mindset of buyers.
 This strategy requires certain skills and attributes such as intolerance of
waste, broader span of control, high bargaining skills, lean production
methods, intensive monitoring, etc. which might be difficult to sustain
in the long run.
 Continued capital investments might be required to maintain cost
advantage and organisation may find it difficult to finance it.
 Technological advancements and / or innovations may make past
inventions, learnings or methods obsolete.
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Suggested Answers
(ii) Differentiation strategy Risks:

 It may be difficult to hold customer brand loyalty when cost gap gets
wider.
 The competitive advantage of differentiation would be eliminated when
competitor(s) imitate it.
 Buyers’ preferences for differentiating factor may lessen over the period
of time.
(iii) Focus strategy Risks:

 Since focus is on a particular segment, any change in demand of that
segment would have significant implications.
 The area of focus may be imitated by others or even disappear with the
passage of time.
 Other firms may provide even a narrower focus or establish
sub-segments within a segment and serve even better.
(c) PL should pursue cost leadership strategy if:

 It is operating as a large-scale business and can be benefited from economies
of scale.
 It is offering standard products with relatively low or no differentiation that
are readily acceptable to the majority of customers.
Ans.2 (a) Salon:

According to the BCG matrix, this division is a ‘Cash Cow’. It has relatively high
market share in an otherwise low growing market. This division might have
attained high economies of scale and/or have become efficient through experience.
New entrants would be reluctant to enter as they may perceive that market is old
and near decline. This division would be cash rich having high return on
investment.
Cosmetics:
According to the BCG matrix, this division is a ‘Question Mark’. This division has
relatively low market share in an otherwise high growing market. Since the market
is growing quickly, there is an opportunity to increase market share but initially it
would require substantial investments to increase or even maintain the existing
market share.
(b) Salon:
It may adopt any of the following strategies:
(i) Since the market is maturing with low prospects of growth, spending on
innovation (R&D) should be limited. Reinvestment should be restricted to the
extent of maintaining the existing level of market share.
(ii) The ROI of this division is high and it might be earning substantial net cash
inflows. The excess cash may be used to develop cosmetics division which is
in ‘question mark’ quadrant or in any other viable investment opportunity.
Cosmetics:
It may adopt any of the following strategies:
(i) The market is emerging with probable opportunity of increasing market
share. Fashionista may opt to invest substantially (like marketing activities) to
increase its market share to become a Star and finally a Cash Cow, if the
growth prospects are good.
Page 2 of 8
Suggested Answers
(ii) Fashionista may opt to disinvest/abandon the division and formulate an exit
strategy if:
 It cannot last long with a small market share and competitors are in a
position to apply cost and / or price pressures; or
 There is a considerable doubt as regards the prospects of increasing
market share.
Ans.3 (a) ‘We Connect’ is following a ‘lock-in’ strategy. The idea of lock-in strategy is that
when a customer has made an initial decision to purchase a company’s product or
service, there would be a commitment to make more purchases from the same
company in the future. The customer becomes dependent upon vendor for products
and services and is unable to use another vendor without incurring substantial
switching costs.
From vendors’ perspective such strategy would help in earning recurring revenue
and minimizing competitive rivalry. However, the vendor has to persist with the
package and would not be able to gain from favourable changes in the market
dynamics.
(b) Organisations may take the following measures to survive in a hypercompetitive

market:
(i) Continually seeking new improved products/services to compete against

established products of competitors. However, this advantage will be short-
lived in a hypercompetitive market as competitors may introduce new and
improved / better products.
(ii) Continually striving for radical solutions. Reinvesting in the business
continuously and being prepared to abandon current approaches even if this
means sacrificing what originally made the business successful.
(iii) Imitating the competitors if required to remove their competitive advantage.
(iv) Seeking intangible dimensions as differentiators such as specific culture,
emotional link with customers or specific mission that is difficult to imitate.
(v) Concentrating on small market segments that might have been overlooked
by the competitors.
(vi) Seeking to build alliances with similar organisations.
(vii) Decentralizing decision making to ensure timely action.
Ans.4 Activities that may be carried out by TCH in respect of its primary value chain based on
the classification suggested by Porter:
(i) Inbound logistics
 Procurement of the finest quality of coffee beans
 Developing and maintaining strategic relationship with suppliers
 Safe transportation of beans from suppliers to coffeehouses and licensed
stores
 Adequate storage of beans to ensure that quality remains intact
(ii) Operations
 Roasting of coffee to bring out the deep and intense flavor
 Frequent testing to ensure quality consistency
 Packaging of gourmet blends for online orders
 Adequate maintenance of coffee makers (coffee brewer, milk frother etc.)
(iii) Outbound logistics

 Sale of coffee through TCH’s own operated coffeehouses as well as
licensed stores
 Delivery of packaged coffee to online customers
Page 3 of 8
Suggested Answers
(iv) Marketing and sales

 Marketing through various mediums i.e. print and electronic media
particularly social media
 Marketing through word of mouth by providing high quality of coffee
with high level of customer services
 Participation in food festivals and related events
(v) Service
 Ensuring best services at all coffee houses
 Complimentary coffee or refund to unsatisfied customers
 Encouraging feedback from customers and addressing their concerns, if
any.
Ans.5 Rising Star should consider the following factors before entering into the franchising
business:
 The market in which it would operate i.e. whether market is in growth mode or in
decline, level of competition, laws and regulations, etc.
 Its business ability to adapt and change to fit in with the local requirements.
 Development of well-defined systems and best practices.
 Development of marketing and brand promotion strategies that may be required in
the new market.
 Selection of franchisees that are committed to operate according to the established
standards of Rising Star.
 Training of franchised staff to acquaint them with the skills that are necessary to
perform their duties.
 Although franchisees make most of the capital investment, Rising Star may have to
provide extended financial support with regard to stock build-up, marketing etc.
 Developing policies regarding up-front payment and royalties in such a manner as to
create a win-win situation for both the parties.
 Exit strategies in the event of failure in meeting the desired results.
Ans.6 FTL should consider the following factors while designing the website:
(i) Domain name and host

Domain name should not only be easily memorable but also needs to accurately
reflect brand’s voice. It should be attractive and less prone to misspell so that
visitors can easily access the website and be easily located in search engine results.
Since tourism website will be media rich with loads of pictures, videos and
presentations, it needs to have reliable technical support from the host.
(ii) Intuitive and attractive design

Tourism website needs to be well-designed and have an appealing look. It should
be easy to navigate and highly visual. It should offer enough links to other relevant
websites.
(iii) User friendly

The website should be easy to use to garner customer interests and encourage
business. Any forms must be easy to fill in. It should offer online user support that
includes a fast search engine, frequently asked questions and information that can
be downloaded by users, etc.
(iv) Information content

Content is key for organic search rankings as well as being central to inbound
marketing strategy. The website should publish useful, updated and clear
information about tourism products and services. The content should be of high
quality, relevant and devoid of errors and misinformation.
Page 4 of 8
Suggested Answers
(v) Loading and downtown time

The website must be available ‘all the time’ to the users with minimum loading
and downtime.
(vi) Integration with organisation’s system

The website must integrate with the company’s other transaction processing
systems, such as its customer database, accounting system and inventory control
system.
(vii) Effective security

With evolution of technology, more advanced security risks threaten to
compromise the website’s integrity. The website must ensure confidentiality of
customers’ data and secured online payments. This aspect should be certified by a
leading organisation to enhance customer confidence.
Ans.7 (a) Brand identity:

Brand identity can be explained as logos, symbols, colors, packaging etc. that are
used by customer to recognize a brand.
Example:
Part of Coca Cola’s brand identity has been the distinctive shape of their glass
bottles and their red scripted ‘coca cola’
(b) Strategies to be considered by STF for successful e-branding:

(i) STF may consider duplicating its existing brand identity online. However,
before adopting this strategy, STF must ensure that quality of the internet site
is appropriate otherwise it might result in damaging the brand. Nike, Ikea,
etc. follow same brand identity.
(ii) STF may consider extending the traditional brand by creating a slightly
different version of the brand. BBC extended its name image to its online
services by giving it a slightly different name of BBC Online. This allows
continued association with BBC brand name and also suggests to the
customer that the services offered by BBC Online might be different.
(iii) Partner with an existing e-brand. For example, chain of hotels and car rentals
are partnered and marketed online with Emirates Airlines website and so
associate with the airline’s brand name.
(iv) Create a new brand for the web. The new brand name would allow an entity
to break free from the perceptions associated with the old brand name.
Smile.co.uk is the online bank of The Co-operative Financial Services and is
kept distinct from the traditional Co-operative Bank.
Ans.8 (a) Jawad Shah’s poor performance could be attributed to the following factors:
(i) Job description

Poor performance may be attributed to the fact that Jawad Shah might not
have been provided with proper job description beforehand. Moreover, he
performed satisfactorily in the first assignment but his performance declined
subsequently which may be because he is disenchanted by the way he was
assigned various responsibilities/he is demotivated due to the overburden of
work assigned to him from time to time.
Page 5 of 8
Suggested Answers
(ii) Orientation and integration

Jawad Shah’s reluctance to pitch in and lack of integration with colleagues
may be due to absence of orientation and integration offered to him at the
time of joining. Orientation and integration is the process by which new
employee is introduced with office colleagues. It provides employees with a
clear understanding of what is expected of them and how their roles fit into
the overall objectives of the organisation.
(iii) Training and development

Jawad Shah’s distinction at university indicates that he might have been
performing poorly due to lack of training and development programs or lack
of proper supervision and feedback.
(iv) Misfit for the role

Jawad Shah might not be a ‘good fit’ for the role assigned to him. He might
have been recruited on the basis of perceived capability to perform the job
rather than on the basis of ‘best fit’ for the job.
(v) Underqualified
Although Jawad Shah has distinction at university, he may be underqualified
for the job as he is a fresh graduate and may lack experience and skills
required for the job.
(b) Fatima may take the following steps:
(i) Meet with Jawad Shah in person to restart the working relationships and
discuss:
 Jawad Shah’s understanding of job description / job requirements
 Probable problems/issues being encountered by Jawad Shah
 Problems already identified and the standard of performance expected
from him
 Reassure him that his performance can be improved and remove any
misconceptions in his mind about work and organisation
(ii) Facilitate a meeting between him and colleagues to ice break and encourage
him to interact more to understand the culture of organisation and the role
expected of him.
(iii) Resolve any issues that Jawad Shah might be facing by arranging orientation
session, training programs, etc. and close supervision to see if he is
responding well to the programs.
(iv) Transferring him to any other section or department where he can be better
utilized.
(v) As a last resort, if still Jamal Shah fails to perform as required of him, Fatima
should consider initiating termination proceedings.
Page 6 of 8
Suggested Answers
A.9 S.No. Categories Essential Desirable

(i) Physical make-up  Highly presentable  Good health record
(ii) Attainments  Graduate in marketing or  Membership of relevant

similar or ability to professional body
demonstrate knowledge or
skill
(iii) General  Critical thinking ability  Methodical

intelligence
(iv) Special aptitudes  Creative thinking  Able to prioritize, delegate

and multi-tasking
(v) Interests  Highly social  Like travelling and

meeting people from
diverse culture and
backgrounds
(vi) Disposition  Demonstrating a positive  Knowledgeable and

attitude, dependability, literate in culturally diverse
honesty and work practices
trustworthiness
(vii) Circumstances  Willing to occasionally  Willing to travel

work on flexible hours extensively for work
(weekends and public
holidays as well)
Ans.10 (a) An integrated report should:
 Provide insight into the organisation's strategy, and how that strategy relates
to its ability to create value in the short, medium and long term.
 Show a holistic picture of the combination, interrelatedness and dependencies
between the factors that affect the organisation's ability to create value over
time.
 Provide insight into the nature and quality of the organisation's relationships
with its key stakeholders, including how and to what extent the organisation
understands, takes into account and responds to their legitimate needs and
interests.
 Disclose all material matters that substantively affect the organisation's ability
to create value over the short, medium and long term.
 Be concised and devoid of any material errors.
 Be presented on a basis that is consistent over time and in a way that enables
comparison with other organisations.
(b) TL might enjoy the following benefits:
 Improved reputation through greater transparency.

 Greater trust and engagement with stakeholders.
Page 7 of 8
Suggested Answers
Ans.11 Khadija Tariq can resolve this conflict by carrying out the following steps:
(i) Identify the issue. Copying research work of the other firm with minor changes
without citing the source is an act of plagiarism. It may not be illegal as research
work is not copy righted but it is unethical.
(ii) Identify the threats: There is a threat to integrity and professional behavior. She
believes that further arguing with supervisor would badly reflect in her appraisal
which is a form of intimidation threat.
(iii) Assess how serious the threats are. The significance of threat will depend on how
much research work of other firm she would be using in her report. In this case, it
seems that she would inevitably use information from the other firm’s work and the
threats would be significant.
(iv) Find a way to resolve the matter through internal procedures. She might consider
using the arrangements that the company may have for internal ‘whistle blowing’. If
there are no formal arrangements for whistle blowing, she might consider reporting
her concerns to the senior personnel in the organisation.
(v) If no-one in the company takes up her concerns and tries to deal with the problem,
she might consider as a final resort, reporting the matter to someone in authority.
She may contact ICAP for confidential advice on this matter.
(vi) If all these measures fail to remove her concern about the ethical risk, she might
need to consider disassociating herself from the project or resign.
(The End)
Page 8 of 8
SUBJECT SESSION
Business Management and Certified Finance and Accounting Professional
Strategy (CFAP) Examination - Winter 2017
General:
The overall performance was much below the expectation and the passing ratio was 11%
percent as compared to 26% in the previous attempt. Failure to perform well was mainly
attributable to lack of knowledge, inability to answer in the light of the given scenario,
and poor communication skills. Another important issue was the presentation of the same
points in different words. It may be noted that in most of the cases guidance is provided
to students as regards the number of points they are expected to produce in their answers.
Many candidates try to reach the required number of points by repeating the same issues
in different points.
Question 1
This question consisted of three parts. The overall performance in this question was quite
poor as only 12% candidates secured passing marks. The performance in each part is
discussed below:
Question 1(a)
In this part of the question the requirement was to identify and discuss the strategies for
achieving sustainable competitive advantage. The overall performance was quite poor as
instead of the broader strategies, the candidates mentioned the steps forming part of that
strategy. For example, instead of Cost Leadership strategy they mentioned “reduce the
price below those offered by the competitors”, “introduce innovative products”, etc.
Moreover, in most cases, the broader objective was listed but how it would be attained
was not discussed.
Question 1(b)
In this part, the requirement was to mention the risks associated with each of the
strategies identified in part (a). The performance in this part was even worse. Quite
obviously, those candidates who could not identify the relevant strategy in part (a) could
not obtain any mark in this part as well. Most of the others were also unable to specify
appropriate risks. In majority of the cases, generic points like failure to achieve targeted
sale, entry of new competitor, etc. were mentioned instead of giving specific risks
relevant to each strategy.
Page 1 of 5
Examiners’ Comments on Business Management and Strategy – CFAP Examination
Winter 2017
Question 1(c)
In this part the candidates were required to identify the most suitable strategy should be
pursued by PL. Most of the students performed poorly in this part as they simply
identified any of the three strategies but couldn’t give proper reasons to support their
answers. Most of them failed to use the guideline provided by the question that they were
supposed to make necessary assumptions. Some students mentioned more than one
strategy also which was totally inappropriate.
Question 2
This question was based on a scenario in which situation relating to two divisions of an
organisation was described. The question consisted of two parts which mainly tested the
Boston Consulting Group (BCG) Matrix. The overall performance was very poor as
some of the candidates were not even aware of the names of the quadrants. The
performance in each part, of those who at least had basic knowledge of the topic, is
discussed below:
Question 2(a)
In this part of the question, the candidates were required to identify and discuss the
relevant quadrant in which each division would fall. Though it was quite evident that the
Salon Division was a Cash Cow, some candidates termed it as a Dog. Generally, the
candidates explained their choice of quadrant correctly.
Question 2(b)
In this part the strategies for Salon and Cosmetics were to be suggested. Many students
lacked understanding and erroneously suggested that cash cow should be injected with
more cash as it is giving high profits. Moreover, it is important to have an exit strategy in
case of divisions falling under the Question Mark quadrant but this aspect was rarely
covered.
Question 3
This question consisted of two independent parts. Performance in each part is discussed
below:
Question 3(a)
This part of the question contained a scenario in which a mobile network operator had
introduced a package deal in which it was providing a latest mobile phone along with
internet and telephone connection. Students were required to identify and discuss the
strategy being employed by the company.
Some students performed well but many students struggled in this question as well.
Many candidates could not correctly identify the Lock-in strategy and instead stated
market penetration strategy which was totally incorrect. Some even suggested strange
names like “All you can get” strategy etc. Many candidates who identified the strategy
correctly could not give appropriate reason about how they reached that conclusion.
Page 2 of 5
Winter 2017
Question 3(b)
In this part, the candidates were required to discuss the measures that may be taken by
organisations to survive in a hypercompetitive market. The most common issue with the
answers was that candidates mentioned general measures like advertising heavily, hiring
competent staff, improving communication, etc. They failed to realise that though
importance of long-term measures cannot be denied, a hypercompetitive market requires
some swift and short-term measures to really survive. Another common issue was of
repetition of the same point. In such cases, generally the candidates identified one key
measure like innovative products and kept on explaining it in detail, throughout their
answer.
Question 4
In this question the candidates were required to list the Primary value chain activities as
suggested by Porter, for a recently established chain of coffee houses. The performance
in this question was good and more than 60% candidates secured passing marks.
However, some candidates were totally ignorant of the classification suggested by Porter.
Some candidates lost marks as they listed the activities pertaining to a business involved
in distribution of coffee rather than a chain of coffee houses.
Question 5
In this question the requirement was to discuss the matters which a company operating
on a nation-wide basis should consider before deciding to expand globally through
franchising. The overall performance remained below average mostly due to the same
issue. Many candidates focused on selection of franchisees only. Some answers consisted
entirely of a list of the terms of the franchising agreement. On the other hand, some
candidates focused only on global expansion, ignoring the franchising aspect.
Question 6
In this question the candidates were required to discuss the factors to be considered while
designing a website for an online business relating to hotels and travelling. The
performance was satisfactory as 35% candidates secured passing marks. Low performing
candidates were generally those who resorted to repetition of the same points. For
example, many candidates gave a long list of the contents of the website only. Many
candidates focused only on the security issues.
It was also observed that in majority of the answer sheets this was the first attempted
question. As a result, many students appeared to have consumed a lot of time which must
have affected their later performance.
Question 7
This question consisted of two parts. The overall response was quite good as about 40%
of the candidates secured passing marks. Performance in each part is discussed below:
Page 3 of 5
Winter 2017
Question 7(a)
In this part of the question the candidates were required to describe the term ‘Brand
identity’. In most cases the performance was one sided i.e. either the candidates secured
full marks or no marks at all. In the latter category were those who presumed that brand
identity is the same thing as a brand. It must be noted that the image of a product in the
minds of consumers like durability and quality is the definition of Brand but not brand
identity.
Question 7(b)
There are four strategies for e-branding which the students were required to write
preferably followed by an example. Similar to part (a), many students gave the strategies
for branding rather than e-branding.
Question 8
This question was based on a brief scenario about an employee Jawad Shah who was
underperforming after initially showing good performance. Though it appeared to be an
easy question the overall response was quite poor as only 11% of the candidates secured
passing marks. However, almost every student scored some marks whereas most of the
candidates secured between 3 to 4 marks. Performance in each part is discussed below:
Question 8(a)
In this part the candidates were required to specify the possible reasons for the poor
performance of Jawad Shah. The common error in this was the mentioning of Jawad
Shah’s domestic problems and Jawad Shah not being happy with the salary. Both of these
were not relevant to the case.
Many candidates just mentioned the reasons in one short sentence and did not offer any
explanation.
Question 8(b)
The steps which supervisor Fatima may take to resolve this situation were required to be
specified in this part. Some students wrote about first warning, second warning etc. and
then dismissal as the way to be adopted by Fatima which was totally inappropriate. On
the other hand, many candidates only mentioned the reassuring measures and ignored
steps such as training, orientation and the disciplinary steps.
Question 9
The requirement in this question was to draft a ‘Person Specification’ for the position of
Marketing Manager containing one essential and one desirable attribute in respect of
each category prescribed by Alec Rodger.
Page 4 of 5
Winter 2017
Considering the overall performance in the paper, the passing percentage i.e. 27% seems
quite reasonable. However, about 50% of the candidates were totally unaware of the
concept and could not secure any mark which had serious effect on their chances of
passing the paper. This type of question had not been tested for quite some time, and
therefore it was quite evident that the candidates’ poor performance was due to selective
learning. Students are encouraged to cover everything included in the syllabus.
Many students could not secure passing marks despite identifying the categories correctly
as they seemed unaware of the essential and desirable aspects / qualities. For example,
under the category of “circumstances” most students wrote that the candidate should be
unmarried / single or living alone. The correct description should have been that the
candidate could work unconventional hours and is available to travel, etc.
Question 10
This question on integrated reporting was poorly attempted and only 14% of the
candidates secured passing marks and about 35% of the candidates could not secure any
mark. Instead of mentioning the guiding principles of integrated reporting, many
candidates tried to describe the report’s contents or tried to explain why organisations
adopt integrated reporting, which was totally irrelevant. Some candidates considered it as
a CSR activity.
While discussing the advantage of integrated reporting many candidates mentioned

increased/improved profitability which was incorrect.
Question 11
This question was based on a scenario in which Khadija, a recently qualified chartered
accountant was asked by her boss to copy the research work of another firm, in a report
which she was supposed to prepare. The requirement was to assess the related threats and
specifying the possible safeguards.
Surprisingly, the overall performance remained poor as only 10% of the candidates
secured passing marks. However, about 70% of the remaining students scored between 3
to 5 marks. Some students gave the opinion that there was no harm in copying the work
since it was not illegal. However, they could not write much after that. Some students
gave it a totally different direction. They believed it to be an issue of professional
competence and advised Khadija to assess the quality of the report before using it. Some
candidates identified self-interest threat instead of intimidation threat. Some candidates
discussed violation of the principle of confidentiality which was totally irrelevant. Many
candidates misunderstood the requirement of the question altogether. Probably they
believed that Khadija had to resolve the issue in any case and wrote pages on how
Khadija should explain, convince and persuade her supervisor.
(THE END)
Page 5 of 5

available marks in answer may exceed the total marks of a question.
Mark(s)
A.1 (a) 0.5 mark for identification of each of the three strategies 1.5
1.5 marks for discussion on each strategies 4.5
(b) 02 marks for discussion of risks under each strategy 6.0
(c) 01 mark for each valid reason for recommended strategy 2.0
A.2 (a) 0.5 mark for identification of the quadrants in which division falls 1.0
02 marks for discussion of the quadrants in which each division fall 4.0
(b) 1.5 marks for discussion of each strategy under the quadrants in which divisions
fall 6.0
A.3 (a) 0.5 mark for identification of correct strategy 0.5

3.5 marks for discussion on the strategy 3.5
(b) 01 mark for each of the valid measures discussed under hypercompetitive
market 6.0
A.4 0.5 mark for identification of each classification under primary value chain 2.5
0.5 mark for listing of each valid activity under related classification of primary
value chain 5.5
A.5 01 mark for discussion of each valid matter to be considered before entering
franchising business 7.0
A.6 Up to 1.5 marks for discussion of each of the valid factors that should be considered
while designing the website under the given situation 9.0
A.7 (a) 01 mark for explanation of brand identity 1.0

01 mark for a valid example of brand identity 1.0
(b) 01 mark for identification and discussion of each valid strategy for
e-branding 4.0
0.5 mark for example under each strategy 2.0
A.8 (a) 01 mark for identification and discussion of each valid reason 5.0
(b) 01 mark for explanation of each valid step to address the situation 5.0
Page 1 of 2
Mark(s)
A.9 0.5 mark for identification of each category prescribed by Alec Rodger 3.5
0.5 mark each for mentioning essential and desirable attribute under valid
categories 4.5
A.10 (a) 01 mark for discussion of each guiding principle for developing an integrated
report 4.0
(b) 01 mark for each valid benefit of integrated reporting 2.0
A.11 Identification and assessment of situation and related threats 5.0

Discussion of relevant safeguards 4.0
(THE END)
Page 2 of 2


Q.1 The advent of internet has revitalized the competition in the global markets. It has
increasingly become a vital component of business strategy and a strong catalyst for survival
and growth in a competitive environment.
In the context of retail industry, discuss the impact of internet on each of the Porter’s five
competitive forces clearly identifying whether internet has strengthened or weakened these
forces. (10)
Q.2 Kidz Wizard (KW), a chain of stores, is engaged in the business of baby clothing and
accessories. KW had been regarded for its high quality products at the most affordable prices
until it had to face a major setback when it introduced ‘toys’ section for infants few years
back. The toys section got an immense response and high revenues were generated.
However, a major defect was identified in one of the toy categories forcing KW to recall the
entire category and had to face legal proceedings which resulted in shutting down of entire
section of toys. Subsequent internal findings revealed that material used in the toys was of
sub-standard quality which could not be identified because of the absence of quality control
measures.
The management of KW now intends to expand into furniture manufacturing business under
the banner ‘baby bed and bedding’, a new section in its chain of stores. It is optimistic about
the success of the new section and has carried out an extensive research on material and
supplier selection. It believes that a well-launched marketing campaign and competitive
pricing would help to generate high profits. However, given the past experience,
management is considering to place certain quality control measures and appoint a risk
specialist for overall risk management.
Required:
(a) Identify four classifications of quality-related costs and mention two costs which KW
may incur under each classification. (06)
(b) Briefly discuss the activities/functions of risk specialist in the risk management process. (04)
(c) Assume that you have been appointed as a risk specialist at KW. Identify and discuss
the approaches under TARA framework for risk management. Also recommend the
most appropriate approach under the given situation with justification. (10)
Q.3 (a) Health care service providers usually do not undertake aggressive promotions as they
rely more on favourable word of mouth. Mention three strategies that health care
centers may adopt to promote the services being offered by them. (03)
(b) Marketers often split the product and/or service into three levels i.e. core product level,
actual product level and augmented product level for the purpose of better product
management, segmentation and positioning.
Explain the three levels of a product. Give one example under each level in case of a
health care center. (06)
Q.4 Smooth Network Service (SNS), a medium sized network service provider has organizational
structure of five levels with a span of control of three. Mr. Tahir Ali is the CEO and reports
to the board of directors. He is responsible for company’s overall affairs and makes most of
the major decisions himself. The role of managers is mainly restricted to close supervision of
operational staff engaged in the day to day operations of the entity.
Mr. Tahir Ali is concerned over weakening performance of the entity. He has identified the
following issues:
(i) Growing number of customer complaints about delayed response to their network
issues.
(ii) The packages offered by the company seem outdated in terms of customer demands
and market trends.
(iii) One of the potential clients has opted for competitor’s services as SNS could not timely
respond to the client’s pricing query.
Required:
(a) Identify and discuss the type of organizational structure prevalent in SNS, based on the
existing span of control. (03)
(b) Recommend the structural changes that SNS may need to adopt along with
appropriate justification. (07)
Q.5 Executive Lounge (EL), a fine dining restaurant has recently been launched in the downtown
area of a city. The restaurant is currently offering dine-in and intends to start food delivery
service as well. The management of EL is in the process of adopting Customer Relationship
Management (CRM) system as it firmly believes that development of strong relationship with
potential customers is integral to the success of EL.
Required:
Briefly discuss the essential functions that CRM system may perform at EL. (08)
Q.6 (a) According to Honey and Mumford learning styles model, pragmatists find abstract
theories and concepts of no use unless they can see their relevance to practical action.
Suggest the circumstances under which pragmatists learn the most. (03)
(b) Kashan Mirza had joined Apna Bank under 2 years’ Management Trainee Program
(MTP) along with several other trainees. At the time of joining, he was highly
motivated and under the impression that he would be provided an opportunity to
understand the entire operations of the bank and his role would be of participative
nature. Twenty-three months into the job, he feels that being a graduate from top
business school, his knowledge and skills have never been fully utilized. His day to day
work mostly revolves around scanning and filing the account opening forms of new
customers with no direct supervision.
Though the bank’s policy manual states that it follows 360-degree approach to
appraisal, when Kashan logged onto HR portal, he found that he was appraised with a
rating of 3 (average) without his involvement in the entire appraisal process. The same
thing had happened last year also and when he attempted to discuss the promotion and
increased pay opportunities with his supervisor he was informed that the bank was
already paying above market salaries.
Kashan’s MTP is ending next month and he is not willing to continue even if he is
offered a job. However, he is determined to share his experience with HR head in an
exit interview, which he learnt is the only way to approach her.
Required:
Assuming all of the above is true, identify and discuss the issues that the bank may
need to address and offer suggestions to overcome them. (12)
Q.7 Identify the strategies/policies that are being pursued in each of the following cases. Also
discuss two risks associated with each strategy/policy:
(a) Ethnic Wears (EW) is a family owned and managed business. EW has been efficiently
using its core competences i.e. innovation and strong marketing capabilities to sustain
competitive advantage. The owners support well-planned and effectively controlled
expansion by utilizing available profits and core competencies. (04)
(b) Oven Fresh (OF) are a home based cake bakers. They have outsourced their online
order taking, packaging and delivery services to Tezz food distributors. However, due
to constant complaints of customers over delayed delivery, OF is in the process of
starting its own delivery services. (04)
(c) Hi-tech Limited is providing software solutions in a hyper-competitive environment

where set of circumstances cannot be predicted with reasonable certainty. The
management encourages employees to respond to the environmental changes by means
of creativity whereas formal planning and approvals have low importance. (04)
Q.8 Answer the following questions in the context of business and professional ethics:
(a) The board of directors of Milestone Limited (ML) has authorized Ahad Mir, financial
controller to negotiate and select a bank for raising finance. Given the good credit
rating of ML, number of banks have shown interest. The terms and conditions offered
by all the banks are more or less similar. However, manager of Loyal Bank has also
promised quick disbursement of personalized housing loan with soft terms to Ahad
Mir, who has been looking for housing loan for some time.
Required:
Explain how Ahad Mir may carry out a mirror test. (06)
(b) What do you understand by principles-based approach to resolve an ethical problem?

Why do accounting bodies prefer to have a conceptual framework for the accountants
to follow rather than a set of strict rules? (05)
(c) Creative Automobile Limited is in the process of formulating a whistleblowing policy

for its employees. The management has requested you to advise in respect of the
following:
(i) The key objectives that should be kept in perspective while devising
whistleblowing policy. (02)
(ii) Rules that should be followed to achieve the objectives in (i) above. (03)
(THE END)
Suggested Answers
Ans.1 The impact of internet on each of the Porter’s five competitive forces for a retail industry
is discussed hereunder:
(i) Threat from potential entrants:

The internet has strengthened the threat of new entrants by reducing the barriers to
entry. Start-up cost in a retail industry has significantly been reduced as new
entrants do not necessarily have to make substantial capital investments such as
establishing retail outlets, forming sales force, distribution channels, insurance
premiums, etc.
(ii) Threat of substitute products:

The internet has no direct impact on the threat of substitute products in a retail
industry. Although customers may have an ease of access to alternative products,
retailers may diversify product portfolios which could lessen the threat of substitute
products considerably.
(iii) Bargaining power of suppliers:

The internet has weakened the bargaining power of suppliers. Buyers’ ease of
access to greater number of suppliers means that bargaining power of suppliers has
reduced significantly.
The internet has strengthened the bargaining power of suppliers as they have access
to wider spectrum of customers at relatively lower cost per customer.
(iv) Bargaining power of customers:

The internet has strengthened the bargaining power of customers. Buyers have
greater access to information (product, supplier, price, market reality) that has
empowered them to make informed buying decisions.
(v) Competitive rivalry:

The internet has strengthened the rivalry among competitors. The availability of
detailed information about the retailers and their products (price, products, etc.) has
made it difficult for the firms to differentiate (as competitors can easily imitate)
resulting in focus being shifted towards the price competition thereby rivalry has
intensified.
Ans.2 (a) Costs that KW may have to incur under each of the four classified quality-related
costs are given hereunder:
(i) Prevention costs:

These are incurred to avoid defects and quality concerns. Examples may
include:
 Designing products with in-built quality.
 Training employees to encourage high standard performance.
 Establishing specifications for incoming materials, processes and finished
products.
 Appointment of quality control expert / purchasing of premium quality
materials / hiring of skilled labor.
(ii) Appraisal costs:

These are incurred to identify defective products before passing on to the
customers. Examples may include:
 Testing and inspecting of incoming materials.
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 Testing and inspecting of final products.

 Performing quality audits to ensure quality system is functioning
appropriately.
(iii) Internal failure costs:

These are incurred to remove defects discovered before the product is
delivered to the customer. Examples may include:
 Re-working / rectifying the defects to bring the product to the required
quality standard.
 Scrapping items that cannot be repaired, used or sold.
 Production time lost due to failure and defects.
(iv) External failure costs:

These are associated with the removal of defect that have been discovered after
the product has been delivered to the customer. Examples may include:
 Costs of carrying out repair work under a guarantee or warranty.
 Costs of recalling the entire products to correct the design fault.
 Costs of lost reputation.
 Legal costs because of liability arising from defective product.
(b) Activities / functions of risk specialist in the risk management process:
 Identifying the risks that are prevailing internally (operational risks) as well as
externally (strategic risks).
 Assessing the significance of each risk identified in terms of likelihood of risk
occurrence as well as the size of the loss in the event of its occurrence.
 Designing, implementing and monitoring risk management strategies and
policies in accordance with the best practices.
 Preparing periodical risk management reports for senior management and
offering recommendations.
(c) The risk management approaches of TARA framework are identified and discussed
as follows:
(i) Transferring risk:

This approach involves passing on whole or part of the risk to a third party so
that in the event of its occurrence, the third party suffers all or part of the loss.
A common example of risk transfer is insurance. However, this approach is
appropriate for risks where the potential losses are high but the probability of a
loss occurring is fairly low.
(ii) Avoiding risk:

This approach involves avoidance of risk altogether by either not investing or
withdrawing from certain business area(s) completely. However, for making
entrepreneurial profits, some business risks have to be taken and this approach
is only appropriate in the extreme circumstances where risk is too high as
compared to the return expected from it.
(iii) Reducing risk:

This approach involves mitigation of risk by restricting exposure in a particular
area or attempting to reduce the adverse effects in the event the risk actually
occurs. This can be achieved by means of sound system of internal controls.
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Suggested Answers
(iv) Accepting risk:

Under this approach risk, is retained in the expectation of making a higher
return. This approach is appropriate where exposure to risk is acceptable and
the benefits expected from it outweigh the costs of managing it. However,
identified risk should be managed and exposure to it should be restricted to
acceptable limits.
Recommendation:
Keeping in view the history of KW as well as high expectations from the new
section, I would recommend a combination of transferring and reducing risks
approaches. KW may insure certain part of its exposure to risk (to mitigate losses)
as well as develop sound internal controls system (for quality maintenance) to
reduce the risk to an acceptable level. Acceptance (because of past experience) and
avoidance (new section is expected to generate high profits) are not recommended
approaches under the given situation.
Ans.3 (a) Health care centers may adopt following strategies to promote their services:
(i) Conducting camps offering free or subsidized medical check-ups to build

awareness of services being offered by them.
(ii) Sponsoring public health awareness events and programs to increase public
awareness of their existence and to improve general image.
(iii) Providing quality services such as minimum waiting time, interactive patient –
doctor sessions, hygiene environment, well trained support staff, etc. resulting
in spreading positive word of mouth.
(iv) Advertising of services by means of media such as health magazines,
newspapers, social media pages, etc.
(b) The three levels of product with examples are discussed as follows:
(i) Core product level:

This level reflects the core need or benefit that the product is trying to meet or
deliver. It does not have a tangible form. It answers the basic question of why
customer is buying the product. For health care center, the core product level
could be ‘preventive and curative treatment’.
(ii) Actual product level:

This level attempts to translate the core product level into actual product level(.
It mainly involves development of product features, design, brand name,
packaging, etc. to deliver the core customer value. For health care center, the
actual product level could be room, medicines, ICU, surgery, etc.
(iii) Augmented product level:

This level builds around the core value and actual product levels. It aims to
offer additional services and benefits along with the product which may
differentiate the product in the marketplace to gain greater market share. For
health care center, the augmented product could be maintenance of case
history of patients, pharmacy, ambulance service, etc.
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Suggested Answers
Ans.4 (a) The organizational structure of SNS is ‘tall-narrow’ as there are many layers of
management from top down to operational level where each management level has
small number of subordinates directly reporting to them. There is close supervision
of work as span of control is narrow and slow vertical communication as shape of
the organization structure is tall.
(b) SNS may adopt ‘wide-flat’ organization structure to overcome the existing issues as
it would bring following benefits:
 The few layers of management from top down to operational levels would
facilitate rapid vertical communication and decision making as information
would travel quickly.
 The wide span of control would result in the greater delegation of
responsibilities to subordinates. The subordinates would have greater
participation in decision making by having more access to top management and
thereby improved motivation and creativity.
 The elimination of the excess layers of management would result in greater cost
savings as well as retention of the best talent staff.
 It would allow the CEO and managers to engage in more important activities
that add value including development of new packages to meet customer
demands and market trends.
 There would be less emphasis on formal roles and individuals would be willing
to carry out other tasks as per business needs.
Ans.5 CRM system at EL may perform the following essential functions:
(i) Customer information

It would gather customer information (name, contact details, etc.) and organize it in
a desired manner (meals preferences, average spending per visit, frequency of visits,
etc.).
(ii) Personalized customer services

It would provide valuable insights about the customers that would allow EL to offer
personalized customer services. Personalized service would encourage more
frequent customer visits as people generally like being recognized and remembered.
(iii) Optimal marketing strategy

It would assist in devising an effective marketing strategy by segmenting the
targeted groups that would allow EL to customize promotional campaigns (for e.g.,
customer loyalty card, discounts, etc.) to generate greater customer interest and
build long term relationships.
(iv) Monitor customer management performance

It would assist in monitoring the customer management performance by
maintaining data pertaining to number of customer complaints, subsequent follow-
ups and consideration of customer feedback and suggestions.
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Ans.6 (a) Pragmatists learn the most under the following circumstances:
(i) They are offered an opportunity to apply ideas and techniques in practice.
(ii) They are given fair feedback on how well they have done.
(iii) They are provided with a model that they may admire and can copy. For
example a boss who acts as role model.
(b) The issues that need to be addressed with the suggestions are discussed as follows:
(i) Job description:

There seems to be a lack of proper job description or absence of it all together
as Kashan was under the impression of greater job responsibilities at the time
of joining the bank. There should be an appropriately designed job description
in place and potential employees should be clearly communicated the roles
expected from them.
(ii) Perception of low contribution:
There is a perception of low contribution in the mind of Kashan as he believes
that his day to day work is clerical and his contribution is insignificant as no
one supervises his work. This perception can be rectified by means of
appropriate job rotation, job enrichment and / or job enlargement.
(iii) Performance appraisal method:
360-degree approach to appraisal has not been followed even though it is
mentioned in the bank’s policy manual. The purpose of appraisal is somehow
lost when employee is not encouraged to participate and understand his
strengths and areas needing improvements. 360-degree approach should be
implemented whereby individual’s performance should be assessed by people
familiar with his work including self-assessment by the individual. Moreover,
not following a stated policy reflects lack of transparency and ethical training.
(iv) Inadequate reward system:
The existing reward system is not appropriate as paying above market salaries
without adequate justification can be questionable. The bank should adopt
performance based pay and promotions to keep employees motivated to
improve their performance and ensure retention of talented individuals.
(v) Inadequate communication channels:
There seems to be an absence of appropriate communication channel between
employees and HR head as HR head is only approachable at the time of exit
interview. Apna Bank needs to develop appropriate channels of
communication whereby periodic feedback from employees / MTs should be
encouraged and views expressed in the feedback should be taken seriously.
(vi) Low motivation:
Kashan was highly motivated at the time of joining the bank but now he is not
willing to continue even if he is offered a job which is a sign of demotivation.
A major overhauling seems necessary to improve the existing working
environment and the motivation levels.
(vii) Over expectations from management training program:
Being a fresh graduate, Kashan might have been over ambitious as he had
expected that he would learn the entire operations of the bank and would be
involved in the decision making activities. HR of the bank should conduct
orientation sessions and offer mentoring programs to management trainees for
adequate guidance pertaining to their work and related concerns.
Page 5 of 7
Suggested Answers
Ans.7 (a) EW is pursuing organic growth (internal development) strategy. This strategy might
be subject to the following risks:
 There might be a limit to the rate of growth a business entity can achieve with
its internal resources. The entity might not have sufficient resources to meet the
growing sales demand.
 The entity might be slow in responding to the changing market dynamics and
the rival firms might be able to grow much more quickly by means of mergers,
acquisitions and joint ventures.
(b) OF is pursuing the strategy of forward vertical integration. This strategy might be
subject to following risks:
 Vertical forward integration may require substantial capital investments. The

costs associated with such integration may outweigh the benefits derived from
it.
 OF might have to compromise its core competencies or new competencies and
its technical skills might be beyond the capabilities of the entity.
(c) High-tech Limited is pursuing emergent strategy. This strategy might be subject to
following risks:
 The entity may be subject to high risks because of absence of formal planning
and approval process as employees may not be able to make appropriate
decisions in all situations.
 There might be over reliance on the ability of individuals within the entity to be
innovative and be entrepreneurial.
Ans.8 (a) Ahad Mir may carry out a mirror test by asking following questions to himself:
(i) Is selection of Loyal Bank legal? If it is not legal then I should not be selecting
it.
(ii) What will other people think? Particularly key stakeholders such as
shareholders, board of directors, etc. and my close family members.
(iii) Is it ethically correct? Can I see in the mirror a person who has acted in a
moral and ethical way and whether I can justify my actions from an ethical
perspective?
(b) Principles-based approach involves application of principles to resolve an ethical

problem. It encourages to follow general guidelines rather than following a
particular set of strict rules. Persons or organizations need to use judgement in
applying principles to decide whether a particular course of action is ethical or not.
Accounting bodies prefer conceptual framework over strict rules based approach
because of the following reasons:
 Accountants while making ethical decisions encounter number of complex and

varied situations. It might be impossible to predict all types of situations in
advance and to make rules for exact course of action.
 Views on ethics differ between countries and cultures. Behavior that might be
considered unethical in one country may be acceptable in another country. It
might be difficult to make allowances for national and cultural differences.
 As the business environment is changing frequently, a rules based approach
would require frequent reviews and updation i.e. after every new situation.
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(c) (i) Following key objectives should be kept in perspective while devising
whistleblowing policy:
 Encouragement of employees to report illegal or unethical behavior or

practices within the organization by protecting the whistleblower doing so
in good faith.
 Discouragement of unfounded allegations made with the intention of
defaming, out of malice or dislike, by taking strict disciplinary action.
(ii) The rules that should be followed to achieve the above objectives:
 Employees should speak up any known concerns about illegal or unethical

behavior. However, in case of any doubt, they should first try to resolve it
by discussing with colleagues and managers or seeking advice from the
relevant authority.
 Employees should not be punished for a whistleblowing done in good
faith. They should be protected from any undesirable actions as a
consequence of such act.
 Disciplinary action should be taken against employees knowingly making
a false report to malign the others.
(The End)
Page 7 of 7
SUBJECT SESSION
Strategy (CFAP) Examination - Summer 2018
General:
The overall performance improved in this attempt as passing ratio was 17.6% as
compared to 10.8% in the previous attempt. However, the passing ratio was still very low
and this performance could have improved by a little more hard work.
The performance suffered mainly on account of poor writing skills and failure to read the
requirement of the questions carefully. Another major issue with majority of the students
was that they gave long generalized comments before starting to respond to the
requirements of the question. This took a lot of their time and their performance suffered
in the end as they were left with very little time to plan and produce properly worded
answers. Some pertinent examples include question #1 in which many students wrote
extensively on the benefits and uses of internet for businesses, question 3 (b) in which
students gave examples of a car in addition to the requirement of giving examples related
to healthcare, and question # 8 (a) in which they started with lengthy comments on the
overall scenario and the threats involved.
Many students started the next answer immediately after the previous answer, leaving no
space to add further points. As a result, when the need arose they had to cramp the newly
added points or add them at the end of the answer book wasting time in cross referencing.
Another common issue was grammatical errors. Many students had no idea whether they
have to write in the present, past or future tense and resultantly, they made errors or their
answers lacked clarity. These types of errors become particularly significant when the
question is scenario based and the answer has to be written accordingly.
In this question, the candidates were required to discuss whether the internet has
strengthened or weakened the Porter’s five competitive forces. Though the overall
performance in this question was good, the students lost marks on account of the
following:
 The fact that the discussion had to take place in the context of retail industry was
ignored in most cases.
 Too much and unnecessary emphasis was placed on trading on a global basis which
in most cases was not relevant and showed lack of understanding.
 While explaining the threat of new entrants the students mostly mentioned that
internet has reduced the barriers to entry but did not specify the reasons thereof.
Page 1 of 5
Summer 2018
 Similar types of issues were observed in case of explanations of all the five
competitive forces.
 In the case of substitute products, the candidates failed to understand that usually the
retailer has no problem in dealing with substitute products as he sells all varieties of
products.
 While discussing competitive rivalry most students tended to discuss the same points
which they had discussed in the other four cases.
Question 2
This question consisted of three parts. Average performance was witnessed as 30% of the
candidates were able to secure passing marks. Part-wise performance is discussed below:
Question 2(a)
This part of the question was based on a scenario relating to a chain of stores that had
been unsuccessful while launching its toy section few years ago due to certain quality
issues and was now intending to expand into furniture manufacturing business. The
requirement was to identify four classifications of quality related cost and mention two
costs which the organisation may incur, under each classification.
Generally the candidates were able to give the four classifications correctly. However,
casual attitude was observed while giving examples of costs. Many students mentioned
raw material and labour cost as the examples, which was incorrect. Had they mentioned
raw material and labour incurred on defective/rejected production, the answer would
have been correct. Moreover, very few could give correct examples of prevention costs.
Further, many students gave the four classifications correctly but did not classify the
costs and presented them in a single list.
Question 2(b)
This part required the candidates to discuss the activities/functions performed by a risk
specialist. The performance remained average as most of the answers covered only two
aspects i.e. identification of risks and implementing controls and risk management
policies. Two important functions i.e. assessing the significance of risks and the reporting
responsibilities were rarely mentioned.
Question 2(c)
In this part the candidates were required to discuss the risk management approaches
under the TARA framework and to recommend the most appropriate approach under the
scenario. The performance remained average as most of the students were able to identify
the four risk approaches but failed to specify the circumstances/situations where a
particular approach would be more appropriate. Moreover, very few candidates could
provide proper justification while recommending a particular approach.
Page 2 of 5
Summer 2018
Question 3
The overall performance in this question was average as 27% of the candidates secured
passing marks. The question consisted of two independent parts and the performance in
each part is discussed below:
Question 3(a)
The requirement in this part was to mention three strategies which healthcare centers may
adopt to promote the services being offered by them. The performance remained average
as the number of students were equally divided between those who did and those who did
not realise that a health care center cannot adopt product promotion policies which are
adopted by an ordinary commercial organisation. Some students mentioned strategies
such as pull and push strategies which were totally irrelevant.
Question 3(b)
In this part of the question, the candidates were required to explain the terms core
product level, actual product level and augmented product level. Generally, the
candidates were able to explain the last two terms correctly but explanation of core
product level, lacked clarity. Further, it was specifically mentioned in the question that
examples should be given with reference to the health care center but many students gave
other examples like those of restaurants, cars, etc.
Question 4
This question was based on a scenario which described the organisation structure of an
organisation which contained five levels and the span of control was three. It consisted of
two parts and both were linked to the same scenario. The overall performance was quite
poor as only 16% of the candidates secured passing marks. Part-wise comments are given
below:
Question 4(a)
In this part the candidates were required to identify and discuss the type of organisation
structure prevalent in the organisation. The responses of the students could broadly be
categorized into three groups i.e. those who correctly identified that the structure was
Tall Narrow, those who either mentioned the term Tall or Narrow and those who
identified other types of organisation structures.
Question 4(b)
This part required the candidates to recommend structural changes based on their
analysis in part (a) where they had discussed the organisation structure in the context of
span of control. Many students did not appreciate this aspect and started discussing
matters other than span of control such as creation of departments, appointment of
personnel, etc. which were not relevant. Some students even discussed matters such as
mentoring and team building which was totally irrelevant. Many students were able to
recommend correctly that the organisation should reduce the number of levels and
increase the span of control but were unable to provide what benefits would accrue by
doing so.
Page 3 of 5
Summer 2018
Question 5
In this question, the candidates were required to discuss the essential functions which a
CRM may perform to help a restaurant in developing a strong relationship with its
potential customers. Though it was a simple question, the performance was below
average as only 20.4% candidates could secure passing marks.
In most cases the answers revolved around collection and storage of data and how it can
be used for booking online orders. Most of the students did not say anything about
analysis of the data and how it would help in formulating effective strategies. Some
students were rather careless in the use of words. For example, CRM produces
information which helps in formulation of strategies but they stated ‘formulation of
strategy’ as one of the functions performed by CRM. Some students produced definition
of CRM which was totally out of context.
Question 6
This question consisted of two independent parts. The overall performance was quite
below:
Question 6(a)
In this part consisting of three marks, the requirement was to identify the circumstances
under which pragmatists learn the most, in the context of Honey and Mumford learning
style modules. Most of the students could identify just one circumstance and scored less
than passing marks, whereas, a number of students did not attempt this part altogether.
Question 6(b)
This question was based on a scenario which described the situation faced by a
management trainee appointed by a bank. The performance remained poor as most of the
students picked up just one or two points and gave lengthy comments on these points
only. Many students only discussed Appraisal system in detail covering two or even
more pages. The following points were seldom covered:
 Orientation sessions of management trainees do not seem to have been conducted

resulting in over expectations of the trainees.
 Perception of low contribution.
 Bank’s policy manual was not being followed with regard to 360 degree approach to
appraisals.
 Paying above market salaries without justification is also questionable.
 Absence of appropriate communication channel.
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Summer 2018
Question 7
In this question, three situations were given. The requirement in each case was to identify
the strategy/policy being pursued and two risks associated with such strategies/policies.
The performance was very poor. In part (b) majority of the students identified the
strategy as Outsourcing probably because they failed to read the question carefully. In
part (c) also, various incorrect strategies were identified. Further, the risks were not
mentioned with clarity and in some cases were totally irrelevant.
Question 8
This question consisted of three independent parts. The overall performance was quite
below:
Question 8(a)
The performance in this part was very poor. Only few students knew how a mirror test is
usually performed. Instead, most of them gave suggestions as to how Ahad Mir should
handle the given situation and gave arguments in favour of and against accepting the loan
offered by the bank, which was not required at all. Some of them also discussed the type
of threat involved i.e. self-interest threat which was totally irrelevant in the context of the
requirement of the question.
Question 8(b)
The performance in this part was average. Many students did not have a clear idea of the
difference between a principle based approach and a rule based approach. Some of them
seemed to understand the difference but could not explain it properly. Some students
even discussed the importance of following the principles in the conduct of business.
Some students listed and even discussed the types of threats which have been identified
in the code of ethics, which was totally irrelevant.
Question 8(c)
The performance in this part was average. The requirement was to discuss the key
objectives of a whistle blowing policy and the rules that should be followed to achieve
those objectives. Most of the students were unable to distinguish between objectives and
rules and used them interchangeably. Many students discussed totally irrelevant things
like importance of SOP and procedures manual.
(THE END)
Page 5 of 5

The marking scheme is given as a guide. Markers also award marks for alternative approaches to
a question and relevant/well-reasoned comments/explanations. Moreover, the available marks in
answer may exceed the total marks of a question.
Mark(s)
A.1 0.25 mark for mentioning each of the Porter’s five competitive forces 1.25
0.5 mark each for identifying the impact of internet on these forces in retail
industry 2.5
1.25 marks for discussion of the impact 6.25
A.2 (a) 0.5 mark each for identification of classifications of quality-related costs 2.0
0.5 mark each for mentioning of each cost subject to maximum of 01 mark
under each classification 4.0
(b) 01 mark for discussing each of the activities/functions of risk specialist in the
risk management process 4.0
(c) 0.5 mark for identification of each approach under TARA framework 2.0
1.5 marks for discussion of each approach 6.0
Recommendation and its justification 2.0
A.3 (a) 01 mark for mentioning each strategy 3.0
(b) 01 mark for explaining each level of product 3.0

01 mark for each relevant example 3.0
A.4 (a) Identification of organizational structure 1.0

Discussion on existing organizational structure 2.0
(b) Recommendation of appropriate organizational structure 1.0

1.5 marks for each benefit justifying the recommended structure 6.0
A.5 02 marks for discussion of each function that CRM system may perform under given
scenario 8.0
A.6 (a) 01 mark each for suggesting circumstances under which pragmatists learn the
most 3.0
(b) 01 mark for identification and discussion of each issue 6.0

01 mark for each suggestion to address the issue 6.0
A.7 (a) Identification of strategy 1.0

1.5 marks for discussion of each risk 3.0
(b) Identification of strategy 1.0

(c) Identification of strategy 1.0

Page 1 of 2
Mark(s)
A.8 (a) 01 mark for framing each question 3.0
01 mark for discussion under each question 3.0
(b) Explanation of principles-based approach 2.0

01 mark for discussing each reason as to why accounting bodies prefer to
have conceptual framework over rule based approach 3.0
(c) (i) 01 mark for each objective 2.0
(ii) 01 mark for each rule 3.0
(THE END)
Page 2 of 2


Q.1 Fashion Couture (FC), a leading fashion designer has a presence in all the prominent
shopping malls across the country. It started a small boutique that transformed into a first
choice brand among women in short span of time. It has following three product lines:
Daily wear
It comprises of unstitched and ready-made dresses. It was the first product line that
FC introduced in 1990 and gained instant popularity due to availability of different designs
and sizes with reasonable quality and courteous customer support staff at the most
economical prices in the market. The demand for this product line has significant potential
for growth in the existing market and the competitors are striving hard to increase their
respective market shares.
Bridal dresses
It comprises of tailor-made bridal dresses. This product line is popular among targeted upper
class groups. The designers are well-qualified having sound knowledge of customer needs.
The premium quality and unique designs are highly regarded by targeted customers.
However, the demand for bridal dresses is moderate whereas competitors offering party wear
dresses are enjoying hefty profits due to high demand.
Fragrances
It comprises of range of perfumes. This product line was first launched in 2015. Despite
aggressive marketing, this product line could not attract the high end targeted customers who
have strong brand loyalty towards already established brands available in the market.
Consequently, FC has set high prices in the hope of achieving break-even.
Required:
(a) Identify and discuss the strategic position of each of the product line of FC in the
strategic clock as suggested by Bowman. (09)
(b) Recommend the growth strategy for each of the product line of FC in terms of Ansoff’s
Matrix. Also discuss how the recommended strategy can be implemented successfully. (09)
Q.2 Glory is a series of high-end smartphones and tablets designed, manufactured and marketed
by Marvel Group (MG). MG is highly regarded for innovative product designs and
aggressive marketing campaigns. The mobile phone industry is one of the fastest growing
sectors of economy where a number of competitors attempt to outperform each other in
terms of product designs, features and pricing.
MG is in the process of introducing new series of foldable smartphones (Glory Ultimate) that
could be a vital breakthrough in mobile phone industry. The management of MG intends to
adopt life cycle costing for Glory Ultimate.
Required:
(a) Discuss the benefits that MG may enjoy by adopting life cycle costing. (03)
(b) List the costs that MG might have to incur in each phase of the life cycle of
Glory Ultimate. (04)
(c) Suggest the strategies that MG may adopt to extend the maturity phase of
Glory Ultimate. (04)
Q.3 Ansar (Private) Limited (APL) has recently been registered as a private limited company. It is
in the process of developing vision and mission statements. Ms. Shanzeh Ghafoor (Shanzeh),
the CEO has advised her team to formulate the vision and mission statements similar to
MEL Limited which is the largest listed company engaged in the same business.
Required:
(a) List down the various purposes of vision and mission statements. (04)
(b) Explain whether you agree with Shanzeh’s approach of developing mission and vision
statements similar to those of MEL Limited. (03)
Q.4 (a) What do you understand by ‘virtual supply chain’? Also mention the benefits of virtual
supply chain. (04)
(b) Al-Zamin (AZ) is a producer of cement and related products. In a recent evaluation of
the existing operations, the management of AZ is considering to adopt virtual supply
chain. In the first phase, AZ would implement e-procurement system where focus
would be on e-sourcing, e-purchasing and e-payment. If process runs smoothly,
AZ would adopt a comprehensive virtual supply chain.
Required:
(i) Briefly describe the terms ‘e-sourcing’, ‘e-purchasing’ and ‘e-payment’. (03)
(ii) Suggest any two examples of data validation checks that would assist the
management of AZ to ensure that data input in the system is correct. (04)
Q.5 City Express (CE) operates inter-city passenger bus service over 20 districts of Sindh. It was
incorporated in 2015 when Government of Sindh (GoS) awarded the company exclusive
road permits to operate in distant areas of Sindh. CE was an instant success because of wide
area coverage, low ticket pricing and large fleet of state-of-the-art buses. In view of the
encouraging response from general public, GoS is also considering to introduce a new
inter-city train service.
GoS has been providing subsidies, granting various tax exemptions and promoting services of
CE by extensive coverage in the electronic and social media to encourage CE to operate in
areas with low profit margins. Still, certain routes are not profitable. In these routes, buses
often depart late and schedules are cancelled frequently. The management of CE is
considering to negotiate with GoS to relax restrictions on fixation of fare rates to counter
increasing fuel costs.
Required:
(a) Perform SWOT analysis for CE. (06)
(b) Suggest any eight non-financial performance indicators for CE. (04)
Q.6 (a) Entities are regarded as citizens of the society in which they exist and operate. As
corporate citizens, they owe certain responsibilities to society similar to that of
individual citizens. One of the ways to fulfill this responsibility is to follow a corporate
social responsibility (CSR) policy that aims to ensure that entities conduct their
businesses in the common interest of society at large.
Required:
Briefly discuss some of the basic principles that an entity may keep in perspective while
formulating its CSR policy. (05)
(b) Corruption among government officials could have devastating effects on society and
these effects can be multi-dimensional.
Required:
Briefly discuss how corruption by the government officials of a country may result in
the country’s failure to achieve its economic objectives. (05)
(c) Mr. Faysal Adil (Faysal) is an experienced chartered accountant. He is on the board of
directors of Aitmaad Builders & Contractors (ABC). Government has recently invited
tenders for construction of country-wide hospitals. The successful bidding on these
tenders would give ABC a considerable competitive advantage.
Faysal’s younger brother is an influential member of a committee responsible for

awarding the contract. Faysal is under the pressure of the management to influence his
brother to obtain favour for ABC in the tendering process.
Required:
Identify and briefly discuss how the fundamental principles of Code of Ethics of ICAP
may be compromised if Faysal proceeds with the management’s advice. (06)
Q.7 Mr. Iqbal Qureshi (Qureshi) owns and operates two retail outlets under the name of Comfort
Feet (CF) that offers variety of footwear including shoes, sandals and chappals. CF is gaining
recognition and has potential to expand but due to financial constraints, it is not possible for
Qureshi to set-up new outlets. Therefore, he is considering to start offering products by
developing an e-business store to reach wider audience. However, one of his friends has
suggested that he should register CF’s products with an e-intermediary instead of developing
his own e-business store.
Required:
(a) Briefly discuss the barriers that CF may encounter if Qureshi develops his own
e-business store. (06)
(b) Briefly discuss the benefits that could accrue to CF if it gets associated with an
e-intermediary to sell its products. (03)
(c) Give four examples of e-intermediaries that CF can approach. (02)
Q.8 (a) An effective recruitment and selection process is likely to result in hiring of individuals
that best fit with organization structure and needs. List the factors that may hinder an
organization from carrying out effective recruitment and selection. (04)
(b) School of Leaders (SoL) is one of the largest school networks in the city. The
management of SoL often fills up the key positions externally as it believes that external
recruitment could bring fresh thinking and ideas. It has recently hired Ms. Shireen
Qadir (Shireen) as Chief Administration Officer who had previously worked with an
IT company.
Shireen has noticed that student intake has been declining and staff turnover is
relatively high. She believes that training and development of teaching staff is
imminent. She has contacted ‘Shape Your Future’ (SYF), a firm of trainers that used to
train staff of the company in which she was previously employed. As part of the
proposal, SYF has designed a 100 hours training program stretched over a period of
30 days. 50 hours would be allotted for in-house training and remaining 50 hours would
be self-learning for which manual and online material would be provided.
The training would be conducted on weekends.
Required:
(i) Identify and discuss the factors that might act as barriers to achievement of
objectives of the training program of SoL. (08)
(ii) Explain whether you agree with the management’s policy of giving preference to
external recruitment. (04)
(THE END)
Suggested Answers
Ans.1 (a) Strategic position of product lines in the strategic clock as suggested by Bowman are
identified and discussed as follows:
Daily wear
In the Bowman’s strategic clock, strategy for this product line is ‘low price strategy’.
The customers perceive that product is offering average benefits (not regarded as
low-quality product) at a low price when compared with similar products being
offered by the competitors in the market. This strategy is likely to be implemented
successfully by the least-cost producer only.
Bridal dresses
In the Bowman’s strategic clock, strategy for this product line is ‘focused
differentiation strategy’. The customers perceive that product is offering above-
average benefits and therefore are ready to pay higher-than-average prices. This
strategy is likely to be implemented successfully when products under this category
are strongly branded as premium products so that high prices can be justified.
Fragrances
Bowman has identified such strategy as is being followed in this case as ‘strategies
that will fail’. The decision to charge high prices may result in customers’ perception
that benefits derived from such products do not justify the prices as they can
purchase products offering more benefits in similar or even low prices. This strategy
is highly unlikely to be successful.
(b) Recommended strategy for each product line in terms of Ansoff’s Matrix with
guidance for implementation is given hereunder:
Daily wear
It is recommended to follow market penetration strategy as demand for this product
line has significant potential for growth in the existing market. This strategy can be
implemented successfully by means of aggressive marketing. FC should seek to sell
more of its current products in its existing markets by persuading existing
customers to buy more, persuading individuals who have not bought the product in
the past to start buying and persuading individuals to switch from buying the
products of competitors.
Bridal dresses
It is recommended to follow product development strategy. This can be achieved by
offering party wear dresses also as competitors are enjoying hefty profits. This
strategy can be implemented successfully by using qualified staff and the existing
brand name that may be extended to new products i.e. party wear dresses.
Fragrances
It is recommended to follow market development strategy since high end targeted
customers have strong brand loyalty to competitors’ products. This strategy can be
implemented successfully by selling products in new geographical markets
(regional, national, etc.) or attracting customers in new market segments (low end
customers) by offering slightly differentiated versions of its existing products or by
making them available through different distribution channels.
Page 1 of 7
Suggested Answers
Ans.2 (a) MG may enjoy the following benefits by adopting life cycle costing:
 The potential profitability of Glory Ultimate would be assessed before major

development is carried out and further costs are committed. It may assist
management in deciding whether to introduce new series at all or not.
 It may assist in identifying various types of costs over the life of Ultimate Glory.
Strategies may then be devised to reduce / control these costs.
 It may assist in developing a pricing strategy that would cover the costs and
achieve desired level of profits.
(b) MG might have to incur following costs in each phase of the life cycle of Glory
Ultimate:
(i) Introductory phase

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

 Increased costs of working capital
 Costs of increasing capacity
 Marketing and advertising costs to raise customer base
(iii) Maturity phase

 Costs to maintain manufacturing capacity
 Marketing and product enhancement costs to extend maturity
(iv) Decline phase

 Costs of withdrawals (costs of remaining warranties)
 Discounts to attract customers
(c) MG may adopt any or combination of the following strategies to extend the maturity
phase of Glory Ultimate:
 Differentiate by modifying design, features, packaging, etc. to extend product

life.
 Sell to untapped markets in terms of geographical area, gender, type of
customer, life style etc.
 Revisit pricing strategy by offering discounts or promotional schemes to attract
customers who are happy to purchase ‘old models’ for a lower price and avoid
paying the premium required for the new models.
Page 2 of 7
Suggested Answers
Ans.3 (a) The purposes of vision and mission statements are listed below:
 These provide basis for consistent strategic planning decisions.

 These assist in translating management’s intentions and purposes into
corporate objectives.
 Provide a common purpose for all groups and individuals within the
organization.
 Assist in establishing goals for the organization.
 Assist in improving the overall image of an organization among external
stakeholders and public in general.
(b) Vision and mission statements reflect the unique/distinctive identity of an

organization. The uniqueness can be in terms of business philosophy, purpose of
business and capabilities of an organization. APL is a newly registered private
company whereas MEL is a well-established listed company therefore, it is highly
likely that above parameters of unique identity could be different. Hence, I do not
agree with Ms. Shanzeh’s approach of imitating the mission and vision statements
of MEL.
Ans.4 (a) Virtual supply chain consists of electronic communications links between suppliers
and customers in the supply chain. The links may use websites, extranet or
electronic data interchange. Following are the benefits of virtual supply chain:
 It improves information flows with suppliers and customers.

 It results in time and costs savings.
 It reduces the probability of errors that can occur when information is
transferred manually.
(b) (i) E-sourcing

It is the use of electronic methods for finding new suppliers and negotiating
terms for purchase agreements.
E-purchasing
It is the process of making purchases electronically by submitting requests for
quotations to suppliers, receiving quotations from them and placing the order
electronically.
E-payment
It is the use of electronic methods for payments such as electronic invoicing /
self-billing and payment to suppliers by sending electronic instructions to the
bank.
(ii) Examples of data validation checks that would assist the management of AZ
to ensure that data input in e-procurement system is correct are given below:
 To input a transaction for purchase of goods, the system would require a

code number for the supplier (range check). If all supplier codes are in
the range of 2000-3999, input of supplier code outside this range would
be reported as an error.
 Key code numbers can be designed to include a ‘check digit’ (digit check).
This is an additional digit in the code that enables the program to check
the code against an input error.
Page 3 of 7
Suggested Answers
Ans.5 (a) SWOT analysis for CE is as follows:
(i) Strengths
 Exclusive road permits.
 Large fleet of state-of-the-art buses.
 Wide area coverage.
(ii) Weaknesses
 Restriction on fixation of fare rates.
 Reliance on GoS for subsidies, tax exemptions and promotion of business.
 Buses often depart late and schedules are cancelled frequently.
 Unprofitable routes.
(iii) Opportunities
 Operate in unexplored markets of other provinces / Start operating intra-
city bus services.
 Abandon non-profitable routes.
 Negotiate with GoS to revise the fares / subsidies.
(iv) Threats
 Introduction of new inter-city train services by GoS.
 Non-preferential treatment from GoS in future.
(b) NFPIs for CE are listed below:
 Number of customer complaints

 Average time to resolve customer complaints
 Customer satisfaction index
 Bus occupancy ratios
 Number of new routes started
 Number of routes closed down
 Number of late departures
 Number of cancelled schedules
 Number of accidents reported
 Percentage of public awareness of CE services by means of annual market
research
 Percentage of market share
Ans.6 (a) An entity may keep in perspective the following basic principles while formulating
its CSR policy:
 Operate in an ethical way. It should have a recognized code of ethical behavior

and ensure that its employees act according to that code.
 Treat employees fairly and with respect. The fair treatment could be assessed
by entity’s adherence to its employment policies such as good working
conditions, provision for training, equal opportunity employer, etc.
 Be a responsible citizen in its community. Responsibility can be shown in the

form of respecting basic human rights (no tolerance of child labor), investing in
local communities (schools, parks, hospitals), etc.
Page 4 of 7
Suggested Answers
 Sustain the environment for future generations. This could take the form of
reducing pollution, cutting down the use of non-renewable energy resources,
recycling of waste materials, etc.
(b) Corruption by the government officials of a country may result in the country’s
failure to achieve its economic objectives as follows:
 Scarce resources might be deployed to high profile projects at the expense of

basic infrastructure projects such as hospitals, schools, etc.
 Tax revenue might be spent on individuals/entities delivering less than value

expected to derive from such spending.
 Fair market structures might be compromised resulting in distortion of

competition and discouraging potential investments.
 More efficient companies may lose out and in the long run that might lead to
slower growth in the economy.
 National resources might be placed in the control of small number of individuals

that might lead to concentration of wealth resulting in chaos and social conflicts.
(c) If Faysal proceeds with the management’s advice, he may breach following
fundamental principles of Code of Ethics of ICAP:
Integrity
According to this principle, chartered accountants must be honest and
straightforward in their professional and business dealings. Faysal might breach
this principle by involving in an unethical activity i.e. influencing his brother to gain
favors.
Objectivity
According to this principle, chartered accountants must not compromise their
professional or business judgement because of bias, conflict of interest or undue
influence of others. Faysal might breach this principle by influencing his brother
under the pressure of management.
Professional behavior
According to this principle, chartered accountants are required to comply with
relevant laws and regulations and avoid any action that they know would discredit
the profession. Faysal might breach this principle by knowingly being involved in an
activity that could affect the reputation of the profession.
Ans.7 (a) CF may encounter following barriers if Qureshi develops his own e-business store:
 It might be fairly expensive for CF to establish e-store for selling its product and
taking payments by means of credit card, debit card, etc.
 It might be difficult for CF to sell its products online successfully as footwear

products are difficult to sell by means of catalogues. Businesses selling such
products by internet often have to budget for large amounts of sales returns.
Page 5 of 7
Suggested Answers
 It might take time to establish a website and particularly creating awareness

among targeted customers about products being offered by CF. This may
require significant spending on marketing as well.
 A website has to be updated regularly to keep it current and attractive. Qureshi

might not have the requisite skills.
 Continuous availability is must for the success of e-stores. The availability could
be compromised due to poor maintenance, inappropriate hosting and denial of
service attacks, etc.
(b) The following benefits could accrue to CF if it gets associated with an e-intermediary
to sell its products:
 The e-store would be readily available that would give CF an immediate access
to a wide range of customers.
 It would require low initial investment as registration costs are generally

minimal. However, a certain percentage of commission on each sale would
require to be paid to the e-intermediary.
 It would give CF an access to well-established website designed and maintained

by team of experts.
 Qureshi would not require extensive technical skills to manage e-business. The
skills such as regular website updating, continuous availability and marketing
campaigns would be performed by e-intermediary itself.
(c) FC may approach following e-intermediaries in Pakistan:
 Daraz.pk
 Alibaba.com
 Amazon.com
 Yayvo.com
Ans.8 (a) The following factors may hinder an organization from carrying out effective
recruitment and selection:
 Lack of proper job analysis may attract individuals lacking the particular skills
essential for the job.
 Badly designed job advertisement / application form where ideal requirements

are primarily focused on and minimum acceptable requirements are ignored
may deter suitable candidates to apply in the first place.
 Use of inappropriate media for advertising the job may result in lack of
awareness of vacancy among the potential candidates.
 The individuals responsible for making the selection may lack the skills
necessary for successful selection.
 The selection process is not monitored or reviewed regularly thereby

disregarding the improvements essential for effective functioning of the
process.
Page 6 of 7
Suggested Answers
(b) (i) The following factors might act as barriers to achievement of objectives of the
training program of SoL:
 It seems that training needs have not been analyzed (i.e. skills expected
from employees and skills they currently possess) as blanket training
program is designed for all teaching staff.
 The selection of trainers may be not be appropriate unless SYF has

previous experience of designing and offering of training to teaching
professionals.
 Training program seems to be inadequately designed. SoL wants teaching

staff to learn too much (100 hours training program) in too little time (30
days).
 Training method might not be suitable as 50 hours are fixed for self-online
learning that might be cumbersome as trainees generally tend to avoid
reading materials for self-learning.
 Trainees might resist learning new skills. They already seem to be low in
motivation as reflected by high staff turnover.
 It seems that management is not committing sufficient resources in terms

of employees’ time and monetary or non-monetary rewards. Trainees
might have to compromise on family and/or other commitments and lack
of incentives might affect their motivation towards training.
(ii) Although new personnel may bring fresh thinking or ideas, I do not agree with
the management’s policy of giving preference to external recruitment. Such
policy could deprive an organization from the benefits of internal promotions.
These benefits are discussed below:
 It is quicker and inexpensive to promote internally as certain costs (i.e.

advertisement, consultants’ fee, interview and selection process) can be
avoided.
 It can be a source of motivation / retention of the key employees who

otherwise may leave the organization for other better opportunities.
 It might be less risky to promote employees internally as management is

in a better position of knowing the strengths and weaknesses of its
existing employees.
 Existing employees are well-conversed with the existing culture and

norms of the organization therefore, management may not have to offer
extensive training in this regard.
(The End)
Page 7 of 7
SUBJECT SESSION
Strategy (CFAP) Examination - Winter 2018
General:
The overall performance in this paper was better than the previous attempt as 24%
candidates secured passing marks as compared to 18% in the previous attempt.
Most of the students could not perform well despite having reasonable knowledge of
some basic concepts as the failed to apply them in the given scenarios. Many students
wrote the same points again and again and presumed that they have written enough.
Consequently, many important points were ignored.
Question 1
This question required thorough understanding of the Strategic Clock as mentioned by

Bowman. According to the given scenario, a leading fashion designer had three product
lines. Relevant details were provided in the question. The question consisted of two parts.
The overall performance was rather poor as only 23% of the candidates could secure
passing marks. This was mainly because many candidates lacked knowledge of
Bowman’s Strategic Clock. Other issues are discussed in the part-wise comments given
below:
Question 1(a)
The requirement here was to identify and discuss the strategic position of each product
line in the Strategic Clock. Most of the students managed to correctly identify the
strategies for Daily wear and Fragrances but failed to do so in the case of Bridal dresses.
Moreover, Bowman’s strategic clock model looks at the product positioning on the basis
of the product’s price and its perceived value. Instead of discussing the product
positioning on this basis most of the students just repeated the details given in the
question with very little value addition.
Question 1(b)
This part of the question required growth strategy for each product line in terms of
Ansoff’s Matrix. Some students gave answers with respect to BCG matrix.
Page 1 of 6
Winter 2018
Most of the students who answered with respect to the Ansoff’s growth matrix, correctly
mentioned the Market penetration strategy for Daily wear. However, many of them were
not sure as to what exactly should be done.
Similar situation was witnessed in the case of Bridal dresses also as most students
identified Product development strategy correctly but could not specify what could be
done to implement the strategy.
As regards Fragrances, many students stated that this product line should be abandoned.
In fact, closing down a product line must be the last resort. In the given situation, there
was a need to rethink the strategy of relying on high end customers and look for other
geographical markets or different customer segment.
Question 2
This question was about product life cycle. It consisted of three parts. The overall
performance was similar to question #1 i.e. only 23% of the candidates secured passing
marks. Performance in each part is discussed below:
Question 2(a)
In this part, the candidates were required to discuss the benefits of life cycle costing. The
performance was not satisfactory as majority of the candidates were unable to discuss the
benefits because of lack of conceptual understanding as they tried to mention the benefits
of product costing rather than life cycle costing. Even among those who had grasp over
the concept, quite a substantial number of students did not discuss an important benefit
i.e. the life cycle costing may assist in developing the pricing strategy that would cover
the cost and achieve desired level of profits. Some candidates discussed cash flow
management which was not a relevant benefit in this context.
Question 2(b)
This part of the question required the candidates to list the costs that the company might
have to incur in each phase of product life cycle. The performance remained average as a
number of students lacked clarity. For example, they mentioned marketing costs in
different stages without specifying the purpose. In many cases it is important to specify
the reason for which a cost is being incurred e.g. in Introductory phase marketing and
advertising cost is incurred to raise product awareness while in Maturity phase such costs
are incurred to extend the maturity of the product. Some students mentioned cost of
decommissioning of plant / machinery and merger or acquisition of competitor’s entities
under the Decline phase of the product life cycle, which was totally incorrect. Some
students did not list the ‘Introductory phase’.
Question 2(c)
The requirement in this part was to suggest strategies that the company might adopt to
extend the Maturity phase of the product life cycle. The performance remained average
as majority of the candidates only identified one or two strategies correctly. Repetition of
the same strategy with slight change in words and phrases was observed in large number
of answers.
Page 2 of 6
Winter 2018
Question 3
This question was about vision and mission statements. It consisted of two parts. The
overall performance was satisfactory as 53% of the candidates secured passing marks.
Performance in each part is discussed below:
Question 3(a)
In this part the candidates were required to list the various purposes of vision and mission
statements. The performance was good as majority of the candidates were able to identify
the purposes correctly. However, some students got confused and discussed the contents
instead of the purposes.
Question 3(b)
In this part the candidates were required to comment on the possibility of developing the
vision and mission statements which were similar to those of the largest listed company
involved in the same business. Performance in this part of the question was not
satisfactory. Though almost every student wrote correctly that mission and vision
statement of the other company must not be copied, very few students were able to
justify their answer with proper reasoning.
Question 4
This question was based on the topic of virtual supply chain. It consisted of two parts.
The overall performance was below average as only 30% of the candidates secured
passing marks. Performance in each part is discussed below:
Question 4(a)
This part required definition and benefits of virtual supply chain. Majority of the
candidates were able to provide the correct definition but failed to provide the benefits of
virtual supply chain. Many candidates focused only on the buying aspect of virtual
supply chain and neglected the other benefits such as improvement in information flow
with suppliers and customers, cost and time savings and reduction in probability of
errors.
Question 4(b)
This part had two sub-parts. In sub-part (i) the candidates were able to secure passing
marks by providing correct definitions of e-purchasing and e-payment. However, only
few students could define e-sourcing correctly.
In sub-part (ii) the candidates were required to give two examples of data validation
checks to be applied in the given situation. The performance remained poor as only few
candidates were able to provide correct examples. Majority of the candidates provided
incorrect examples such as firewalls, passwords, etc. which are not data validation
checks.
Page 3 of 6
Winter 2018
Question 5
This question contained a scenario based on an organisation named City Express (CE)
which operates inter-city bus service. The candidates were required to carry out a SWOT
analysis and suggest any eight non-financial performance indicators.
Question 5(a)
This was an easy question and 51% of the students passing marks. In the SWOT analysis,
the students correctly picked the Strengths and Weaknesses but were not very clear about
Opportunities and Threats. Somehow, majority of the students took introduction of new
inter-city train services by GOS as an opportunity incorrectly presuming that the contract
would be given to CE. Many students were confused between weaknesses and threats.
Restriction on fixation of fares and reliance on Government of Sindh (GOS) for subsidies
were considered as threats whereas these were weaknesses. Similarly, non-preferential
treatment of GOS in future dealings was a threat rather than a weakness.
Question 5(b)
Students failed to score good marks in this part. Non-Financial Performance Indicators
(NFPIs) are the quantitative measure of either an individual’s or an entity’s performance
that is not expressed in monetary units. The performance was mixed. Many candidates
performed well but almost an equal number performed poorly as well. The most common
error was that the candidates picked items from the question but did not convert them
into performance measure. For example, ‘new routes’ was mentioned instead of number
of new routes started. Similarly, ‘customer complaints’ was mentioned instead of number
of customer complaints. Some candidates did not understand that performance measure
should be measurable and incorrectly included items such as dependability, customer
service, etc.
Question 6
This question consisted of three parts. All the three parts of the question were quite
simple but surprisingly the overall performance was very poor and only 16% of the
candidates secured passing marks. Performance in each part is discussed below:
Question 6(a)
In this part of the question, the candidates were required to discuss the basic principles in
formulating the CSR policy. The performance was average. A large number of
candidates did not care to understand the essence of the question and went on discussing
the various steps that might be taken to formulate and implement the companies CSR
policy. Some students seemed to think that CSR is all about environmental protection
and mentioned all the points pertaining to it, whereas on the other hand many students
ignored it altogether. Some students were of the view that CSR policy should be based on
the views of the stakeholders i.e. it should be directed towards those matters which are
favoured by the stakeholders, which was totally incorrect.
Page 4 of 6
Winter 2018
Question 6(b)
This part of the question required the candidates to discuss how corruption by the
government officials results in failure of a country to achieve its economic objectives.
The performance was quite poor as most of the candidates did not appreciate the demand
of the question and went on describing the menace of bribery and its impact on the
society instead of the economy. Many students commented on political issues which was
totally irrelevant.
Question 6(c)
In this scenario based question, the candidates were required to identify and discuss the
fundamental principles of code of ethics of ICAP that had been compromised in the
given situation. The performance was average. Generally, the students identified the
relevant fundamental principles correctly. However, a substantial number of students
lacked clarity and mixed up the definitions of Integrity, Objectivity and Professional
Behaviour. Some students instead of identifying the fundamental principles relevant to
the given situation stated all the principles and lost all the related marks.
Question 7
This question was based on a short scenario pertaining to a footwear retailer who was
considering to introduce e-business store. The question consisted of three parts. The
overall performance was good as 61% of the candidates secured passing marks.
Performance in each part is discussed below:
Question 7(a)
In this part of the question the candidates were required to discuss the barriers which the
business may have to encounter in developing the e-business store. Majority of the
candidates were able to secure good marks by highlighting the barriers such as it might
be expensive, e-business may not be suitable for footwear, time to establish and creating
awareness, requirement of updation and continuous availability, etc.
Question 7(b)
In this part the students were required to explain the benefits that could accrue to the
business by associating with an e-intermediary. This part was very well attempted and
the candidates were able to display good knowledge of this trend which is gained
immense popularity over the years. However, some students misunderstood the situation
totally and considered it as a merger and discussed the advantages of mergers and
acquisitions.
Question 7(c)
The requirement in this part was to give four examples of e-intermediaries. Majority of
students scored full marks in this question by giving correct examples. However, some
candidates were unable to secure marks as instead of naming the intermediaries they
suggested how to advertise on the internet.
Page 5 of 6
Winter 2018
Question 8
This question consisted of two parts. The overall performance was poor as only 23% of
the candidates secured passing marks. Performance in each part is discussed below:
Question 8(a)
In this part of question, the candidates were required to list the factors that might hinder
an organization from carrying out effective recruitment selection. The overall
performance in this question was quite good as majority of the students mentioned the
important factors.
However, some students did not understand that the requirement was only to list the
factors. They only mentioned one or two factors along with lengthy explanations and lost
easy marks.
Question 8(b)
This part of the question contained a scenario in which details were provided with regard
to a training program introduced by a school for its teachers.
In sub-part (i) the candidates were required to identify and discuss the factors that might
act as barriers to the achievement of the objectives of the training program. Performance
remained poor. Many students did not read the scenario carefully and mentioned
unrelated points. For example, most of the students mentioned that the school was not
spending enough money on training or that management was against the training;
whereas there was no indication in the scenario about these conditions. Many students
mentioned deficiencies which are generally found in training programs without relating
these to the given scenario; for example lack of good trainers, lack of or poor quality of
learning material, etc.
In sub-part (ii), the candidates were asked to offer their views about the management’s
policy of giving preference to external recruitment. This part was reasonably well
attempted. However, many candidates only mentioned just one or two points in support
of their decision and could not secure high marks.
(THE END)
Page 6 of 6

Mark(s)
A.1 (a) 01 mark for identification of each strategic position 3.0
02 marks for discussion of each identified strategic position 6.0
(b) 01 mark for recommendation relating to growth strategy for each product
line 3.0
02 marks for discussion on implementation of each recommendation 6.0
A.2 (a) 01 mark for discussion of each benefit of life cycle costing 3.0
(b) 0.5 mark for listing of each cost under relevant phase of life cycle 4.0
(c) Up to 1.5 marks for each suggestion 4.0
A.3 (a) Up to 01 mark for listing down each purpose of vision and mission statements 4.0
(b) Up to 01 mark for each relevant reason justifying agreement/disagreement with

APL’s approach 3.0
A.4 (a) Explanation of ‘virtual supply chain’ 1.5

Up to 01 mark for mentioning each benefit of virtual supply chain 2.5
(b) (i) 01 mark for explaining each given term 3.0
(ii) 02 marks for each example of data validation check 4.0
A.5 (a) Up to 0.75 mark for mentioning each correct factor under appropriate
classification of SWOT 6.0
(b) 0.5 mark for suggesting each non-financial performance indicator 4.0
A.6 (a) 1.25 mark for discussing each relevant principle 5.0
(b) 1.25 mark for discussing each relevant factor resulting in the country’s failure to
achieve its economic objectives due to corruption 5.0
(c) 0.5 mark for identification of each relevant fundamental principle of Code
of Ethics 1.5
1.5 marks for discussion of how identified relevant principle would be
compromised 4.5
Page 1 of 2
Mark(s)
A.7 (a) Up to 1.5 marks for discussion of each relevant barrier in developing e-business
store 6.0
(b) Up to 01 mark for discussing each relevant benefit of association with an

e-intermediary 3.0
(c) 0.5 mark for each example 2.0
A.8 (a) Up to 01 mark for each relevant factor affecting the effective recruitment and
selection 4.0
(b) (i) Up to 1.5 marks for identification and discussion of each relevant factor
that might act as barrier to training program under the given situation 8.0
(ii) 01 mark for each relevant argument 4.0
(THE END)
Page 2 of 2


Q.1 Blue Ocean Services (BOS) is a medium sized consulting firm. It offers accounting and tax
solutions. Zarrak Rashid (Zarrak), managing director, had started the firm at a small scale.
The unwavering approach of providing exemplary services has resulted in a growing number
of clients each year.
The firm has just completed the demanding season of filing annual tax returns for clients.
This year was particularly challenging as just before the start of the season, some key
management personnel and staff resigned from the office. BOS was already understaffed and
given the past practice of the firm, Zarrak had to fill the vacancies on recommendations of
colleagues and friends.
Like previous years, this year too, Zarrak had to spend a considerable time in solving client
queries that he believed could have been resolved at lower levels. He retains the authority for
performance appraisal of employees whereby he informs the performance targets set by him
at the beginning of year to each concerned employee.
Required:
Identify the issues that BOS may need to address and offer suggestions for improvements in
the process under each of the following headings:
(a) Workforce planning (04)
(b) Recruitment and selection (04)
(c) Training and development (04)
(d) Performance appraisal (04)
Q.2 (a) What do you understand by the term ‘brand identity’? Briefly discuss the strategies that
an entity may consider for successful e-branding of its products or services. (05)
(b) Pleasure Read (PR) is a chain of retail bookstores having presence in major shopping
malls. It is owned and managed by Komal Fatima (Komal), who advocates traditional
methods of marketing.
All promotions are communicated by means of brochures, newspapers and magazines.

Komal attends education fairs and visits schools and colleges to ascertain the changing
needs of targeted customers. There is a team of dedicated staff for responding customer
queries. Customers can approach PR during store hours by personal visits or through
telephone.
Komal is concerned over growing competition and declining market share. One of the
friends has advised her to adopt e-marketing mix to better compete in the market.
Required:
(i) State how PR is applying the principles of interactivity, intelligence,
individualization and integration of marketing mix. (03)
(ii) Discuss how the principles mentioned in part (i) would be applied under
e-marketing mix. (10)
Q.3 Grill Shack (GS) is the largest fast food chain of the country. It is regarded for ambiance,
gourmet meals and customer services. The major ingredients are imported from USA. The
management is concerned over the increasing cost of imports contributed by weakening local
currency and increasing import duties.
GS is considering acquiring local livestock and poultry farms where all activities from
breeding to processing would be carried out exclusively for meeting major ingredient
requirements of GS. Fariha Wajahat (Fariha), marketing head, has raised concerns that such
integration may have adverse impact on the financial and non-financial performance of the
business. However, COO has suggested that introduction of entity-wide balanced scorecard
could assist in achieving a satisfactory balance between various aspects of performance.
Required:
(a) Identify the integration GS is intending to pursue. Briefly discuss the benefits that may
accrue to GS on adopting such integration. (05)
(b) Justify the concerns raised by Fariha. (03)
(c) Devise a balanced scorecard for GS by suggesting three outcome measures under each
aspect of performance. (06)
Q.4 Steadfast Bank (Bank) is operating through its branches in major cities of the country. The
management has recently introduced certain structural changes for Bank’s branches. Each
branch is now being treated as a profit center where return on invested capital will be an
important criterion for fund allocation. Branch managers are given greater autonomy for
making operational decisions. The management at head office is now concentrating on
strategizing the ways to expand the business in other parts of the country.
Required:
By using Greiner’s growth model:
(a) identify and explain the present phase of the Bank. Also, discuss the crisis it may likely
encounter if it continues to grow. (04)
(b) suggest the measures that management at head office should take to overcome the
crisis as discussed in part (a). (03)
Q.5 Reliance Motors (RM) launched a small car, called Mini-R, in 2016 that failed to bring in the
expected revenues and the production had to stop.
Mini-R was targeted for working women in their twenties. It was designed to be used in
metropolitan cities where a small car would easily navigate through the busy streets. It had a
typical design and all the standard built-in technical features. However, the customer could
pay extra to get the desired features available in the market like high-tech sound system and a
hybrid technology kit for fuel efficiency.
The pricing for Mini-R was kept at a premium level. It was decided that RM would initially
charge high price which would then be reduced gradually over a couple of years. Mini-R was
mainly marketed by putting big catchy adverts in daily newspapers to attract the customers.
Through a market survey of the targeted customers, Mohsin Sheikh, CEO of RM, found out
that most of the targeted customers were simply unaware of the car and those who knew
about it did not perceive the car offers value for money.
Required:
(a) Why did customers perceive Mini-R could not offer value for money? (02)
(b) Before the launch of Mini-R in 2016, suggest how changing the following could have
resulted in a more desirable outcome:
(i) Product (Mini-R) only
(ii) Pricing only
(iii) Both product and pricing (08)
(c) Explain the reasons why targeted customers might be unaware of the car. Also, suggest
cost effective ways to create awareness among targeted customers. (03)
Q.6 Captain of the Sea (COS) is a state of the art cruise ship with an enormous capacity to carry
5000 passengers. It has been built to display several striking features for a cruise ship. This
includes one of a kind 3-storey full-length shopping mall that continues to attract a large
number of customers and repeat business.
Required:
(a) Identify and explain the market competitive strategy being followed at COS. (03)
(b) Suggest how following the strategy, identified in (a) above, helps COS in providing a
suitable defence against each of Porter’s five competitive forces. (05)
Q.7 (a) Shandaar (Private) Limited (SPL) is a leading plastic manufacturer. It supplies plastic
and chemical products through its plant situated in the industrial area. There has been
growing pressure from social groups on plastic manufacturers to carry out
environmental conscious practices.
Required:
Suggest various environmental initiatives that SPL may take to respond to social
groups and create sustainable business. (04)
(b) Shayan Ahsan (Shayan), a chartered accountant has recently joined as CFO in a large
company. While finalizing the annual budget of the company, CEO told him to inflate
the training and development budget by 25%. Shayan attempted to discuss that
company was already on the verge of financial crisis and such increment in budget
might adversely reflect in the liquidity position of the company. However, CEO did
not respond positively to his concerns.
Close aide to CEO, on a promise to keep his identity anonymous, has informed
Shayan that CEO is planning a Europe trip with his family and like the previous
personal trips of CEO, certain expenses of that trip may also be charged against
training and development budget. He has also advised not to escalate this matter
further as it may have severe repercussions on Shayan’s annual bonuses and as well as
his future continuity with the company.
Required:
(i) List the factors that Shayan should consider before ‘blowing the whistle’. (03)
(ii) Assume that all holds true, advise Shayan as to how he can resolve the issue by
using the ethical model based on threats and safeguards. (09)
Q.8 Baby Toys (BT) is a wholesale store that procures various components of toys from suppliers
and assembles them to be sold at the store. Lately, Ibrahim Sheikh (Ibrahim), owner of BT
has been facing stock mismanagement issues. Some items in the store frequently go out of
stock, whereas others keep on piling up. One of the friends has suggested Ibrahim to
categorize his inventory depending on the inventory holding costs and apply different control
mechanisms to each category. The table below shows the three required categories:
Annual inventory
Category
holding cost (%)
A 70%
B 20%
C 10%
Another friend has suggested Ibrahim to use Just-in-time (JIT) as it can significantly reduce
costs.
Required:
(a) Suggest inventory control mechanisms for each category presented in the table. (05)
(b) Identify the requirements for a successful JIT system. Briefly explain whether it would
be a practical option for BT. (03)
(THE END)
Suggested Answers
A.1 (a) Workforce planning

Despite the fact that the number of clients has been growing each year, before the
start of demanding season, BOS was understaffed.
Suggestions for improvement in the process

 Study the corporate objectives of BOS to estimate the expected total size and
organization structure of the entity.
 Forecast the expected number of employees by keeping in view that clients of
BOS have been increasing and BOS has demanding annual period.
 Assess the existing human resources at BOS including the estimation of what
might happen to these resources each year over the forecasted period.
 Prepare policies and plans to fill the gap between existing human resources
and forecasts of future requirements.
(b) Recruitment and selection

There is an absence of appropriate recruitment and selection policy as vacancies are
filled by Zarrak on recommendations of colleagues and friends.

 In case of any vacancy, identify the skills needed for the job. There should be
proper job analysis, job description and person specification.
 Vacancy may first be filled by identifying potential individuals already working
within the firm as part of developing and promoting internal staff.
 If vacancy cannot be filled internally, encourage applications from potential
candidates best suited for the job by various means such as newspapers, web
portals, recruiters, etc.
 Select candidates on the basis of merit (carrying out tests and interviews) who
can be best ‘fit’ for the role expected from them.
(c) Training and development

Employees at BOS are either not suitable for the work expected from them or lack
the requisite skills as Zarrak has been involved in solving the queries that can be
resolved at the lower levels.

 Identify the training gap i.e. skills required to perform the job and the existing
skills of the employees.
 Set objectives to fill the identified training gap.
 Design / arrange the training and development programs (training content,
delivery method, etc.).
 Evaluate and review to check whether desired objectives are achieved.
(d) Performance appraisal

Performance targets are set without the involvement of the concerned employees.
Suggestions:
 Encourage employees to participate in an appraisal interview to agree the
performance targets expected from them.
 Targets set must be agreed and recorded for future reference.
 Monitor employees’ performance periodically to identify the need for training
or development.
 Appraise employees on the basis of targets meet by them.
Page 1 of 8
Suggested Answers
A.2 (a) Brand identity can be explained as logos, symbols, colors, packaging, etc. that are
used by customers to recognize a brand.
Following are the strategies that an entity may consider for successful e-branding of
its products or services:
(i) Duplicate its existing brand identity online. However, it must ensure that
quality of the website is appropriate otherwise it might result in damaging the
brand.
(ii) Extend the traditional brand by creating a slightly different version of the
brand. It allows continued association with existing brand name and also
suggests to the customer that the services offered online might be different.
(iii) Partner with an existing e-brand. An entity may seek partnering with an
already established e-brand for marketing purposes.
(iv) Create a new brand for the web. It would allow an entity to break free from the
perceptions associated with the old brand name.
(b) (i) PR is applying the given principles of marketing mix as follows:
Interactivity
Communication of new promotions by means of brochures, magazines and
newspapers.
Intelligence
Attending education fairs and visiting schools and colleges.
Individualization
PR is not applying the principle of individualization as no customized
information is communicated to individual customers.
Integration
Answering customers’ queries on their personal visits or through telephone
communication.
(ii) The principles in part (i) would be applied under e-marketing as follows:
Interactivity
The internet can be used to establish interactivity with customers and create a
dialogue. It can be achieved by:
 designing a website that offers features such as books’ reviews, ratings,
synopsis, etc. to encourage greater interactivity.
 encouraging visitors to the website to provide personal details and agree
to receive emails/communication from PR in future.
 allowing visitors to buy a product and pay for it online.
 providing a form for customer’s feedback and queries.
Intelligence
The internet can be used as a relatively low-cost method of gathering data.
Intelligence can be achieved by:
 collecting market research data available online.
 storing data about customers who visit the website.
 Analyzing the data (collected and stored) to produce information about
what customers buy and what information on a website interest them the
most.
Page 2 of 8
Suggested Answers
Individualization
The internet can be used to communicate personalized messages to
individuals. It can be achieved by:
 recording activities of each registered visitor so that on a subsequent visit
to website, relevant information can be retrieved to produce
individualized messages.
 using cookies (small pieces of information that are used to customize
visitors’ experience on subsequent visits to the website) for visitors who
have not registered to the website.
Integration
The internet can be used to deliver customer service by integrating
communication tools as follows:
 offering a call-back facility built into a website so customers can be
contacted at the time convenient to them.
 supporting the buying decisions online even if the purchase order does not
take place on the website.
 supporting customer service, for e.g., by encouraging users to check a list
of frequently asked questions (FAQs) for reference purposes.
A.3 (a) GS is intending to pursue ‘backward vertical integration’ as it is entering the product
market of its suppliers. Following benefits may accrue to GS:
 It would have greater control over the source of supply that may be extended
to desired quality and timely availability of ingredients.
 It may be in a better position to differentiate its product as backward vertical
integration often assists in making unique components to meet customers’
demand more efficiently.
 It may result in reducing costs for GS in terms of suppliers’ profit margins and
import duties.
 It may develop competitive advantage for GS as it would be in a better position
of achieving economies of scale.
 It may relieve GS from foreign exchange risks.
(b) Fariha has rightly raised concerns over probable adverse impact on the financial and
non-financial performance of GS because of the following:
 Acquiring and operating livestock and poultry farms may involve high capital
investments. The costs incurred may outweigh the benefits expected to
achieve.
 Core competence (ambiance, customer service and gourmet meals) might be
compromised while seeking new competence that may adversely impact the
overall reputation of GS.
 A relaxed relationship between entities is likely to grow. Management at farms

know that GS restaurants would most certainly buy its products that may
result in less pressure on achieving cost efficiency and innovation.
 As GS would no more be importing ingredients from USA, certain number of
customers might be lost who prefer meals prepared from imported
ingredients.
(c) Balanced scorecard for GS is as follows:
Page 3 of 8
Suggested Answers
Financial perspective Customer perspective

 Return on investment  Customer retention
 Productivity and cost control  Number of new customers
 Revenue growth  Customer satisfaction
Internal perspective Innovation and learning perspective

 Meal preparation time  Number of new meals introduced
 Number of operational control  Employee productivity
failures
 Standardization of processes  Time to develop new meals
A.4 (a) As per Greiner’s growth model, Bank is in the phase 3 i.e. ‘Period of growth through
delegation’. In this phase of growth, central management mostly focuses on strategy
and business expansion. Divisional managers take most of the decisions about how
division should be run.
This phase may lead to crisis of ‘control’. As business continues to grow, central
management would realize that it is losing most of its authority and that local
managers are becoming too powerful and unaccountable.
(b) The management at head office should take following measures:

 Branches should be carefully monitored at head office by using sophisticated
reporting systems.
 Branch managers should be held accountable for their decisions.
 Focus should be on coordination of activities at all branches and overall
consolidation of the business.
A.5 (a) RM had made a standard product (standard features) and was charging premium
price for it that translated into customers’ perception of low value for money.
Mini-R is targeting working women in their twenties who are most likely starters in
their professions and may not have high amount of disposable income, hence, are
cost conscious. Therefore, value for money becomes even more important.
(b) (i) Changes in the Product Only:

Add distinguishing features to increase the perceived value of the product.
Features can be in terms of:
 attractive design, color variants, comfort levels, etc.
 hybrid technology, anti-lock braking system, GPS navigation system, rear
parking sensor, etc.
(ii) Changes in the Pricing:

 For a standard product offering standard features, the price of the product
needed to be low for the value it offered. RM needed to go for a low price
option.
 Skim pricing strategy was used in the case which did not work for RM as
there were no differentiating features to justify premium pricing.
 For a standard (non-distinguishing) product, penetration pricing might
have been more appropriate to capture large share of the market quickly.
(iii) Change both product and pricing

 Improve product offerings and reduce pricing
Page 4 of 8
Suggested Answers
- The Mini-R could have been improved by adding distinguishing

features and reducing pricing to appeal to the target audience (young
working women).
- Price should not be set too low given the distinguishing features have
added value to overall product.
- Either skim or penetration pricing strategy could have been used
depending on the distinguishing features introduced in the car.
 Lower product offerings and reduce pricing

- Mini-R could have been made to offer lower value by reducing the
standard offerings. To justify basic offerings, price had to be reduced
to competitively lower levels.
- Penetration pricing would have been a better option to attract a large
customer base quickly.
 Improving product offerings and increasing price further would not have
been practical as a premium level pricing had already been charged.
 Lowering product offerings and increasing price would have been a

strategy for failure as RM had already failed to achieve desired revenues
with the existing product offerings and pricing.
(c) Target customers are working women in their twenties. Many who belong to this
customer group may not be known to read daily newspapers. Hence, many target
customers may still be unawared of Mini-R.
Marketing efforts need to be concentrated on venues where target audience is most

likely to be found. Young individuals are avid technology users. Hence, channels like
social media, mobile applications and websites should also be used for the purpose.
Other venues may include: magazines, banners in shopping malls or sponsoring

concerts, etc.
A.6 (a) Captain of the Sea (COS) is following the Differentiation Strategy.
Differentiation Strategy:
 Making the product different: means making a product different from rival
products in a way that customers can recognize.
 Customers may pay more for the value of unique features: customers might be
willing to pay a higher price for the product, because they value its different
features.
(b) Differentiation strategy can affect Porter’s five forces in the following ways:
(i) Threat from potential entrants

Offering the services in line of COS would require significant capital investment
which might create entry barriers for potential entrants.
(ii) Threat from substitute products

The uniqueness of services being offered by COS i.e. one of a kind shopping
experience in a cruise ship may reduce the threat of substitute products
significantly.
Page 5 of 8
Suggested Answers
(iii) Bargaining power of suppliers

With differentiated features COS can yield higher margins with which it can
offset suppliers’ power.
(iv) Bargaining power of customers

Customers of BOS are likely to be less price sensitive as cruise ship is offering
luxury, thereby, they are less likely to exert bargaining power.
(v) Competitive rivalry

BOS is offering one of a kind 3-storey full-length shopping mall in a state of the
art cruise ship with a customer base unlikely to be affected by pricing war,
thereby, competitive rivalry is likely to be low.
A.7 (a) SPL may take following environmental initiatives to respond to social groups and to
create sustainable business:
 Setting a target of zero waste generation and zero waste emissions.
 Conserving energy and scarce resources such as water, electricity, natural gas,
minerals, etc.
 Recycling materials to reduce the need for disposals.
 Making, using, handling and transporting materials safely and in an
environment-friendly way and in compliance with local regulations and the
best international practices.
 Developing new products and processes that reduce the environmental risks.
(b) (i) Shayan should consider following factors before blowing the whistle:
 Whether he has sufficient evidence to justify blowing the whistle. At this
point of time, Shayan is only being informed by close aide of CEO for the
possibility of misuse of company’s budget.
 Double check that he has thought about the situation objectively and with
neutral emotion.
 Consider whether there is scope to discuss events confidentially with the
relevant authorities (internal audit, human resource, professional helpline,
etc.)
 Ensure that he follows company’s policy and whistleblowing procedures at
all times.
(ii) Shayan may resolve the given conflict by ethical model based on threats and
safeguards as follows:
(i) Identify the issue

Shayan is told to inflate the budget allocated for training and development
that might be used for personal trip of CEO. Such act may not be illegal but
it is unethical.
(ii) Identify the threats

There are threats of self-interest and intimidation as Shayan is informed
that escalating the matter might adversely reflect on his annual bonuses
and future continuity with the company. There is also a possibility of non-
compliance with the fundamental principles of integrity and professional
behavior.
(iii) Assess the significance of threats
Page 6 of 8
Suggested Answers
The scale of threat to certain extent might depend on the significance of

the budget inflated for catering personal trip and the effect this would
have on the profitability of the company. In this case, inflation of budget
by more than 25% might be significant given the fact that company is
already facing financial crisis.
Further, deliberate unethical act by top management may also raise

significant doubts on overall environment (integrity and culture) of
organization.
(iv) Applying safeguards

Shayan would need to consider safeguards to protect himself against the
ethical threats. He may need to take following steps:
 Discuss his concerns with CEO.
 If CEO does not respond positively, he would need to consider the
arrangements that company may have for internal whistle blowing.
 In the absence of formal arrangements for whistle blowing, he might
consider reporting his concerns to the senior personnel in the
organization (those charged with governance).
 If his concerns still remain unaddressed, he might consider seeking
an expert advice which in that case may be ICAP.
(v) Taking action

If all these measures fail to remove his concerns or ethical risks still exist,
he might need to consider requesting disassociation from the
responsibility of budget finalization or resign from the position.
A.8 (a) For Category A:

 The annual holding costs are the highest. Hence, high level of control on
inventory is required.
 Items in this category can be controlled by purchasing the EOQ as soon as the
inventory level falls to a set reorder level.
For Category B:
 The annual holding costs are in the middle. Hence, moderate level of control
on inventory is required.
 Items in this category can be controlled by a periodic review system, with
orders placed to restore the inventory level to a maximum level.
For Category C:
 The annual holding costs are the lowest. Hence, low level of control on
inventory is required.
 Items in this category may be purchased in large quantities, and controlled by
means of a two-bin system i.e. when one bin gets empty purchase is planned
to fill it up before the stocks run out.
(b) Following are the requirements for a successful JIT system:

 efficient and high-quality production
 efficient and reliable supply arrangements with key suppliers
JIT will not be a practical option because BT has stock mismanagement issues which
can result in inefficient production/assembly time.
Page 7 of 8
Suggested Answers
(The End)
Page 8 of 8
INSTITUTE OF CHARTERED ACCOUNTANTS OF PAKISTAN
SUBJECT SESSION
Business Management and Strategy (BMS) Certified Finance and Accounting
Professional (CFAP) - Summer 2019
Passing %
1 2 3 4 5 6 7 8 Overall
44% 35% 30% 41% 29% 61% 36% 33% 34%
General comments
The overall result showed marked improvement from several previous attempts. The
examinees who could not perform satisfactorily exhibit rote learning, copying information
from question, giving lengthy irrelevant answers or mere repetition of same idea with
different wordings.
Question-wise common mistakes observed
Question 1
 Some examinees could not identify the issues from given scenario and instead wasted
their time by discussing hypothetical issues having no direct relevance to the scenario.
 Many examinees overlapped the suggestions for improvements in the process of
workforce planning and recruitment and selection.
 Only few examinees suggested the consideration of strategic objectives for workforce
planning.
 Some examinees wasted their time on lengthy discussion over types of tests and
interviews that should be conducted before selecting employees.
 Only handful of examinees suggested the identification of training needs before
arranging the training and development programs.
 Many examinees discussed the methods for providing training which was not the
requirement of the question.
 Many examinees suggested the development of a human resource department under
different headings, which was not incorrect but it was too generalized suggestion
particularly when question required specific suggestions.
Question 2(a)
Discussion of strategies for successful e-branding was mostly restricted to single

statements, e.g. duplicate the existing brand name or create the new brand for web, etc.
Page 1 of 3
Examiners’ comments on Business Management & Strategy - CFAP
Examination Summer 2019
Question 2(b)
Many examinees could not differentiate between principles of interactivity, intelligence,

individualization and integration and incorrectly related these principles to the given
scenario.
Question 3(a)
 Some examinees could not identify the backward vertical integration from the given
scenario.
 Many examinees repeated the same benefits by using different wordings.
Question 3(b)
This part was performed well by the examinees.
Question 3(c)
 Some examinees could not even identify four perspectives of balanced scorecard.
 Many examinees restricted their answers to only financial measures under each
perspective of balanced scorecard.
Question 4
Many examinees failed to identify the correct phase of growth and opted for guesswork.
Consequently, they could not be able to suggest appropriate measure.
Question 5(a)
This part was answered well by majority of the examinees.
Question 5(b)
 Many examinees could not differentiate between requirements under (i), (ii) and (iii).
 Most examinees repeated the same points throughout this part.
Question 5(c)
This part was answered well by majority of the examinees.
Question 6
This questioned was answered well by majority of the examinees.
Question 7(a)
 Many examinees misconstrued the requirement and offered initiatives only specific to
corporate social responsibility instead of environmental initiatives.
 Some examinees discussed sustainable reporting which was not the requirement of the
question.
Page 2 of 3
Examination Summer 2019
Question 7(b)
 In part (i), there was repetition of the same factors with different wordings.
 In part (ii), some examinees discussed mirror test for resolving the ethical issue.
 Some examinees listed down all the threats with a view that some of these would be
correct and marked accordingly.
Question 8
 Some examinees could not offer correct suggestion of inventory control mechanism for
given categories.
 Many examinees correctly identified the requirements for a successful JIT, however,
some of them still could not infer that JIT was not a practical option under the given
scenario.
(THE END)
Page 3 of 3
Certified Finance and Accounting Professional – Summer 2019

Mark(s)
A.1 (a) Identification of issue under the given situation 1.0
01 mark for each suggestion for improvement in the process 3.0
(b) Identification of issue under the given situation 1.0

(c) Identification of issue under the given situation 1.0

(d) Identification of issue under the given situation 1.0

A.2 (a) Explanation of the term ‘brand identity’ 1.0

01 mark for discussion of each strategy 4.0
(b) (i) 0.75 mark for matching each principle under the given situation 3.0
(ii) Up to 03 marks for discussion of each principle 10.0
A.3 (a) Identification of type of integration 1.0

01 mark for discussion of each benefit 4.0
(b) 01 mark for each reason justifying the concerns raised under the given situation 3.0
(c) 0.5 mark for suggesting each outcome measure 6.0
A.4 (a) Identification of present phase 1.0

Explanation of identified phase 1.0
Identification of crisis 1.0
Discussion of identified crisis 1.0
(b) 01 mark for suggestion of each measure 3.0
A.5 (a) Discussion on customer’s perception under the given situation 2.0
(b) Up to 03 marks for suggestion of change under each heading 8.0
(c) Explaining the reasons of unawareness of targeted customers 1.0

Up to 01 mark for suggestion of each cost effective way to create
awareness among targeted customers 2.0
Page 1 of 2
Certified Finance and Accounting Professional – Summer 2019
Mark(s)
A.6 (a) Identification of strategy 1.0
Explanation of identified strategy 2.0
(b) Identification of the Porter’s five competitive forces 1.0

Up to 01 mark for explaining how the existing strategy may provide
defence against each of the Porter’s five competitive forces 4.0
A.7 (a) 01 mark for suggesting each environmental initiative 4.0
(b) (i) 01 mark for listing each factor 3.0
(ii) Up to 2.5 marks for discussion under each heading of ethical model 9.0
A.8 (a) Up to 02 marks for suggesting each inventory control mechanism 5.0
(b) 01 mark for identification of each requirement of JIT system 2.0

Explaining whether JIT system would be a practical option under the
given situation 1.0
(THE END)
Page 2 of 2


Instructions to examinees:
(i) Answer all SEVEN questions.
(ii) Answer in black pen only.
Q.1 Etihad Limited manufactures and sells three products. The following information is
available in this regard:
Product 1 Product 2 Product 3

(See note-1) (See note-2) (See note-3)
Year Total Total Total
Sales Sales Sales
market size market size market size
-------------------------------- Rs. in million --------------------------------
Actual
2017 74 132 3 70 10 100
2018 72 134 2 71 14 120
2019 74 133 2 69 16 140
Forecasted
2020 73 135 2 68 18 160
2021 74 134 1 62 22 190
Note 1: Product 1 is a long-standing product that has been consistently selling in the same
market.
Note 2: Product 2 has been consistently selling in the same market for quite some time.
Note 3: Product 3 was introduced in 2017 and is still considered new in the market.
In the current year, 2019, the market share of the biggest competitor for Product 1 is 20%,
Product 2 is 44% and Product 3 is 37%.
Required:
Analyse the information provided above and devise strategies for each of three products. (14)
Q.2 Alpha, a small management consultancy firm, deals with corporate trainings on various
finance matters. It gets the required training data in an Excel format through email. The data
is kept on a central computer that can be accessed remotely through the internet with a
password.
Recently, a long-standing corporate client has asked Alpha to provide consultancy on an

investment decision. Not willing to pass the opportunity, the directors at Alpha have said
yes to the client as they believe that their senior executives have the capability to perform the
task. However, the directors are concerned about the risks of handling such sensitive and
confidential investment information with the existing IT controls in place.
Required:
(a) Identify and briefly explain categories of business risks that Alpha may be exposed to. (07)
(b) Briefly explain the general system software controls that Alpha should employ to
protect data confidentiality. (04)
Q.3 Zymal Aryan (Zymal), a chartered accountant has recently been appointed as CEO of Palate
Foods Limited (PFL), which is engaged in the manufacturing and marketing of
ready-to-cook food.
Zymal has noticed that no formally defined corporate code of ethics exists at PFL. There
have been instances that urge the need of having a formal corporate code of ethics to deal
with stakeholder groups. Some of the instances are as follows:
Managers often abuse junior staff with verbal and personal attacks;
Internally reported cases of kickbacks in the procurement department are pending
management action;
Female employees are not hired in the finance department;
Data integrity is highly questionable as personal details of employees, customers and
suppliers are easily accessible; and
No significant CSR activity has been carried out in the past three years.
Zymal’s concerns have further aggravated when in a recent meeting, marketing head
informed her that key ingredients for ready-to-cook food would not be available due to
payment dispute with a foreign supplier. Alternatively, PFL would buy local ingredients
which would not be of as good quality as imported ingredients. However, marketing head
further informed that ready-to-cook food would be aggressively marketed as new and
improved products. When Zymal questions the ethical stance, she is informed that such
practice is a marketing norm and disclosure of that information would adversely impact
product demand and profitability which would not be acceptable to shareholders of PFL.
Required:
(a) List down the statements that might need to be included in the formal corporate code of
ethics to address the concerns of Zymal for each of the following stakeholder groups:
Employees Customers Society (06)
(b) Mention the factors that Zymal would need to consider for effective implementation of
and compliance with the corporate code of ethics. (03)
(c) Identify and explain the fundamental principles of Code of Ethics of ICAP that may be
compromised if Zymal proceeds with the marketing head’s strategy. (06)
Q.4 Gertonia is the largest economy in the European region and enjoys a stable and business
friendly government. Its automotive industry is well known for producing top quality speed
car brands and is considered an industry leader in the world. It has an excellent road
network with no speed limit that makes it perfect to meet the Gertonian’s appetite and
demand for quality and speed.
Gertonia’s automotive industry is the largest industry sector and employer in the country
which includes from the large car manufacturers to extensive support network of many
subsystems, component and parts manufacturers. The industry is well supported by iron and
steel industries, efficient financial and IT systems, well reputed technical education
institutes, heavy public and private expenditure in education and highly skilled workforce.
There is an intense competition and a constant pressure on manufacturer to innovate.
Fredrick Dunden, Head of Auto Industry Union, believes Gertonia has developed a national
comparative advantage over many other countries, however, he is hesitant about the future
leadership position for speed cars mainly due to the tougher regulations on emission
requirements prompted by Gertonia’s deteriorating environmental conditions, petrol
depended engines and systems of speed cars, government plans to introduce speed limits on
all areas to reduce the increasing rate of car accidents in some areas, changing needs of the
tech-savvy consumers and the rising trend of people interested in driving rented speed cars
rather than owning one.
Required:
(a) Explain how Gertonia achieves the national comparative advantage over many other
countries. (06)
(b) Discuss the threat(s) and weakness(es) of the automotive industry for speed cars
presented in the case, and provide suggestions to Fredrick Dunden to tackle these
issues. (12)
Q.5 (a) WinTech Limited, a US based company is looking for a candidate to fill a key position
in finance department at its Karachi office. The potential candidate would be expected
to lead a large team of accountants in a complex environment where strict deadlines
for reporting would need to be met. The candidate would be reporting to CFO and
would also need to frequently liaise with the head office in US. Human resources
manager in liaison with CFO has prepared the following job description to be
advertised shortly:
WinTech Limited is looking for an enthusiastic individual to fill a

vacancy in finance department at its Karachi office. The person will be
reporting to CFO. Job responsibilities include:
Monitoring day-to-day financial operations of the company.
Preparing periodic financial reports and statements.
Developing strategies to ensure that financial risk is minimized.
Ensuring compliance with financial regulations and legislation.
Salary: Competitive
How to apply: email us financejobs@wintech.com
Required:
Identify the shortcomings in the above advertisement / job description. Also make
suggestions to overcome the identified shortcomings. (06)
(b) Solutions Limited (SL) is known for having strong sales force. To attract the talented
sales personnel, SL offers higher than industry base pay. Although opportunities for
promotions are limited due to the size of the firm, SL compensates sales personnel by
means of lucrative cash bonuses. Financial targets are communicated to sales groups at
the beginning of each quarter and cash bonuses are paid on the basis of collective
performance of the group members.
However, recent increase in turnover of sales personnel despite having an attractive

reward system has been a matter of concern for the management of SL.
Required:
Critically evaluate the existing reward system for sales personnel at SL. Your evaluation
should include discussion of shortcomings and suggestions for improvement. (10)
Q.6 Fahad Ahmad (Fahad) owns a small retail store that sells computer parts and accessories. In
an effort to expand the business, Fahad is planning to attract a wider customer base by
launching its own e-store to sell the goods online.
Required:
(a) Discuss whether it is advisable for Fahad to launch its own e-store. (06)
(b) Mention the alternatives available to Fahad to sell the goods online and recommend
the most suitable alternative(s). (05)
Q.7 (a) The expected role of accounting function in devising and implementing marketing
strategies in an organization is much broader than just performing investment analysis
on the basis of financial return.
Required:
Discuss the expected role of accounting function in devising and successful
implementation of marketing strategies in an organization. (03)
(b) Rivaaj Group is intending to introduce a new product line under the brand name
‘Super Athlete Sportswear’ (SAS) that would manufacture and market sportswear such
as shoes, apparels and related accessories.
SAS would offer two variants of sportswear; premium variant with unique features
targeting high-end customers and economy variant with basic features targeting middle
and low income customers. Sportswear would be offered through SAS dedicated
outlets, distributors who would supply to the major retail chains and SAS official
website.
Required:
Recommend marketing strategy to SAS for each of the following 4 P’s of the marketing
mix:
Product Price Place Promotion (12)
(THE END)
Suggested Answers
A.1 Product 1:
Analysis of Info:
 It is a product in a market with low growth.
 Its market share is consistently very high and is forecasted to remain high.
 Its market share in the current year, 2019, is 56% (55.6%), which makes it the market
leader.
 It is a long standing product in the existing market.
 It displays the characteristics of a mature product with dominant position.
 This is a Cash Cow product.
Future Strategies:
 It should be dealt with consistently to keep reaping profits.
 The cash generated by product 1 can be used to invest in other products.
 Market penetration, although difficult to implement in a low growth market, should
be used when expansion is required as it is the least risky approach. For example, this
can be obtained through cost leadership and acquisition of competitors, etc.
Product 2:
Analysis of Info:
 It is a product in a market with declining growth.
 Its market share is consistently very low and is forecasted to dip lower.
 Its market share in the current year is about 3% (2.9%) which is much less than the
44% market share of the market leader.
 It is an existing product in the existing market.
 It has weak position and seems to be in the decline phase.
 This is a Dog product.
Future Strategies:
 If the product is generating required ROIs or positive NPV, EM can choose to keep the
product till it is feasible.
 Divest the product as it is projected to decline and may incur losses.
 If EM decides to keep this product for any reason (e.g. profit, brand value, product
synergy, etc), market penetration strategy may be used for expansion, however, EM
should avoid risky investments on this product.
Product 3:
Analysis of Info:
 It is a product in a market that is showing high growth.
 It has low market share.
 Its market share in the current year is about 11% (11.4%) which is less than the 37%
market share of the market leader.
 It is considered a new product in the new market.
 It resembles an entrepreneurial venture in a high growth market.
 This is a Question Mark product.
Future Strategies:
 The market is growing quickly, there is an opportunity to increase market share, but
initially it will require a substantial investment of cash to increase or even maintain
market share. EM should keep investing in the growth of this product.
 EM can invest cash generated from product 1 into Product 3.
 Differentiation or focus strategy may be used to gain a larger market share.
Page 1 of 8
Suggested Answers
A.2 (a) Category - Legal risk

It is the risk of loss arising from legal actions and lawsuits due to failure to comply
with laws and regulations.
The breach of data confidentiality may cause the client to incur heavy losses. This
may result in the client to take legal action against Alpha and stop doing business with
it.
Category - Reputation Risk:

It is the risk that a company’s reputation with the general public (and customers), or
the reputation of its product ‘brand’, will suffer damage.
The breach of data confidentiality may result in forming a bad image in the eyes of
the clients. This may result in loss of business and brand value.
Business probity risk:

Business probity risk is the risk of losses from a failure to act in an honest way.
If Alpha decides to get the data with existing controls it will not be acting with honesty
and integrity. As the investment information is sensitive and confidential, it should
be dealt with appropriate IT controls.
Alpha may not actually have the required expertise in providing investment
decisions. Acceptance of this assignment may raise questions on the integrity of
Alpha.
(b) Passwords:
Alpha should follow strong password policy. The policy may include having a
password with a combination of letters, numbers and symbols, that is not easily
guessed, periodically changing passwords, etc.
Encryption:
The data confidentiality can be maintained at Alpha by asking the clients to encrypt
data before sending it through network. When Alpha has received the encrypted data
it can decrypt it with a decryption key to access the data.
Firewall:
Alpha should use firewall to protect its computer that stores the client data to protect
it from unauthorized access from within and outside the company. It can also be used
to obtain reports on blocked messages for further analysis and action.
Install anti-virus software

Alpha should install anti-virus software to protect it from viruses that can harm the
system and compromise data confidentiality.
Page 2 of 8
Suggested Answers
A.3 (a) The statements that might need to be included in the revised corporate code of ethics
to address the concerns of Zymal are listed below:
Employees
 Equal opportunity of hiring in an organization regardless of gender.
 Zero tolerance of harassment of employees by colleagues or managers.
 Respect for the privacy of confidential information of each employee.
 Disciplinary action on giving or receiving kickbacks.
Customers
 Fair dealings with the customers.
 Truthfulness of marketing with no false claims.
 Respect for the privacy of confidential information of each customer.
Society
 Compliance with the spirit as well as the letter of laws.
 Carrying out regular CSR activities such as protection and prevention of
environment, contributions for charitable work, etc.
(b) Zymal would need to consider the following factors for effective implementation of
and compliance with the revised corporate code of ethics:
 Code of ethics to be strongly endorsed by top management including herself.
 Training to be provided to employees for understanding of how to apply code of
ethics in practice.
 Code of ethics to be easily accessible to all employees.
 Code of ethics to be reviewed periodically and updated, when required.
 Adherence to the code of ethics should be part of employee contract and
departure from the code should be considered as a disciplinary offence.
(c) If Zymal proceeds with the marketing head’s strategy, she may compromise following
fundamental principles of Code of Ethics of ICAP:
Integrity
According to this principle, a chartered accountant must be honest and
straightforward in his/her professional and business dealings. Zymal would breach
this principle by knowingly not disclosing the fact that quality has been
compromised.
Objectivity
According to this principle, a chartered accountant must not allow his/her
professional or business judgement to be affected by bias, conflicts of interest or
undue influence from others. Zymal would breach this principle by being influenced
from the pressure of shareholders to maintain the profitability.
Professional behavior
According to this principle, a chartered accountant must observe relevant laws and
regulations and avoid any actions that would discredit the accountancy profession.
Claiming of better and improved product might not be illegal (a marketing norm as
mentioned by marketing head) but an unethical act which may impact the reputation
of PFL as well the accounting profession in general.
Page 3 of 8
Suggested Answers
A.4 (a) Porter’s Diamond shape model can be used to explain the national comparative
competitive advantage for a country over other countries. In the case of Gertonia they
can be explained as such:
(i) Firm strategy, structure and rivalry:

 There is intensive competition among the manufacturers and constant
pressure to innovate.
 Public and private expenditure/investment in education.
(ii) Related and supporting industries

 Extensive network of many subsystems, component and parts
manufacturers.
 The industry is well supported by iron and steel industries.
 Well reputed technical education institutes.
(iii) Favourable factor conditions:

 It has an excellent road network with no speed limit.
 Efficient financial and IT systems.
 Business friendly government.
 Highly skilled workforce.
 Repute for top quality speed car brands.
(iv) Demand conditions in the home market:

 Gertonians have an appetite and demand for quality and speed.
(b) Threat: Tougher regulations on emission requirements / Deteriorating

environmental conditions
This means companies would need to meet the new regulations, which in many cases
would mean changing the speed cars. This runs a risk of loss in business due to high
costs, risk of comprise in quality, difficulty in meeting regulations, etc.
Suggestions:
 Make environmentally friendly cars to satisfy regulatory requirements.
 Conduct CSR activities to reduce deterioration of environment causing by cars.
Threat: Government plans to introduce speed limits on all areas

One of the reasons Gertonia can produce high speed cars is because of the local
demand to meet Gertonian appetite. Plan to introduce speed limits would mean
Gertonians cannot drive fast at will which will consequently affect local demand for
fast cars. Hence, this can compromise the leadership position.
Suggestions:
 Gertonia has a business friendly government, as such government can be asked
to keep no speed limits for areas that do not run the risk of accidents due to high
speed e.g. highways, etc.
 The accidents may be due to reasons other than high speed cars (e.g. bad roads,
etc), as such a closer look at the issue should be suggested to the government.
Threat: Changing needs of the IT-savvy consumers

This would require the companies to upgrade to meet the high-tech demands of the
consumers. If not responded quick enough, this would result in loss of business.
Page 4 of 8
Suggested Answers
Suggestions:
This is a manageable threat as Gertonia has efficient IT and financial systems, healthy
spending in education and a push to be innovative. The industry should quickly react
to meet the customer needs.
Threat: Rising trend of people interested in driving rented cars rather than owning
one
This may result in lower demand resulting in lower profitability and an industry
wide change from targeting consumers to own the car to targeting
organizations that rent out the car.
Suggestions:
 Strategies should be planned to target businesses who would give people cars to
drive.
 Expand market and reach areas where people would like to own cars.
Weakness: Not responding quick enough to the changes in environment

Gertonian automotive industry has not been moving quick enough to respond to the
changes in the environment, for example, they are not responding to IT-savvy
consumers, heavy reliance on petrol and changing trends of driving a rented car
rather than owning one.
Suggestion:
 R&D should be encouraged in the industry.
 Private and public investments should be diverted for R&D.
 R&D efforts should be directed towards reducing reliance on petrol dependent
engines and systems to produce environmentally friendly cars.
A.5 (a) The shortcomings in the advertisement of job description and suggestions for
improvements are given below:
Shortcomings Suggestions
The job title is missing. Given the job description, the appropriate
job title might be ‘Finance Manager’ /
‘Accounting and Finance Manager’.
The information regarding expected Given the job is challenging as person
weekly or monthly working hours are would need to meet strict deadlines,
not included in the job description. information regarding expected working
hours/overtime might also be included.
The information concerning frequent It is suggested to include this information
liaison with the head office in US is as part of job description Further, job
not given. description may also include that
candidate might also require to
work/available on specific hours due to
timing difference in Karachi and US.
It is not mentioned that whether Since, potential candidate is expected to
potential candidate would work lead a large team of accountants, this
individually or as a team member. information should also be included.
Mentioning of salary as competitive It is suggested to provide a range of
might not be sufficient. expected salary to attract the potential
candidates.
Key dates are missing. It is suggested to mention the date of job
Page 5 of 8
Suggested Answers
announcement and/or the last date for

applying for the position.
(b) The shortcomings in the existing reward system with suggestions are evaluated
below:
Bonuses based on achievement of financial targets

It appears that bonuses are only linked to achievement of financial performance.
Sales force might be incentivized by a bonus to achieve financial targets while
ignoring the other aspects of performance (non-financial) for which there are no
specific bonuses.
It is suggested that reward system should be designed to consider both financial as

well as non-financial performances such as quality of service, successful
implementation of a new process, improving knowledge and skills, etc.
Focus on short-term objectives

Bonuses are paid on meeting the quarterly targets. It appears that SL is directing its
sales personnel to primarily focus on achievement of short-term objectives while
long-term objectives might not be given due consideration.
It is suggested that SL should devise a reward system that links rewards with
performances that also support the achievement of long-term strategic objectives.
Absence / Lack of implicit rewards

It appears that there is an absence or a lack of implicit rewards at SL as indicated by
limited opportunities for promotions. For some sales personnel, implicit rewards
might be as important as explicit rewards. This might also be the reason for recent
increase in employee turnover.
It is suggested that SL should also include the element of implicit rewards. For
example, granting shares or share options to employees that are contingent upon
minimum number of years of employment with SL.
Group incentives over individual incentives

SL pays bonuses to work groups on the basis of collective performance of group
members. Some members might believe that they are responsible for successful
performance of the group and other group members are not contributing as much as
they should have done.
It is suggested that element of individual performance should not altogether be

ignored. The group bonuses should be divided among the group members on an
agreed basis for example on the basis of actual contribution by each group member.
Over compensatory reward system

SL is paying base pay higher than industry average to attract the talented sales
personnel. However, a sales person not being a right fit might not leave SL because of
lack of better/high-paying opportunities outside SL.
It is suggested that high base pay should not only be restricted to attract talented
personnel but also be linked to the expected performance.
Page 6 of 8
Suggested Answers
A.6 (a) Although, owning an e-store would give Fahad an access to wider customer base,
before launching an e-store, Fahad should consider the following:
 Setting up a website to sell products online can be expensive for a small retail
store. The setup of a website involves showing an online catalogue with
photographs, keeping records of inventory balances, getting website hosting,
setting up the facility for online payments, delivery of goods to customers, etc.
All these can be costly to implement.
 It might take time to establish a e-store and particularly creating awareness
among targeted customers about products being offered by Fahad. This may
require significant spending on marketing as well.
 Continuous availability is must for the success of the e-store. The availability
could be compromised due to poor maintenance, inappropriate hosting and
denial of service attacks, etc.
 Operating costs can be substantial for maintaining a website. The operating
costs include regularly updating the website to keep it current and attractive,
regularly managing hosting requirements and costs. Fahad might not have the
requisite skills to do the required maintenance. Hiring a resource to do
maintenance can be costly for a small business.
Based on the points above, he is not advised to establish his own e-store. Instead, he
should look for credible alternatives that can overcome these challenges to achieve
the objective.
(b) Fahad can:

 Get associated with an e-intermediary, for example daraz.pk, olx.com.pk.
 Join e-Auctions.
 Form alliances with partner managed e-stores.
Fahad can select any or a combination of the above alternatives.
Reasons:
 The e-portals (e-intermediaries, e-Auctions, partner e-stores) would be readily
available that would give Fahad an immediate access to a wide range of
customers.
 It would require low initial investment as registration costs are generally
minimal. However, a certain percentage of commission on each sale may need
to be paid.
 It would give Fahad an access to well-established e-portals designed and
maintained by team of experts.
 Fahad would not require extensive technical skills to manage e-business. The
skills such as regular website updating, continuous availability and marketing
campaigns would be performed already.
A.7 (a) The expected role of accounting function in devising and successful implementation
of marketing strategy in an organization is discussed below:
 Appraising investment in terms of strategic as well as financial assessment of
proposed new investment projects.
 Providing a reporting system for the marketing function including management
information on customer profitability, channel of distribution profitability as
well as product profitability.
 Assessing the effectiveness of marketing initiatives and the marketing mix in
Page 7 of 8
Suggested Answers
collaboration with marketing function.

 Identifying and measuring the value addition throughout the value chain in
liaison with marketing function.
(b) The marketing strategy for SAS for each of the given 4 P’s of the marketing mix is
recommended below:
Product
It is recommended to adopt following marketing strategy for products:
 For premium variant, marketing strategy could be ‘product differentiation’ i.e.
marketing products as different from competitors.
 For economy variant, marketing strategy could be ‘cost leadership’ i.e. marketing
products as low costs when compare to competitors.
Price
It is recommended to adopt following marketing strategy for price:
 For premium variant targeting high-end customers, marketing strategy could be
‘market skimming price’ i.e. to charge high prices initially from customers willing
to pay premium price because of new or different product.
 For economy variant targeting middle-class and low income customers,
marketing strategy could be ‘market penetration price’ i.e. to charge low prices
to win a large share of potential market at the early stage of product life cycle.
Place
It is recommended to adopt following marketing strategy for place:
 For customers willing to buy from retail outlets, marketing strategy could be an
adequate distribution network getting the products to the places (SAS own
dedicated outlets and major retail chains) where customers want to buy them.
 For customers willing to buy online, marketing strategy could be efficient
delivery of products to customer’s desired location / user friendly website
supporting customers in making buying decisions.
Promotion Strategy
It is recommended to adopt following marketing strategy for promotion:
 For distributors, marketing strategy for promotion could be push strategy i.e.
persuading distributors to buy the products for resale by offering special credit
terms.
 For end-consumers, marketing strategy for promotion could be pull strategy i.e.
getting end-consumers to want to buy the product through advertisement and
sales promotions.
(The End)
Page 8 of 8
CERTIFIED FINANCE AND ACCOUNTING PROFESSIONAL (CFAP) EXAMINATION
SUBJECT SESSION
Business Management and Strategy Winter 2019
Passing %
Question-wise
Overall
1 2 3 4 5 6 7
54% 14% 68% 20% 28% 35% 36% 39%
General comments
There has been an increasing trend in the passing ratio for the past few attempts. Performance can
further be improved by applying the concepts relevant to the given situations rather than offering
general answers. It is observed that examinees lacked the requisite skills in the questions
demanding critical evaluation of the given situation and recommended course of action. Further,
repeating the same idea with different wordings can only result in wastage of time. It is advised to
refer suggested solution and marking scheme to understand the expectation of examiners.
Question 1
Many examinees restricted their analysis and recommended strategies to the BCG Matrix only
and ignored Ansoff’s Growth Model and Product Life Cycle altogether.
Most of the examinees did not consider the existing position of products and did not compare
with the biggest competitors in the market.
Some examinees restricted their answers either to continue or discontinue the products without
justifying the reason for such recommendation.
Only few examinees could suggest cost leadership, differentiation or focus strategies for
different products.
Question 2(a)
Instead of explaining the categories of business risks, general risks were discussed.
Some examinees failed to identify and relate the relevant categories of business risks to the
given situation and wasted their time in discussing irrelevant categories of business risks.
Question 2(b)
Physical access controls were discussed by some examinees though question clearly required
the explanation of general system software controls.
Few examinees opted for lengthy discussion of system software controls for instance, lengthy
policies for password setting.
Page 1 of 3
Winter 2019
Question 3(a)
Some examinees did not restrict the answers to the given situation and suggested general
statements to be included in the corporate code of ethics.
Question 3(b)
Many examinees repeated the same factors particularly ‘training of employees’ with different
wordings.
Few examinees lacked the knowledge and opted for guesswork.
Question 3(c)
Some examinees either could not explain the relevant principle correctly or could not relate to
the given situation.
Few examinees opted to explain all principles and attempted to relate them under the given
situation.
Question 4(a)
Some examinees did not answer this part in the light of Porter’s Diamond model.
Many examinees could not classify the given information under the relevant factors of Porter’s
Diamond model.
Question 4(b)
Many examinees could not differentiate between threats and weaknesses and discuss the factors
under these headings interchangeably.
Instead of discussing the threats, some examinees simply mentioned the threats in single
statements.
Only few examinees could identify and discuss the threat of changing needs of IT-savvy
consumers.
General suggestions were offered rather than specific suggestions under the identified threat.
Some examinees repeated the same suggestions under various threats with different wordings.
Question 5(a)
Non-disclosure of information regarding liaison with head office and key dates for applying in
the job advertisement/job description were not identified by many examinees.
Some examinees offered weak suggestions like in case of job title was missing, they simply
suggested that job title should be included instead of including appropriate job title in
suggestions.
Question 5(b)
Only two to three shortcomings were identified. Focus on short-term goals and
over-compensatory reward system were identified and discussed by only few examinees.
Suggestions offered by many examinees were weak. Some examinees limited their suggestions
to the extent of single statements. For instance in the case of lack of implicit rewards, their
suggestion was restricted to the statement that ‘there should be some implicit rewards’.
Page 2 of 3
Winter 2019
Question 6(a)
Discussion was restricted in the ambit of high costs of setting-up and operating the e-store.
Few examinees who advised to launch e-store, could only offer one argument that is access to
wider audience.
Question 6(b)
Some examinees could only mention one alternative that is association with e-intermediary.
Most of the discussion of suggested alternative restricted to the extent of cost savings only.
Question 7(a)
Role of accounting function was mostly discussed in the context of appraising investments
only.
Some examinees discussed the same point under various paragraphs with different wordings.
Question 7(b)
Some examinees instead of recommending marketing strategy, discussed the marketing

methods and tools.
Some examinees did not differentiate the premium and economy variants and offered uniform
marketing strategies for both variants.
(THE END)
Page 3 of 3

Mark(s)
A.1 0.5 mark for analysing each product under BCG matrix 1.5
01 mark for analysing each product under Ansoff’s growth matrix 3.0
0.5 mark for analysing each product under lifecycle portfolio matrix 1.5
01 mark for devising each strategy 8.0
A.2 (a) 0.5 mark for identifying each category of risk 1.5
0.5 mark for explaining each identified category of risk 1.5
Up to 1.5 marks for discussing how identified category of risk would arise
in the given situation 4.0
(b) 01 mark for explaining each general system software control 4.0
A.3 (a) Up to 01 mark for each statement to be included in the corporate code of ethics 6.0
(b) Up to 0.75 mark for each factor that needs to be considered for implementation
of and compliance with corporate code of ethics 3.0
(c) 0.5 mark for identifying each principle of Code of Ethics of ICAP 1.5
01 mark for explaining each identified principle 3.0
Up to 01 mark for discussing how each identified principle would be
compromised in the given situation 1.5
A.4 (a) 0.5 mark for identifying each of the factor of Porter’s Diamond model 2.0
0.5 mark for relating each factor with the given situation 4.0
(b) 01 mark for identifying and discussing each threat and weakness 5.0
01 mark for each suggestion to overcome identified threat and weakness 7.0
A.5 (a) 0.5 mark for identifying each shortcoming 3.0

0.5 mark for each suggestion to overcome identified shortcoming 3.0
(b) Up to 1.5 marks for discussion of each shortcoming 5.0

Up to 1.5 marks for each suggestion to overcome identified shortcoming 5.0
A.6 (a) Up to 1.5 marks for discussing each factor supporting the given advise 5.0
Advising whether e-store should be launched under the given situation 1.0
(b) 0.5 mark for mentioning each alternative 1.5

Up to 01 mark for discussing each factor supporting the given
recommendation 3.5
Page 1 of 2
Mark(s)
A.7 (a) Up to 01 mark for each point discussing the expected role of accounting
function in devising and implementing marketing strategies 3.0
(b) 1.5 marks for recommending each marketing strategy 12.0
(THE END)
Page 2 of 2


(i) Answer all EIGHT questions.
Q.1 Star Coffee (SC) is a USA based chain of high-end cafes. It has sixty-three state of the art
cafes mostly in the commercial areas of the country to target office workers.
Every year in October, SC orders freshly harvested and processed coffee cherries from
several growers in Guatemala – a place that is well-known for its coffee industry and offers
benefits of labour arbitrage. Along with the payment for cherries, SC pays the growers to
book premium shipping agents who can deliver the cherries to SC warehouse in USA. When
the shipments arrive, SC workers run quality checks to keep only the best quality cherries
and return the rest back to the growers. SC keeps the cherries in a highly well-maintained
large storage facility at the warehouse to ensure they stay fresh as long as possible and are
carefully sent to the cafes when required.
Each SC cafe is equipped with roasters and grinders. The roasting process is quite complex
but the grinding process is fairly simple. As soon as the cherries arrive at the cafes, they are
checked for freshness and roasted into coffee beans according to SC's specific requirements.
The coffee beans carry a long shelf life and are kept at small stores in the cafes. To bring just
the right flavours, the coffee beans are crushed by grinders right when that perfect cup of
coffee needs to be prepared.
SC takes pride in its proprietary quality control, roasting and grinding processes and markets
them by putting imprints on cups, placing attractive posters on cafe walls and by word of
mouth through their customers. SC is extremely particular about the customer experience at
the cafes. It only hires experienced staff, maintains cafes in immaculate condition, has a
credible loyalty program and provides free use of Wi-Fi, newspapers and magazines.
Required:
(a) Explain how SC’s primary business activities offer value to the customers to achieve
the competitive advantage. (06)
(b) Suggest improvements in SC’s primary business activities to reduce costs without
reducing the value delivered to the customers. (06)
Q.2 (a) Fatima Fawad is a well-known dietician. She is planning a start-up business under the
brand name ‘Know Your Calories’ (KYC) for which she is determining the size of her
target market. KYC would prepare customized daily, weekly and monthly healthy
meals and exercise plans and would charge premium price. In the first phase, KYC
would target working women only.
Required:
Explain how Fatima may determine the size of target market by using different
approaches to market sizing. (05)
(b) Bina’s Kitchen (BK) is a medium size company specializing in ready to cook spices.
Management at BK plans to provide personalized services to its customers to improve
customer retention. It is considering to adopt Customer Relationship Management
(CRM) system to efficiently provide personalized customer service.
Required:
Discuss how the functions of CRM system can assist BK to improve customer
retention. (05)
Q.3 Sporty Limited (SL) is engaged in exporting sports products in a highly competitive market.
The management of SL is under pressure of meeting targets as at the beginning of year, it
has been clearly communicated by CEO that if SL fails to meet financial targets, there will
be no bonuses and promotions for this year and some of the management personnel may
also be laid-off.
Taha Buksh, Treasury Head, a qualified Chartered Accountant, has been given an
additional role of officiating the office of CFO in the absence of Mahira Akhtar, who is on
annual leaves. Taha and Mahira have been associated with SL for over ten years and they
have also worked together in many projects successfully.
Recently, one of the key customers has placed a large order with SL. While authorizing the
sales invoice, Taha noted the significant difference between the price agreed as per sale
agreement and invoiced price. On inquiry, Finance Manager informed him that under-
invoicing is a common practice to avoid tax and import duties. It is also implied from the
discussion that Mahira has never objected on customer’s demand of under-invoicing and if
Taha does not act as per customer’s demand, SL would most likely lose out that customer to
a major competitor.
Taha knows that under-invoicing is an illegal act and SL stresses on strict compliance with
laws and regulations. The disclosure of this information would likely result in legal
consequences and bad reputation for SL as well as internal disciplinary action against
Mahira.
Required:
(a) Identify and explain threats to compliance with the fundamental principles of ethics
that Taha might be subject to. (06)
(b) Suggest the safeguards that SL may apply within the work environment to prevent
illegal/unethical activities. (05)
(c) Discuss the matters that Taha may consider before disclosing the information to board
of directors. (04)
Q.4 (a) On 15 March 2020, middle of spring semester, AUM University (AUM) decided to
promptly act on government’s directive to close university campuses for the rest of the
semester due to the global pandemic and take all classes online. Since the closure of
campuses, complaints have been mounting from faculty members, students and IT
support staff. Summary of their complaints is as follows:
 Faculty members are complaining that they are ill-prepared with taking the
courses online and using online teaching tools.
 Students say that the sudden burst of online work from the university and stay-at-
home chores amount to a lot of work, which they were not ready for. Also, due to
varied personal circumstances not all of the students can attend online sessions in
a synchronous mode.
 IT support staff is facing a resource crunch as they are overwhelmed with a
sudden rush of queries from faculty and students.
Required:
Propose possible measures AUM should adopt to address the issues in order to
successfully deliver online teaching services. (10)
(b) Faiz Ibrahim is a Regional Sales Manager at Dolphin Limited. He leads a team of
10 sales personnel. There is a vacant position of Assistant Sales Manager and
management has authorized Faiz to promote one of his sales personnel for that
position.
Faiz has been appraising performance of his team in the scale of 4-6 out of 10 for the
past five years. Given the on-going economic downturn in the region, none of the sales
personnel has met the targets this year and Faiz could not decide on how to select sales
personnel for promotion.
Required:
Discuss the appraiser bias in the above case. Suggest techniques of assessment that Faiz
may apply while deciding to select the sales personnel for promotion. (05)
Q.5 Leather Fiesta Limited (LFL), a medium-sized company, is engaged in making and selling
shoes and bags. The company intends to introduce new product lines and expand the
business in other regions and for that management is considering appointing Regional Sales
Director (RSD) for new region.
RSD would lead a large team, work in close liaison with Country Sales Head and report to
Board of Directors. Other key responsibilities include: overseeing revenue generation
strategies including launching successful marketing and sales campaigns, interfacing with
inventory and purchasing departments, reviewing and analyzing periodic sales reports and
cultivating lasting relationships with customers and other stakeholders.
The human resource department has shortlisted two candidates for the position of RSD. The
summarized profiles are given below:
Name of Key Skills &

Brief Introduction
Candidate Competencies
Arham Nasir He has been associated with LFL for  Meeting sales targets
over ten years and has worked at consistently
various positions in the sales function.  Maintaining good client
He is currently working as Sales relationships
Manager and reporting to his Regional  Preparing and finalizing
Sales Director. sales reports
Shahveer Zaidi He has working experience of over  Developing sales targets
twenty years with number of small and  Managing portfolio of
medium sized organizations. He is products
currently leading a sales function and  Monitoring sales
reporting to board of directors at Star strategies
Limited, a small sized organization.
Required:
Evaluate the profiles of shortlisted candidates and discuss the factors that Board of Directors
may consider before making selection from above candidates. (12)
Q.6 The internet has invigorated the industry competition by challenging the existing ways of
doing business. It has also significantly disrupted the Porter’s five forces of industry
competition.
Required:
Analyze the impact of internet on each of the Porter’s five forces. Also provide
business/industry examples to support your analysis. (10)
Q.7 Razzaq Cement (RC) is one of the largest producers of cement in the country. It achieves
this success by adhering strongly to its well established bureaucratic processes and systems.
In an effort to diversify the business portfolio, Razzaq Laghari, the owner of RC has
acquired three profitable businesses under the brand name of ‘Razzaq’. He has acquired a
hospital with professional bureaucracy configuration, a delivery services start-up with simple
structure configuration that caters to in-country deliveries and an IT company with
adhocracy configuration that makes innovative algorithms for business decisions.
The acquired businesses were expected to adopt and adhere to the well-polished
organizational process and systems used for RC. However, after just a few months, sharp
declines in profits were observed in all three acquired businesses. RC Management is
convinced that the issue lies in the organizational configuration reforms. In order to achieve
this, Babar Rao, COO of RC, suggested that instead of RC Management running the affairs
of the new businesses, each business should be considered a separate division with its own
unit head who will be responsible for the profitability of the businesses by ensuring RC’s
organizational process and systems are strictly adhered to.
Required:
(a) Discuss the typical elements of organizational configuration for each of the business
entities. (03)
(b) Analyse Babar’s suggestion and recommend possible course of action. (07)
Q.8 Zaryab Khan, a young enthusiastic entrepreneur, started a venture under the brand name
‘Flagship Products’ (FP) three years ago. Zaryab prides in achieving the consistent growth
by means of effective utilization of available profits and consistent optimization of core
capabilities.
Zaryab is considering expanding business in Middle East. He is of the opinion that FP

should launch its first international venture as a wholly owned business. He is confident that
the existing growth strategy of FP should be continued in Middle East in future as well.
However, Marketing Head and CFO have shown their reservations over launching a wholly
owned business in Middle East.
Marketing Head is of the view that FP should establish joint venture. On the other hand,
CFO believes that franchising is a better option as it would be less risky given the fact that
FP has no previous experience of operating in foreign markets.
Required:
(a) Explain the existing growth strategy of FP. Also discuss why this strategy might not be
suitable in the long-term. (06)
(b) Discuss the methods of expanding business in Middle East as suggested by Marketing
Head and CFO. (05)
(c) Discuss the factors that FP would need to consider while deciding on whether to
launch wholly owned business or form an alliance with a local company in Middle
East. (05)
(THE END)
Suggested Answers
Ans.1 (a) Primary activities

 Inbound logistics
 SC gets cherries from Guatemala to ensure it has the best quality of cherries, to
make the perfect cup of coffee.
 SC pays growers to book premium shipping agents to ensure quality and timely
delivery of cherries.
 SC performs quality check on the cherries received to ensure only the best are
selected for coffee.
 SC carefully stores the cherries at the warehouse and sends them to the cafes per
demand to ensure that the quality of the cherries is maintained to standard.
 Cherries are carefully delivered to the cafes to ensure their quality is maintained.
 Operations
 SC cafes roast the cherries themselves so they can roast the cherries into coffee
beans per SC’s specific requirements for quality.
 SC cafes grind the coffee beans right when the cup of coffee needs to be made so
the customer receives the very fresh coffee every time.
 Outbound logistics
 The cafes act as a delivery point where the customers can come and enjoy their
coffee.
 Marketing and sales

 By keeping the cafes in the commercial areas, it can easily reach out to their
target customers.
 SC does not spend much on marketing activities (e.g. tv adverts, social media,
etc.). It only spends on in-store posters and imprints on cups. This saves them
money.
 Service (after sales)

 All the facilities at cafes (free use of Wi-fi, newspapers, magazines, etc.) and after
sales services (loyalty programs) are to ensure the customers have a pleasant
experience.
(b) SC can make the following improvements:

 Instead of shipping the cherries to US only to be returned back to Guatemala after the
quality check, SC should peform the quality check before buying the cherries. This
way it can save shipping costs on:
 return of unwanted goods; and
 labour intensive process of quality check in US, that is likely more
expensive than Guatemala.
 Instead of asking several growers to arrange their separate shipping agents, SC
should select and hire its own shipping agent to reduce:
 handling and delivery costs by several shipping agents; and
 costs for tracking shipments.
 Roasting should be done centrally at the warehouse or preferably in Guatemala (if
feasible). It can reduce costs on:
 training of cafe staff on the complex roasting process;
 storing high-maintenance cherries at the warehouse;
 delivering high-maintenance cherries locally to the cafes; and
 shipping high-maintenance cherries from Guatemala.
Page 1 of 9
Suggested Answers
Ans.2 (a) Fatima may determine the size of target market by using following approaches to market
sizing:
Top-down approach
Fatima may seek market-wide information (statistics of working women) from
government offices, statisticians or independent market research firms. This information
then may be refined by excluding those working women who would not be interested in
KYC’s meal and exercise plans and those who could not afford premium prices.
This would then just leave the target market to those working women who are looking for
healthy life styles and willing to pay premium price for KYC’s meal and exercise plans.
Bottom-up (demand-side) approach

Fatima may organize a series of focus groups and chairs discussions with working women
about their desired or targeted healthy life styles and whether they are willing to pay
premium prices. She may also ask the attendees to fill out a questionnaire.
Using the feedback from the focus groups, chair discussions and questionnaires, Fatima
may extrapolate the results across working women (on the basis of statistics) to establish
the size of the target market. However, Fatima Fawad would need to take care of how she
selects the sample to ensure that it can be extrapolated across targeted customers with
reasonable accuracy.
Supply-side approach
Fatima may collect the sales data of competitors who are offering healthy meals and
exercise plans targeting working women (from published annual reports, trade press
articles or market researchers) and determine the market share these competitors
represent.
Fatima then may gross-up the market share of these competitors to arrive at an estimated
size of target market i.e. working women looking for healthy life styles.
(b) The functions of CRM can assist Bina’s Kitchen to improve customer retention as follows:
 Collect information for identifying individual customers and categorizing their
behavior so that the key customers and their requirements can be identified.
 Store the customer information and keep it up to date. It will help create a customer
database where all the customer information will be kept up to date.
 Access the information, often instantly, whenever it is needed. It will retrieve the
desired customer information efficiently, which will result in improved personalized
customer services.
 Analyze customer behavior as it will help in better understanding of customer
behavior and patterns.
 Use the analysis of customer behavior to develop a more effective retention strategy.
It will help develop better personalized customer service strategies and improve
retention.
 Monitor key customer management performance indicators, such as the number of
customer complaints. This will help minimize customer complaints.
Page 2 of 9
Suggested Answers
Ans.3 (a) Taha might be subject to following threats to compliance with the fundamental principles
of ethics:
Self-interest threat
There is a self-interest threat as bonuses and promotions for management are subject to
meeting financial targets and management is already under pressure of meeting them. The
disclosure of this information would likely result in legal consequences and bad reputation
for SL which would adversely affect meeting those financial targets.
Familiarity threat
There is a familiarity threat as Taha and Mahira have worked together in many successful
projects and have been associated with SL for over a long period of time (10 years). The
disclosure of information by Taha would likely result in an internal disciplinary action
against Mahira which could affect his relationship with her.
Intimidation threat
There is an intimidation threat as CEO has already communicated at the beginning of the
year that if financial targets are not met, some of the management personnel may be laid-
off. The losing out of key customer with a large order may adversely affect the
management’s ability of meeting financial targets and thereby layoff of some management
personnel.
(b) SL may apply the following safeguards within the work environment to prevent unethical /
illegal activities:
 Developing code of ethics to be endorsed by top management who should
communicate and encourage strict compliance with it by all employees.
 Ensuring implementation, compliance and monitoring of a system of sound internal
controls.
 Keeping individuals away from work where there might be a threat to their
compliance with the fundamental principles of ethics (for example where a conflict of
interests or a threat of familiarity exists).
 Rotating employees particularly at key positions or regular review of their work to
reduce the probability of error or fraud.
 Encouraging employees to blow whistle of illegal / unethical activities within the
work environment.
 Encouraging employees to discuss illegal and ethical concerns with those people in
the company who are responsible for governance issues, such as the audit committee,
senior non-executive director, or board of directors.
(c) Taha may consider following matters before disclosing the information to board of
directors:
 Whether he has sufficient evidence to justify disclosing the information to board of
directors. At this point of time, it is only implied from discussion with Finance
Manager that Mahira has been involved in an illegal activity.
 Whether he has thought about the situation objectively and with neutral emotions.
 Whether there is a scope to discuss it confidentially with the relevant authorities
(internal audit, human resource, professional helpline, etc.).
 Whether there is a legal obligation to report to external regulatory bodies or
institutions.
 Whether he is following company’s policy and procedures for disclosing sensitive
Page 3 of 9
Suggested Answers
information at all the times.
Ans.4 (a)  The issues noted are the result of an unplanned change (or reactive change) that
happens in response to developments, events and new circumstances that have
arisen. The change is not intended in advance. In this case the event was
government’s directive to switch to online mode of teaching due to a global
pandemic.
It is proposed that AUM should adopt the following measures to address the
identified issues:
 For AUM management:

 Conduct awareness sessions among faculty and administration staff on the
need for change.
 Get buy-in from department heads and opinion/talk leaders (among students,
faculty and staff) on the need for change.
 For faculty:
Faculty must be provided with adequate training and support in using online
teaching tools and taking their classes online.
 For students:
 Students should not be overburden with assignments. Faculty should be
informed and advised to make appropriate arrangements.
 Asynchronous mode of teaching should be made available to students. Online
sessions should be recorded and lecture material should be provided so
students who cannot attend live sessions can work on the material in their own
time.
 University Counsellors should be made aware and available to tackle student
issues.
 Student helpdesk should be formed to assist students with their queries/needs
(e.g. trainings/scheduling/availability of facilities/etc.).
 Students should be kept well informed and advised to show support and
understanding towards the changes made.
 For IT support staff:

 IT support staff should be provided with more resources (additional staff, new
IT equipment etc.) to address queries in a timely manner.
 They should be provided with the training to manage queries and tackle
common technical issues in this period.
 They should be asked to prepare FAQs for common queries.
In light of the analysis above, other recommendations are:

 Need for time to get ready is the common denominator to address faculty, student
and IT support issues. The university should take a short break or slow down to let
everybody catch up and get ready for the desired change.
 AUM management should encourage university staff (faculty, IT support, etc.) to keep
open communication and show flexibility and understanding towards varied needs of
students during this time. It should also encourage them to seek guidance from
management when required.
Page 4 of 9
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(b) The appraiser bias in the given case is ‘Central tendency bias’, whereby appraiser groups
the bulk of employees into mid-level grades meaning that most employees are considered
‘average’ with just a few ‘high’ and ‘under’ achieving outliers. This type of bias ignores the
fact that the relative performance of group of individuals may collectively be above or
below average based on long-term performance averages.
Faiz may apply following techniques of assessment while deciding on selecting the sales
personnel for promotion:
 He may assess performance of sales personnel by comparing the targets that have
been set and the targets that have actually been achieved. In this way, best performer
may be identified and promoted.
 He may ‘rank’ sales personnel in order of competence (skills, qualification or
experience). It would assist in establishing which sales personnel are better than
others and who can be considered for promotion.
 He may use critical incident method to identify the right person for promotion. It
would involve discussing how well sales personnel dealt with the critical incident
(for example, how each sales person performs during on-going economic downturn
and whether any lessons are learned for the future).
 He may use rating scales (numerical or non-numerical) to rate sales personnel on the
basis of different competence or performance factors. The overall performance of
sales personnel may then calculated by adding up the scores for each factor to
identify the best candidate for promotion.
Ans.5 The profiles of shortlisted candidates are evaluated as follows:
Arham Nasir
 He has experience of working at various positions in the sales function at LFL. He would
likely have detailed understanding of the LFL’s sales function which could be relevant for
the position of RSD.
 He must be well-versed with the existing culture and norms of LFL as well as
people he will be working with.
 The management must know him well with respect to how he has performed so far
and what his strengths and weaknesses are.
 He has track record of consistently meeting sales targets and maintaining good
relationship with clients which are part of responsibilities for RSD.
Shahveer Zaidi
 He has twenty years working experience with number of small and medium sized
organizations.
 He would likely bring knowledge and experience of relevant working practices from those
organizations which could be essential for the position of RSD.
 He has experience of managing portfolio of products, developing sales targets and
monitoring sales strategies.
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Additional factors that Board of Directors may consider:

Both profiles seem to have good potential for the position of RSD at LFL. However, board of
directors may consider following factors as well:
 Appointment of Arham would also mean an internal promotion that would give a message
to the existing workforce at LFL that company values its employees by providing career
development opportunities.
 It would not only improve the morale and motivation of the existing workforce but would
also likely to act as an effective tool for retaining key employees.
 Appointment of Arham as RSD would save time and cost in terms of recruitment and
selection process and getting acquaint with the existing culture of LFL.
 Shahveer has more working experience (two times than Arham). Although he is currently
associated with a small sized organization, he has experience of leading a sales function
and direct reporting to board of directors.
 Appointment of Shahveer would mean external hiring so he could bring ‘fresh thinking’
and new ideas into LFL which could be essential for the position of RSD as LFL is intending
to introduce new product lines and expanding business in other regions.
Recommendation
We recommend board of directors to consider the above factors in the ambit of company’s policy
and preference of internal promotion or external hiring.
We would also recommend that board of directors must also consider other relevant factors as
well such as qualification, experience and potential for overseeing revenue generation strategies,
launching successful marketing and sales campaigns, managing stakeholders, leading a large
team, etc. all of which are vital for the position of RSD at LFL.
Ans.6 The impact of internet on each of the Porter’s five forces along with business/industry examples
is analyzed as follows:
Threat of new entrants

The internet has increased the threat as barriers to entry have generally been lowered in many
industries. The use of internet has enhanced the ability of new competitors to market their
products or services by entering the market more quickly (formalities of setting up business can
be avoided) and more cheaply (no large physical set-ups, employment of full-time sales force or
distribute products through traditional retail networks can be significantly reduced).
Example - online food delivery businesses have invested little capital and captured the large size
of market very quickly.
Threat of substitute products

The internet has increased the threat posed by substitute products as the same underlying
products can now easily and inexpensively be delivered through an alternative distribution
medium. This threat is further strengthened in industries where switching costs are low and
buyer propensity to substitute is high.
Example – online newspapers have reduced the demand for hard-copy daily newspapers.
Bargaining power of customers
The internet has increased the bargaining power of customers substantially. By using search
engines, customers are able to obtain information about the rival products of many different
competitors. Customers are also finding it easier to switch suppliers because of greater
availability of substitute products and low switching costs involved.
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Example – airline ticket prices are updated in real-time that can easily be compared before
customers can make purchase decisions.
Bargaining power of suppliers

The internet has increased the bargaining power of suppliers as they now can access greater
number of clients or customers (due to global reach) for their products. As a result, the
bargaining power of suppliers is likely increased.
Example – online retail business and e-payments have made it easier for suppliers to access
greater number of customers.
Competitive rivalry with existing competitors

The internet has significantly increased the competitive rivalry among competitors.
Organizations have been providing greater amount of information about themselves and their
products on their websites. This makes it easier for competitors to imitate. Also, low entry and
exit barriers also encourage new competitors to enter the market without making large capital
investments.
Example – mobile phone companies have been introducing and aggressively marketing new
features frequently thus intensifying the competition.
Ans.7 (a) RC - Machine Bureaucracy

 Business environment: Simple and static
 Internal features: Large and well-established with regulated processes and systems
 Key organizational element: Technostructure
 Main coordinating factor: Standardized procedures
Hospital - Professional Bureaucracy

 Business environment: Complex but static
 Internal features: Simple processes, control by the professionals
 Key organizational element: Operating core
 Main coordinating factor: Standardized skills
Delivery Service - Simple Structure

 Business environment: Simple and dynamic
 Internal features: Small entity, simple tasks
 Key organizational element: Strategic apex
 Main coordinating factor: Direct control by strategic apex
IT Company – Adhocracy
 Business environment: Complex and dynamic
 Internal features: Complex tasks, young entity
 Key organizational element: Support staff or operating core
 Main coordinating factor: Flexibility and adaptation
(b) Arguments for Babar’s suggestion are:

 It is right to treat RC and three new businesses separately so to protect RC from
negative effects.
 It is a valid suggestion to divisionalize the organizational configuration where each
new business unit/division is treated as a separate business as the nature of all three
businesses is very different from RC.
 Unit/Division heads will be responsible for turning profits out of the new businesses
would mean RC’s management and operations will remain focused and will not be
Page 7 of 9
Suggested Answers
affected by the running of the new businesses.

 Decisions can be taken more quickly by division heads.
 The division head would have more knowledge of their own divisions.
Arguments against Babar’s suggestion are:

 As can be seen from the organizational configurations above, each of the businesses
are of different nature, therefore, adhering to the same organizational processes and
systems will be disastrous for the divisions as it may not suit their business
objectives.
 RC management may not like to loss control as most of the decisions will be made by
division managers.
 Making of separate units/divisions would mean that sharing of resources and
expertise with RC may be limited for the new divisions. Consequently, cost may
increase.
In light of the analysis above following recommendations are proposed:

 Divisionalized organizational structure should be adopted as suggested by Babar
Rao. However, the unit/division heads should be allowed to structure and run their
businesses as they see fit to meet business objectives.
 RC management would need to compromise on control over divisions or come up
with a workable solution with the division managers.
 RC should offer support in sharing of resources and expertise when required.
Ans.8 (a) The existing growth strategy of FP is ‘Organic Growth’. According to this strategy, an entity
seeks growth in business through effective utilization of its own resources. This strategy
assists an entity to control the rate of growth while ensuring that it has sufficient sources
at disposal. It also directs the company’s focus on developing the core competencies in
order to grow successfully.
This strategy might not be suitable in the long-term because of the following reasons:
 There is a limit to the rate of growth FP can achieve with its internal resources. Rival
firms might be able to grow much more quickly by means of mergers, acquisitions and
joint ventures.
 In order to expand a business beyond the limits of its current capacity, FP might need
to invest in new capacity. The lead time between taking a decision to invest in new
capacity and the availability of new capacity might be long. Until new capacity is
available, FP might not be able to meet customer demand and it might therefore, loss
business to competitors.
 In the need of diversification, FP might find it difficult to learn new skills as it relies on
its existing core capabilities which might not be relevant for diversified activities.
 FP might eventually need to change its organization and management structures in
order to handle the growth in its business. The change in organization structure and
management style might be challenging to accomplish.
(b) Marketing Head has suggested joint venture as method of expanding business in Middle
East. According to this method, FP would need to seek partnership with one or more
entities to develop a business or an activity jointly. It would allow FP to share financing as
well as business risks with the joint venture partner(s).
However, joint venture would subject to certain risks such as:

 one joint venture partner might perceive that other joint venture partner(s) not
contributing adequately; or
Page 8 of 9
Suggested Answers
 joint-venture partner(s) might start to compete with each other instead of

collaborating; or
 one of the joint venture partners might want early withdrawal than expected from the
venture.
CFO has suggested franchising as a method of expanding business in Middle East.

According to this method, FP would involve in:
 supplying product design and rights to sell the product to franchisee. It might also
need to provide centralized marketing service and other support services such as
business advice to franchisee; and
 receiving a constant inflow of cash from franchisee by means of royalty which might
be fixed amount or based on the value of franchisee’s sales (or the size of its profits)
or combination of both.
However, FP would not likely be able to participate in day to day operational decisions of
franchisee. Further, FP would have to draft franchise agreement with considerable care to
protect its brand name and to present a consistent appearance to its customers in Middle
East.
Conclusion:
The decision on whether to go for joint venture or franchising would depend on risk and
control appetite of FP. If risk and control appetite is low then franchising would be more
viable option and vice versa.
(c) FP would need to consider following factors while deciding on launching wholly owned
business or forming an alliance with a local company in Middle East:
 The legal constraints or restrictions for setting up a business by foreign company in
Middle East and likely relaxation or ease of these constraints or restrictions by
forming an alliance with a local company.
 Knowledge of business conditions and marketing practices that management of local
company is likely to offer.
 Size of and access to existing customers of local company.
 The probable challenges of direct competition with local company. Particularly,
considering the customers’ buying habits or preferences of favoring local company or
foreign entity in making purchase decisions.
 The risk and power appetite of FP as forming an alliance with a local business would
be less risky in terms of financial risks but there would also be sharing of decision
making power. Whereas, wholly owned business would give greater decision making
power but with greater risks.
 The amount of capital FP is intended to invest in Middle East. Partnership with local
business would require less investment as compared to wholly owned business.
(The End)
Page 9 of 9
INSTITUTE OF CHARTERED ACCOUNTANTS OF PAKISTAN
SUBJECT SESSION
Business Management and Strategy (BMS) Certified Finance and Accounting
Professional (CFAP) - Winter 2020
Passing %
Question no. 1 2 3 4 5 6 7 8 Overall

Passing % 48 44 32 18 42 72 4 34 32%
General comments
The overall result has declined from 39% (Winter 2019) to 32% in this attempt. The below
average performance was mainly noticed in the questions from the areas that have not been
frequently examined in the past sessions. This reflects the selective studies.
As also noted in the past, it seems that examinees do not read the requirements of the
question correctly (as reflected in Question 3, 7 and 8) and respond with irrelevant answers.
It is advisable to utilize the reading time effectively and plan the structure of answer
accordingly.
Question 1(a)
 Examinees did not explain the primary business activities by using Porter’s value chain
model.
 Examinees could not classify the primary business activities in the correct elements of
value chain, particularly outbound logistics and services were least well-performed.
 Some examinees restricted their answers to the extent of copying the information from
the question without explaining ‘what value such activities were adding’?
Question 1(b)
 Only 1 or 2 improvements were correctly suggested in most of the cases.

 The suggestions were restricted to single statements without explaining the rationale of
those suggestions.
 Some examinees offered the suggestions that were in conflict with the requirement of
the question i.e. to reduce cost without reducing the value delivered to the customers.
Page 1 of 4
Examination Winter 2020
Question 2(a)
 Examinees appeared to be not aware of approaches to market sizing and opted for
guesswork.
 Some examinees incorrectly discussed the bottom-up approach under the heading of
top-down approach and vice versa.
 Answers were restricted to how to obtain market information whereas discussion of
how to utilize that information to determine the target market size, was missing.
Question 2(b)
 Examinees repeated same functions with different wordings.

 Answers were mainly restricted to the function of personalized customer services.
Question 3(a)
 Instead of identifying and explaining the threats to fundamental principles of ethics,

some examinees discussed non-compliance with fundamental principles of ethics.
 Some examinees explained all threats instead of threats relevant to the given scenario.
Question 3(b)
 Some examinees restricted their responses to the discussion of how code of ethics
should be implemented in the organization.
 There was lot of repetition of same points with different wordings.
Question 3(c)
 Instead of discussing the matters to consider before disclosing the information, many
examinees suggested the course of action such as discussion with Mahira, resign from
office, etc.
 Ensuring the sufficient evidence is available and following company’s policy and
procedures for disclosing sensitive information were mostly missing in the answers.
Question 4(a)
 Insufficient number of measures (most answers were restricted to 3-4 relevant

measures) were proposed.
 Repetition of same measures such as providing training to faculty and recording of
lectures was noted with different wordings.
 Some measures mentioned in the responses lacked the substance or do not seem
practical e.g. providing laptops, internet connections, etc. to students or completely
outsourcing the IT function.
Question 4(b)
 Some examinees wrongly identified ‘Central tendency bias’ as ‘Recency bias’.

 Most of the answers could only identify 1 or 2 techniques of assessment correctly.
Page 2 of 4
Question 5
 Some examinees failed to infer that Arham’s selection would be internal promotion and
Shahveer’s selection would be external hiring.
 Some examinees opted to discuss only the profile that they recommended for selection
and ignored the other profile altogether.
 Discussion of additional factors that board of directors to consider was restricted to
single statements without discussing the rationale for considering the particular factor.
Question 6
 This was the best performed question with large number of examinees obtained full
marks.
 Some examinees offered the same example under different forces without linking them
to particular force.
Question 7(a)
 Examinees seemed completely clueless about Mintzberg’s organizational

configurations.
 Many examinees could only be able to mention one element i.e. ‘key organizational
element’ correctly.
Question 7(b)
 Babar’s suggestion was analyzed from the perspective of ‘arguments for’ only and
‘arguments against’ were completely missing.
 Only 2 or 3 arguments were presented that were too lacked the substance.
 The root cause of problem that is adoption and strict adherence to RC’s organizational
processes and systems to other acquired business was not discussed.
 Recommendation for possible course of action was either vague or missing altogether.
Question 8(a)
 Some examinees could not identify and discuss the correct strategy.
 Most of the answers were restricted to the discussion of limit to the growth in future
only.
 Many examinees repeated the same points with different wordings.
 Some examinees wrongly misconstrued the requirement of explaining the existing
growth strategy with the factors to consider before expanding the business in Middle
East.
Question 8(b)
 Most of the discussions were restricted to basic definition / meaning of joint venture and
franchising.
 The discussion missed both the comparison of two methods and conclusion.
Page 3 of 4
Question 8(c)
 The comparison of launching wholly owned business and forming an alliance with local
company was missing.
 Only 2-3 factors were correctly identified and discussed.
(THE END)
Page 4 of 4

Mark(s)
A.1 (a) Stating the primary elements of value chain 1.0
Up to 01 mark for explaining how each of SC’s primary business activity
offers value to the customers to achieve the competitive advantage 5.0
(b) 01 mark for each suggestion 3.0

0.5 mark for each reason justifying the suggestion 3.0
A.2 (a) Up to 02 marks for explaining each approach to market sizing 5.0
(b) 01 mark for discussing each function of CRM system 5.0
A.3 (a) 0.5 mark for identifying each threat 1.5

0.5 mark for explaining the reason as to why identified threat may exist 1.5
01 mark for discussing as to how each identified threat may arise 3.0
(b) 01 mark for suggesting each safeguard 5.0
(c) 01 mark for discussing each factor 4.0
A.4 (a) 01 mark for each proposed measure 8.0

Recommendation 2.0
(b) Discussion of appraiser bias 2.0

01 mark for each assessment technique 3.0
A.5 01 mark for discussion of each factor while evaluating the profile of Arham 4.0
01 mark for discussion of each factor while evaluating the profile of Shahveer 4.0
01 mark for consideration of each additional factor 3.0
Recommendation 1.0
A.6 1.5 marks for analysing the impact of internet on each force 7.5
0.5 mark for each example 2.5
A.7 (a) 01 mark for discussing the elements of organizational configuration for each
business entity 3.0
(b) 01 mark for each argument in favour of or against Babar’s suggestion 6.0
Recommendation 1.0
Page 1 of 2
Mark(s)
A.8 (a) Explanation of existing growth strategy 2.0
01 mark for discussion of each reason 4.0
(b) 01 mark for discussing each point in respect of joint venture and
franchising 4.0
Conclusion 1.0
(c) 01 mark for discussing each factor 5.0
(THE END)
Page 2 of 2


Q.1 Zain’s Kitchen, owned and managed by Zain, is a small chain of three restaurants located in
different areas of Karachi. One restaurant is located in Gulistan-e-Johar (‘Johar’) that serves
full menu of various ‘desi’ food items at low cost. The Johar branch has a large number of
customers that consider it highly cost effective.
The second restaurant is in Clifton. It serves desi and continental food that is comparatively
pricier than the Johar branch. It is well-known for its delicious steaks and burgers. It is the
only restaurant in the vicinity that has a large play area for children and is a go to place for
children’s birthday parties.
The third restaurant is located near West Wharf and has fish only menu. It is famous for its
tasty and unique fish recipes among fish lovers.
The recent economic downturn has brought about varied sets of issues from all the branches,
which are becoming increasingly difficult for Zain to manage. One of Zain’s relatives who
owns a successful chain of high-end restaurants has suggested him to replicate Johar
branch’s model to the other two branches.
Required:
Analyze the information provided above in the light of Porter’s generic strategies. Also
discuss the likely impact of following the suggestion of Zain’s relative and recommend a
possible course of action. (10)
Q.2 Fatima, a member of the Institute of Chartered Accountants of Pakistan, has recently joined
FinTech, a consultancy firm, as senior associate, at a lucrative salary package. She was
enjoying her job until the following two recent incidents caught her off guard:
First incident
Supervisor has assigned her a task of creating working paper templates. He has informed
that he is expecting her to create a replica of working paper templates of her previous
employer, which is the rival firm of FinTech. Fatima tried to raise a concern that those
templates might be the intellectual property of her previous employer, to which supervisor
responded that ‘only those people grow here who put FinTech as their first priority’.
Second incident
During a meeting with the client, managing partner introduced her as merger and
acquisition specialist and proposed the client to assign his firm the upcoming merger project
where Fatima would be leading the team from FinTech.
Fatima has never claimed to be a specialist of merger projects, in fact, she has no previous
experience of working on such projects. She is deeply concerned that if project is assigned to
her, she would not be able to perform at the required standards.
Required:
Advise Fatima as to how she may apply the ethical model based on threats and safeguards in
the above case. (12)
Q.3 SinoPharma (SP), is engaged in manufacturing and selling of pharmaceutical products. The
following information pertains to two of its products:
InstaB
It is a mature branded product whose patent expired at the end of 2015. Thereafter, two
competitors launched their generic products i.e. GenA and RapidA in 2016 and 2017
respectively. The table below shows sales volume of InstaB, GenA and RapidA over the
years:
Year 2014 2015 2016 2017 2018 2019 2020* 2021 2022
--------------------- Sales volume in '000 ---------------------
InstaB 220 220 115 90 80 70 60 50 45
GenA - - 110 108 90 94 100 112 116
RapidA - - - 26 55 60 63 62 63
Total market size 220 220 225 224 225 224 223 224 224
* indicates current year
Azkaard
Azkaard was launched in 2012 in the market and its patent is expiring in 2022. It continues
to enjoy great returns in a mature low growth market. However, SP is concerned that
Azkaard too will meet the fate of InstaB unless proper competitive strategies are planned
before its patent expires. One of the suggestions is to discontinue Azkaard as soon as the
patent expires and utilize the resources on other products which have potential in the
existing market.
Required:
By using the information provided above, analyze and recommend the strategies for InstaB
and Azkaard from the perspective of:
(a) Boston Consulting Group (BCG) Matrix (10)
(b) Ansoff’s Growth Matrix (08)
Q.4 Smart Fit (SF), a fashion retailer having presence all over the country, is in limelight in
social media over safety practices for its workers. It all started when one of the dispatch
riders carrying SF’s parcel encountered a road accident resulting in multiple injuries. He
made a video claiming that accident happened due to overweight parcel and SF
management is not accepting the mistake and instead blaming him for not taking
appropriate safety measures. This video has gone viral on social media and people are
criticizing SF for not taking care of its workers.
When management of SF interrogated Administration Head, he informed that accident

happened because of careless attitude of the rider as he was not wearing helmet. He pointed
out that large number of orders are dispatched on a daily basis and no such accidents have
ever been reported before. He stated that it was just a one-off incident and should not be
given importance.
When contacted with HR Head, she informed that existing health and safety program is for
employees of SF only and these dispatch riders are freelancers, who are paid on the basis of
number of orders they deliver.
The management has concluded that despite having no legal binding, on ethical ground, SF
would implement safety program for dispatch riders to avoid future criticism from social
media users.
Required:
(a) Discuss the statement of Administration Head that such incidents should not be given
importance. (03)
(b) Explain the ethical stance of management of SF to implement safety program for
dispatch riders. (03)
(c) Suggest the factors that SF may consider in designing and implementing the safety
program for dispatch riders. (06)
Q.5 Movie Buff (MB), a media production house, was established in late 90s. It has an exclusive
library of music, movies and TV shows (entertainment content). The entertainment content
is released through DVDs which are sold and marketed through distributors, retailers and
sales agents. MB uses traditional methods for promotions and updates regarding
entertainment content such as brochures, magazines, etc.
The management is concerned over declining demand for DVDs. The Marketing Head has
proposed that MB should also start selling its entertainment content directly to
end-consumers through online streaming website which is gaining popularity. She believes
that it would improve the existing marketing mix of MB. CFO has also supported the idea
and suggested that customers would be offered various monthly packages to subscribe for
entertainment content which would likely improve the revenue stream and profitability of
MB.
Required:
(a) Explain how ‘six I’s’ of e-marketing mix could be used to improve the existing
marketing mix of MB. (12)
(b) Explain how MB may assure customers that its website is secured for sharing
information and making online payments for subscription. (03)
Q.6 Avocado Delight (AD) is a European company that manufactures and sells canned avocado
paste. In order to better serve the growing product demand in Asia, AD is contemplating to
establish its operations in Asia and is considering Country A and B for the purpose.
Country A is a large agricultural country that is naturally suited to grow avocados, which is
not only the most popular local delicacy used in various food items but also is the most
exported fruit item. It has many small to medium sized companies that are highly
competitive and support the production and processing of agri-products. It has unstable
government with volatile political environment. It is incessantly involved in countering long
standing disputes with its neighbours that includes Country B.
Country B is a small densely populated country that is well-known for its free ports, sound
infrastructure, very high residential and commercial property rates and taxes, a stable and
credible government, strong financial industry and an efficient business environment. It is
the most well-reputed and interconnected country in the region. It has world renowned
educational institutes that support no cost for higher education. The graduates of these
institutions are not only in great demand within the country but also are well sought after
abroad.
Required:
Discuss the national competitive advantage of Country A and B, and recommend a course
of action to AD. (10)
Q.7 Big Buck Bunny (B3), a toy manufacturing and selling company, is owned and run by
Mustafa. B3 toys are in high demand because of good quality at low prices. B3 has a vision
to produce and sell toys at the best economical prices which is strongly advocated by
Mustafa under B3’s slogan of ‘Every Penny Matters’.
Toys are manufactured in a high cost efficient environment under the supervision of
Mustafa. B3 has an arrangement with a known large distributor who collects the toys from
factory and distributes them to widespread network of retailers.
Saniya, daughter of Mustafa, who has recently joined B3, has proposed that cost efficiencies
can further be achieved if B3 eliminates the distributor from the existing supply chain and
starts self-managed distribution network to retailers. This way related costs such as delay in
supply to retailers, mishandling of products and commission to distributor would be
avoided.
Saniya has further proposed that distribution network would be financed through a bank
loan. She is confident that B3 would successfully negotiate the bank loan on favourable
terms which would make the proposal financially viable.
Required:
Evaluate the proposal of Saniya from the perspective of Suitability, Feasibility and
Acceptability criteria. Also give your recommendation. (10)
Q.8 (a) Shine & Rise, a cosmetic company, has decided to change the name of its well-known
brand ‘White Shine’ to ‘Bright Shine’. The management has directed the marketing
team to communicate it to a large segment of customers as quickly as possible,
without disturbing the existing budgets greatly.
The marketing team has come up with the following promotional strategies:
 Advertising campaign through TV and social media
 Sales promotion via buy-one-get-one free
 Sponsorship of beauty contest starting next month
Required:
Evaluate each of the above promotion strategies and recommend the appropriate
course of action to the company. (05)
(b) Afridi Furniture (AF) is engaged in making and selling office furniture. The sales
function is comprised of personnel having varying set of skills and experiences. Javed, a
foreign qualified MBA, has recently joined AF as Sales Head. He has observed that sales
personnel remain busy throughout the day either making phone calls to potential
customers or spending time on field work.
Javed believes that sales figure of AF can significantly be improved if sales personnel
become more vigilant and improve their persuasion skills. On inquiry, he learnt that
previous Sales Head, at the start of each quarter, used to gather sales personnel and brief
them about the expected strategies. At the end of session, queries of sales personnel were
answered.
He decided to train his sales personnel and provided them the learning material
comprising of business case studies, self-developed notes and videos on the topic of
‘efficient selling’ that he gathered during his MBA.
After two weeks, on inquiry, he was surprised that large number of sales personnel had
not even opened the learning material and the remaining had barely gone through and
understood it.
Required:
Discuss the probable factors that may act as barriers to learning in the above case. (08)
(THE END)
Suggested Answers
Ans.1 Porter’s generic strategies are analyzed as follows:
(i) Johar branch

It is following cost leadership strategy. Johar branch is seeking to become least-cost
producer by offering food items at a lower price than rival products. This strategy
would give Zain’s Kitchen a competitive advantage as it is seeking to offer the same
value as its competitors but at a lower cost.
(ii) Clifton branch

It is following differentiation strategy. Clifton branch is differentiating by offering
delicious steaks and burgers and a large play area for children. This strategy would
give Zain’s Kitchen a competitive advantage as customers seem willing to pay
higher price for its products to enjoy the unique experience which otherwise is not
available from other restaurants.
(iii) West Wharf branch

It is following focus strategy. West Wharf branch is focusing a particular segment of
market i.e. fish lovers. This strategy would give Zain’s Kitchen a competitive
advantage as it is concentrating on selling the product to a particular segment of
the market. Further, within a market segment, Zain’s Kitchen has adopted product
differentiation strategy.
Impact of following the suggestion of Zain’s relative

Replicating Johar’s branch model to Clifton and West Wharf branches would mean
risking business from customers who visit these restaurants for differentiation value,
such as delicious steaks and burgers, large play area and unique fish recipes. It might be
difficult to maintain that differentiation while seeking to achieve cost efficiencies.
Recommendation
 The impact on business is due to the economic downturn, which is likely going to
recover when the situation improves. Instead of disturbing the existing business
models, Zain should try to work on strategies that could make it easier to manage
his restaurants during these tough times e.g. cut down on operations, offer limited
services where possible, starting delivery services, close operations temporarily,
etc.
 For management issues, he may concentrate on managing his workload through
other means e.g. delegation of work, prioritization of work, etc.
Ans.2 Fatima may apply ethical model based on threats and safeguards in the given case as
follows:
Stage 1: Recognize and define the ethical issues

Use of likely intellectual property of previous employer without proper authorization
would be unethical and might be illegal as well.
Further, accepting the project knowingly that she would not be able to perform at the
expected standards, might not be illegal but unethical.
Stage 2: Identify threats to compliance with the ethical principles

There is a self-interest threat as Fatima is enjoying a lucrative salary package which she
might not otherwise receive from any other organization.
There is also an intimidation threat as the statement of supervisor has inferred that she
might not have career progress if she does not oblige.
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The threats would likely result in compromising following principles of ethics:
Integrity – if she accepts to lead the project, she would not be honest with her employer
as well as with the client, as she knows that she would not meet the required level of
performance.
Confidentiality – if she replicates the working paper templates which might be

intellectual property of her previous employer, she would breach this principle.
Professional behavior – if she fails to perform at the required standards, she would likely
end up with discrediting accountancy profession.
Stage 3: Assess the significance of the threats

The significance of the threats depend on:
 What kind of information would be shared and whether that information is publicly
accessible? In this case, Fatima would inevitably be sharing the confidential
information of her previous employer that would render this threat as a significant
one.
 The expected role of Fatima in a merger project. She would be leading the team
without requisite skills, this threat would also likely to be high.
Stage 4. Apply safeguards

 For threat to compliance with confidentiality, Fatima needs to clear out with her
supervisor that she cannot create replica of working paper templates of her
previous employer without proper authorization. If supervisor still pressurizes her
then she may seek help from other appropriate channels such as discussion with
higher management within FinTech or ICAP, without compromising the principle of
confidentiality.
 For threat to compliance with the principles of integrity and professional behavior,
she may request the managing partner to either change her role in the project or
withdraw her from the project.
Stage 5: Re-assess the threats to compliance after additional safeguards

After applying the above safeguards, Fatima would need to re-assess whether the risks
have been eliminated or reduced to an insignificant level or not.
Stage 6: Make the decision

If Fatima believes that threats to compliance with above principles of ethics have been
not been eliminated or reduced to an insignificant level, she may as a final resort, resign
from the job.
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Ans.3 (a) BCG Matrix:
InstaB
It is a ‘Dog’ as it has a low market share in a low growth market. Its market share
has continuously been declining from the year its patent expired. Its market share
in the current year is about 27%, which is much less than the share of the market
leader (45%). Further, it is forecasted to continue to decline to 20% by 2022.
Recommended Strategies
 If it is no more generating positive cash flows, then the appropriate strategy
would be to withdraw it and invest the resources in other products which have
potential in the existing market.
 If it is generating positive cash flows, then SP may continue to enjoy the cash
flows as long as these are positive before eventually withdrawing from the
market.
 If SP decides to continue it, then it is recommended to not to invest heavily as
gaining market share in a low-growth market is highly unlikely to achieve.
Azkaard
It is a ‘Cash cow’ as it has a high market share in a low growth market. It is a patent
product and enjoying 100% market share which would continue at least till the
patent expires. It is more likely earning substantial net cash inflows due to the
benefit of having a patent in place.
Recommended Strategies
If SP decides to continue Azkaard when patent expires:
 Defend and maintain market share which might be possible by achieving
economies of scale and/or become efficient through experience.
 Try to extend the patent validity as long as possible.
 Do nothing and keep reaping the profits as long as it enjoys positive cash flows
and then eventually withdraw from the market.
 Use the cash from the sales of Azkaard for R&D or to further develop other
drugs which are in ‘Question mark’ and or ‘Star’ quadrants.
If SP decides to discontinue Azkaard when patent expires:

 Use the sale proceeds of Azkaard for R&D or to further develop drugs that are
in ‘Question mark’ and or ‘Star’ quadrants.
 For the last year before the patent expires, raise the prices further, if feasible,
to gain maximum benefit before competition kicks in that would reduce
revenue and market share.
(b) Ansoff’s Growth Model

InstaB and Azkaard
Both are existing products in the existing market. They are long-standing products
that have enjoyed the monopoly due to patent.
Recommended strategies
If SP decides to continue InstaB and Azkaard

Adopt market penetration strategy according to which SP would need to seek sell
more of InstaB and Azkaard in its existing market. However, it might be difficult to
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achieve as market has reached maturity or is growing slowly.
Market penetration strategy can be realized by persuading the individuals to switch

from buying the products of competitors. It can be achieved by seeking better work
arrangements with distributors, medical professionals and other external
contributors of the supply chain e.g. offering relevant benefits to pharmacies and
doctors for its products, offering profit sharing to distributors, etc.
However, following risks are associated with it:

 If SP fails to increase sales, InstaB and Azkaard will have no strategic
direction and will suffer from ‘strategic drift’.
 Competitors may retaliate with their own marketing initiatives to win the
customers.
If SP decides to discontinue InstaB and Azkaard

There is a potential for other products in the existing market so it is recommended
to adopt product development strategy as follows:
 SP seems to have a strong research and development as it has been enjoying
the patents on its products. It should attempt to develop new range of
products and get them patented to enjoy high profit margins.
 Develop generic of competitors’ products whose patents have been expired or
to be expired shortly if there is potential for such generics in the existing
market.
Ans.4 (a) The statement of Administration Head is not justified. If such incidents are not
given due importance, SF may end up facing following repercussions:
 Loss of reputation in the eyes of stakeholders, in particular customers, which
could result in loss of business or in dire situation closure of business.
 The payment of compensation to injured workers and in the case of severe
injury or death that compensation may involve a significant amount with
other legal consequences.
 Fines and other penalties from regulatory authority which may include
suspension or revocation of an operating license.
 High turnover of employees. Further, SF may find it difficult to recruit new
employees or freelance bike riders at market terms and conditions in future.
(b) The management of SF has taken ethical stance of ‘enlightened self-interest’.

According to this ethical stance, company believes that it would benefit by showing
some concerns for the interests of employees, communities, the general public and
the environment though interests of its shareholders would remain the most
important concern.
In the above case, SF management has decided to implement the safety program for
dispatch riders more for the sake of avoiding criticism from social media user than
realizing its ethical obligation towards society as a whole.
(c) SF may consider following factors in designing and implementing the safety
program for dispatch riders:
Designing
 Identification of safety risks that are being faced by dispatch riders. This can
be achieved by having a dialogue with them or their representatives.
 The preparation of safety guidelines for minimizing the identified risks. These
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may include wearing helmets, following traffic rules, limit on maximum

weight of parcel, etc.
Implementing
 Appoint a safety officer or assign this role to a senior management person
whose job would be to monitor related risks and to ensure that all necessary
safety measures are in place and working appropriately.
 The safety guidelines to be shared with dispatch riders to make them aware.
This objective may be effectively achieved by providing short training
courses.
 Dispatch riders must be made aware that it is their moral and ethical duty to
comply with SF’s safety guidelines in order to protect both themselves and
others from harm.
Ans.5 (a) ‘Six I’s’ of e-marketing mix could be used to improve the existing marketing mix of
MB as follows:
Interactivity
MB is currently relying on push media as communication is one way that is from
MB to the customers whereby it is trying to persuade the customers to buy its
products. A Website would act as a pull medium, as it would aim to attract interest
from customers and make them want to visit the Website.
Moreover, the Website would allow a greater interactivity with customers and
create a dialogue. It may take several forms such as encouraging customers to
provide details about themselves and subscribe for updates regarding promotions
and new release of entertainment content. This would create continuation of the
dialogue in the future and connection with the customer that would help in
establishing long-term relationships.
Intelligence
MB has apparently no direct access to data of its end-consumers therefore, it is not
utilizing the marketing intelligence efficiently. The direct selling through Website
would allow MB to collect data about its customers and other visitors to a Website.
MB can analyze this data to produce marketing information about type of
entertainment content customers buy/watch or search the most.
Moreover, ‘clickstream analysis’ of data on a Website log file can be used to build up
a picture of customer preferences, and possibly also to identify different market
segments.
Individualization
MB is not currently applying the principle of individualization as updates and
promotions are communicated in general through traditional methods. The
Website would help in tailored or personalized communication to the individuals.
For example, the activities (music and movies watched or searched) of customer
can be recorded and whenever that customer next visits the Website, relevant
information would be retrieved from the data files to produce an individualized
messages or recommend the related entertainment content watched or searched
earlier.
Integration
The Website would provide scope for integrated marketing communication. MB
would be able to better integrate online streaming with the selling of DVDs.
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Further, communication tools such as built-in call back facility, buying decisions
support, and encouragement of users to check a list of frequently asked questions
(FAQs) before contacting customer support via phone call, etc. can be better
integrated.
Industry restructuring
MB is currently selling its entertainment content through distributors, retailers and
sales agents. The Website can be used to disintermediate by selling directly to end-
consumers. This would likely reduce or abandon the need of intermediaries and
thus reduce the incidence of offering discounts / commission to these
intermediaries.
Independence of location
MB has limited geographical reach at present. The sell through Website would give
MB a global reach. It would be able to sell to any place without the need of a
physical presence or intermediaries. Similarly, customers would be able to access
the Website from any location.
(b) MB may assure its customers regarding the security of information and online
payment by having a ‘WebTrust’. It would act as a mean of assurance to the
customers that MB’s Website meets the following principles of high standards:
 Business and information privacy practices.

 Transaction integrity.
 Information protection.
Ans.6 Porter’s Diamond model can be used to discuss the national competitive advantage:
Country A Country B
Favorable factor Naturally suited to grow It is well-known for its free
conditions Avocados. ports and sound infrastructure.
It is the most well-reputed and
interconnected country in the
region.
Related and Many companies are It has world renowned
supporting supporting the production and educational institutes that
industries processing of agri-products. support no cost for higher
education.
It also has strong financial

industry that supports
businesses and consequently a
healthy economy.
Demand conditions It is the most popular local The graduates are not only in
in the home market delicacy used in various food high demand within the
items. country but also are well
sought after abroad.
Firm strategy, There are many small to It has efficient business
structure and rivalry medium sized companies that environment.
are highly competitive.
Government It has unstable government It has stable and credible
Support with volatile political government.
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environment. It is incessantly
involved in countering long
standing disputes with its
neighbors that includes
Country B.
Country A:
AD’s purpose is to facilitate its product demand in the region, opening a manufacturing
facility or business/rep-office would be problematic due to the troublesome political
environment. AD may only consider establishing its operations in Country A, if it either
successfully negotiates or seeks an agreement with the government to minimize the
impact of volatile political environment on AD’s operations.
Country B:
It has national competitive advantage in providing business services. It seems like a
developed service based economy. It is also well-positioned to capitalize on trading
business due to free ports, efficient business environment and infrastructure. The skilled
workforce required to conduct business in the region is easily available here. Therefore,
AD may consider carrying trading activities through a business/rep-office here. However,
it may not be suitable for opening a manufacturing facility because of very high
residential and commercial property rates and taxes.
Other Countries:
 For manufacturing in Asia, AD should look for another country that is conducive to
Avocado paste manufacturing and can work well with country B.
 Or, it can continue to manufacture in Europe and use the rep-office in Country B
for facilitating business activities.
 Or, if possible, it can look for other countries that are more suitable for
Avocado paste manufacturing and selling.
Ans.7 The proposal of Saniya, from the perspective of Suitability, Feasibility and Acceptability
criteria, is evaluated as follows:
Suitability
The suitability criterion of given proposal is evaluated as follows:
 B3 would be moving into a later stage of the supply chain which is an example of
vertical forward integration. It seems to be a suitable strategy as it would
complement the existing business of B3 and may give it a competitive advantage.
 It would give B3 control over its channel of distribution and would likely result in
cost efficiencies which is consistent with the slogan of ‘Every Penny Matters’.
 B3 is in a strong position and its toys are in growth stage of product life cycle. B3
can further strengthen its position by seeking cost leadership and be able to
produce and sell toys at the best economical prices.
Acceptability
The acceptability criterion of given proposal is evaluated as follows:
 Owners – Mustafa is a strong supporter of achieving cost efficiencies, so the
proposal would likely be acceptable to him.
 Customers - They would also support this proposal as cost efficiencies will likely
result in low prices of toys.
 Retailers – They may or may not react positively as they will be buying directly
from B3. They might have developed strong relationship with the distributor. B3
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would need to convince the retailers that it would not affect their business and in
fact it might overcome the existing issue of delay deliveries.
 Employees – The existing employees would likely be unaffected by the proposal as
it would not affect their work. B3 would likely need to hire new employees for self-
managed distribution network.
Feasibility
The feasibility criterion of given proposal is evaluated as follows:
 The proposed distribution network would be financed through a bank loan.
However, financial viability relies on the fact that B3 would successfully negotiate
the bank loan on favorable terms.
 B3 has no previous experience of handling distribution network. It appears that it
would need to hire staff and rely on their capabilities for efficient distribution
network.
 The capabilities required for successful management of distribution network would
be very different from the existing capabilities of B3 which are focused on
manufacturing of toys. B3 may end up with diverting its focus from core
competencies and lose out the competitive advantage it has.
Recommendation
The setting-up of distribution network seems to be an attractive opportunity that could
assist B3 in achieving its objective of attaining cost efficiencies. However, it seems that
financial feasibility is not performed appropriately as it strongly relies on successful
negotiation with the bank. Further, it appears that B3 has not considered or evaluated
that what other alternative(s) would be available if the bank refuses to provide finance at
the expected favorable terms or refuses to provide finance at all and whether the
proposal would then be financially viable.
Also, lack of experience and expertise of managing distribution network may render this
proposal as high-risk venture. It is therefore, advised to perform due diligence before
going ahead with the proposal.
Ans.8 (a) The promotion strategies are evaluated as follows:

Advertising campaign through TV and social media
This is an easy and quick method of reaching a large target market. However,
advertisement through TV can be expensive. Further, it also relies on potential
customers reacting proactively to it.
Sales promotion via buy-one-get-one free
Customers like receiving free goods. Further, this can act as a persuasive strategy in
the short-term in encouraging potential new customers to try the product.
However, it can be expensive if needs to penetrate a large target market.
Sponsorship of beauty contest starting next month
This strategy is good for brand awareness and positive corporate image, as it shows
the company’s involvement and a way of giving back to the community. However, it
may have a very limited reach and it can be potentially expensive as well.
Recommendation
 The promotion strategy of sponsorship of beauty contest can be ruled out on
the grounds that it would only start after a month’s time, it may have limited
reach as well as it can be potentially expensive.
 Strategy of sales promotion via buy-one-get-one could be very expensive as
company is targeting a large segment of customers.
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 It is recommended that management should opt for carefully developed

advertisement campaign through social media as it is relatively inexpensive
method and can reach the large audience. Advertising through TV can either be
avoided or restricted to limited airtime so that it does not disturb the budget of
the company greatly.
(b) The following factors may act as barriers to learning in the above case:
 It seems that training gap (i.e. skills expected from employees and skills they
currently possess) has not appropriately been identified and analyzed. Javed
has handed over the learning material assuming that it would fit for all.
 There seems to be a lack of communication of purpose of training. It appears that
Javed has neither communicated the objectives that are being sought from the
training nor the timelines for completion of training to the sales personnel.
 It seems that Javed has not committed enough resources to achieve the objectives
of training. There is no time off work for training is given. Further, there are no
additional monetary or non-monetary rewards attached to successful completion
of the training. Trainees might have to compromise on family and/or other
commitments and lack of incentives might affect their motivation towards
learning.
 The learning material may be badly designed. Javed has shared the material that
he gathered while doing MBA. The material might have been prepared to serve
the different purpose that is for study and research and not keeping the existing
learning needs of sales personnel in mind.
 It appears that sales personnel are already loaded with the work. The existing
workload seems to take up too much time leaving barely any room for taking time
out for learning new things.
 The training method does not seem well-suited to the learning style of the sales
teams. The existing learning material requires self-learning whereas in the past,
learning objectives were achieved by means of interactive sessions where the
doubts if any, were cleared out then and there.
 The training material may have put the trainees on a ‘learning gradient’ that might
be too steep and unreasonable. The sales personnel have varying set of skills and
experiences. Some of them may have found it either too difficult or too easy given
their existing level of knowledge and skills.
 The sales personnel might comprise of individuals not having interest in the
subject of training or who do not want to learn anything new.
(The End)
Page 9 of 9
SUBJECT SESSION
Business Management and Strategy Certified Finance and Accounting
Professional (CFAP) Examination
Summer 2021
Passing %
Question-wise
Overall
1 2 3 4 5 6 7 8
42 47 19 11 55 36 15 80 33
General comments
The overall result has slightly improved to 33% from 32% of the previous session. The poor
performance is noted in the questions that are less frequently examined which reflected selective
studies.
Further, it is noted that some examinees struggle in applying the learned concepts under the given
case scenarios and often end up either reproducing the concept without giving due consideration
to the given case scenario or offer weak explanation and recommendations.
Question 1
 ‘Cost Leadership’ strategy as suggested by Porter was identified as ‘low cost’ strategy.
 Some examinees wrongly assumed that Zain’s relative had suggested to uniform the menu
items of Johar branch to other branches.
 Many examinees agreed with Zain’s relative suggestion and attempted to offer arguments in
favor of it.
 Only few examinees correctly recommended the course of action in the light of economic
downturn and difficulties being faced by Zain to manage the restaurants.
Question 2
 Only few examinees used the ethical model correctly as large number of examinees mentioned
the threats and safeguards only.
 Examinees remained confused between threats and fundamental principles of ethics and used
them interchangeably.
Page 1 of 3
Summer 2021
 Some examinees discussed all types of threats and principles without referring them
appropriately in the light of given scenario.
 Some examinees repeated the same safeguards under different paragraphs such as consultation
with those charged with governance, internal auditors, human resource department, etc. as
separate points.`
Question 3(a) & (b)
BCG matrix
 InstaB was wrongly identified and explained as ‘question mark’.
 Azkaard was wrongly identified and explained as ‘star’.
 Many examinees restricted the explanation of strategies to the extent of whether to continue
the product or not without giving the rationale behind those strategies.
Ansoff’s growth matrix

 Only handful of examinees could explain InstaB and Azkaard correctly. Many examinees
reproduced the information from the question as explanation.
 Some examinees opted to offer all four strategies under Ansoff’s growth matrix without
considering the given case scenario.
 Many examinees suggested the strategies without explaining the reason for that suggestion
and how that particular strategy can be implemented under the given case scenario.
Question 4(a), (b) & (c)
 Instead of discussing the statement of Administration Head from the perspective of likely
repercussions on the entity, some examinees attempted to offer suggestions that entity should
consider in such situations.
 Many examinees restricted their answers to ‘loss of reputation’ only and missed out other
relevant factors.
 In part (b), only handful of examinees could correctly identify and explain the ethical stance of
management. Most of the examinees offered the benefits of including dispatch riders in safety
program which was not the requirement of the question.
 In part (c), instead of discussing the factors that need to consider in designing and
implementing the safety programs, many examinees offered general suggestions such as
provide helmets, arrange insurance, etc.
Question 5(a) & (b)
 Examinees remained confused between ‘interactivity’ and ‘individualization’ and explained

them interchangeably.
 Some examinees ignored the given case scenario altogether and opted to explain ‘six I’s’ in
general.
 The explanation of integration and industry restructuring lacked the substance in many
answers.
Page 2 of 3
Summer 2021
Question 6
 Examinees failed to use Porter’s Diamond Model to discuss the national competitive
advantage.
 Some examinees attempted to discuss the national competitive advantage from the perspective
of Porter’s five forces framework and lose out many important aspects.
 Many examinees recommended either country A or B without giving due consideration to the
given limitations of each country.
Question 7
 Some examinees appeared clueless as how to evaluate the given proposal from the perspective
of suitability, feasibility and acceptability criteria.
 Many examinees restricted their evaluation in the form of questionnaire instead of analyzing
each question being raised by them.
 Examinees could not differentiate between suitability and feasibility criteria and discussed the
matters under two headings interchangeably.
 Some examinees restricted their evaluation to the extent of financial feasibility only.
 Only few examinees could evaluate the acceptability criteria from the perspective of key
stakeholders.
 Many of the offered recommendations restricted to the statement that ‘if proposal is
financially feasible, then go ahead with it’.
Question 8(a) & (b)
 Examinees focused on only low budget criteria while ignored the other criteria of quick
reachability to the targeted segment.
 Some examinees offered the recommendation without discussing the rationale supporting that
recommendation.
 There was lot of repetition of the same point with different wordings in the discussion of the
factors that may act as barriers to learning in the given case scenario.
 Identification of training gap, lack of communication of the purpose of training and steep
‘learning gradient’ were the least common factors that were discussed in the answers.
(THE END)
Page 3 of 3

Mark(s)
A.1 02 marks for identification and explanation of each generic strategy 6.0
Discussion on the impact of following relative’s suggestion 2.0
Recommendation 2.0
A.2 Identification and explanation of the ethical issues 1.0

Identification and explanation of threats to compliance with the ethical
principles 5.0
Assessment of the significance of the threats 2.0
Application of the safeguards 3.0
Final decision 1.0
A.3 (a) 02 marks each for discussion of ‘Dog’ and ‘Cash Cow’ 4.0
Up to 01 mark for each relevant recommendation 6.0
(b) Discussion on existing product in the existing market 2.0

03 marks each for recommending and discussing market penetration and
product development strategies 6.0
A.4 (a) 01 mark for discussion of each relevant point 3.0
(b) Identification of ethical stance 1.0

Explanation of ethical stance 2.0
(c) Up to 1.5 marks for suggestion of each factor 6.0
A.5 (a) 02 marks for explanation of each ‘I’ of e-marketing mix 12.0
(b) Suggestion 0.5

Explanation of suggestion 2.5
A.6 03 marks each for discussion of national competitive advantage of Country A

and Country B by using Porter’s Diamond Model 6.0
01 mark each for discussion on the selection of Country A and Country B 2.0
Recommendation of consideration of other countries 2.0
A.7 01 mark for discussion of each point under Suitability, Acceptability and
Feasibility 8.0
Recommendation 2.0
A.8 (a) 01 mark for discussion of each promotion strategy 3.0

Recommendation 2.0
(b) Up to 1.5 marks for discussion of each barrier 8.0

(THE END)
Page 1 of 1


Q.1 Star Beans (SB) is a well-known brand of cafes in Amerita. It is one of the biggest names in
cafes in terms of revenue, number of branches and reach within the country. SB is renowned
for its great tasting coffee and trendy cafes in high activity areas like commercial hubs and
tourist spots. SB is frequently recommended by numerous tourist blogs as a must try for people
visiting Amerita.
Two years ago, SB decided to open cafes in Sirania, a small mountainous country that is
well-known for its beautiful landscapes and lakes amongst the tourists. Sirania has a rich
coffee culture. For Siranians, coffee is not just a drink, it is a part of their social culture.
Meeting over a cup of coffee is a common reason to meet family and friends. Almost every
neighbourhood in Sirania has a coffee shop where locals gather after work. The servers at the
cafe usually know the regular customers by names and serve their preferred flavours without
having to ask first. Sirania has three states and each state has its own local brand of coffee that
is distinctly different from others. One could take a sip and guess the origin of the coffee where
it was made.
The huge coffee drinking market in Sirania attracted SB in the first place. SB entered Sirania’s
market with full force by opening several cafes covering almost every commercial area in each
city and all major lakes in the country. However, SB’s business never really picked up in
Sirania. It has been two years and all the cafes are showing losses except a few cafes near the
lakes. SB is not sure what went wrong. The CEO of SB said – “We did everything right. We
shipped our great tasting coffee directly from our central plant in Amerita. We made sure that
all the cafes implement our winning ways to the dot. We had strong financial support and
were committed to stay in Sirania. However, sometimes you don’t get all that you want and
with a sad heart I announce that we will be closing all our loss making cafes in Sirania”.
Required:
Evaluate and suggest improvements to SB’s strategy for international business operations.
Include Critical Success Factors in your answer. (11)
Q.2 (a) Company A is a cotton yarn manufacturer founded in 1997. It has 65 employees with
Rs. 58 million revenues and is growing steadily. It is a well-structured organization
which follows centralized decision making model and has strong procedures and control
systems. However, recently there have been a number of concerns raised by the
employees about the efficiency and effectiveness of decisions made by the top
management.
Company B is a direct competitor of Company A. It was founded in 2007 and has

68 employees with Rs. 65 million revenues. Its organizational structure has evolved into
five divisions each having its own divisional manager who handles all matters pertaining
to the division and reports progress to the top management.
Required:
In light of Greiner’s growth model, explain the current growth phase and the crisis to
be expected for Company A and Company B. (08)
(b) An industry analyst was asked about how Company B grew and evolved so rapidly
when compared to Company A, he said – “the only differentiating factor could be that
Company B has a better marketing and sales team”.
Required:
Using Greiner’s growth model, evaluate and indicate your agreement with the industry
analyst’s comments. (05)
Q.3 The Human Resources Department has received the following emails from Faraz, Sales Head
and Laiba, Sales Officer:
Email from Faraz

To: Human Resources Department
From: Faraz Mobeen
Subject: Dismissal
Date: 8 December 2021
Laiba has not been able to meet targets for the past two years. I have given her multiple
verbal intimations through performance appraisals that she needs to improve her
performance. However, she never takes my words seriously and has shown no intent for
improvement. Today, we lost a potential client only because she failed to send the proposal
on time. I have informed her that she cannot work with me anymore.
Regards,
Faraz
Email from Laiba

To: Human Resources Department
From: Laiba Nausheen
Subject: Unfair dismissal
Date: 8 December 2021
This morning Faraz called to tell that he is dismissing me from the job. I know Faraz does
not like me as it is implied from his actions that he likes to work with young people and
finds aged staff low on motivation. It was also reflected in annual performance appraisal
interviews wherein he mostly talked about my weaknesses and failures during the year and
ended the interviews with giving me low performance ratings. Unfortunately, that is all
formal interactions we have had in these past two years.
I always try to put in my best efforts. I consider this an unjust dismissal and would like to
hear from senior management or else, I will seek legal advice and act accordingly.
Regards,
Laiba
Required:
(a) Evaluate the disciplinary action taken by Faraz. Suggest other disciplinary alternatives
that Faraz could have considered before dismissing Laiba. (04)
(b) Identify the shortcomings in the performance appraisals of Laiba. Suggest the
improvements for future performance appraisals. (06)
(c) Recommend the disciplinary process that senior management may follow to offer fair
trial to Laiba. (05)
Q.4 GameIT Limited (GIL) is the market leader in the video game industry. It has introduced the
slickest video game console (Console) that supports high-end graphics and online video
streaming services giving unique experience to users. The Console is patented to prevent
competitors from imitating its unique design and ultra-advanced features.
GIL has been enjoying high profit margin by selling Console as an exclusive brand to its
targeted high-end customers through celebrities’ endorsements and positive word of mouth.
Customers make purchases through GIL’s high-tech website or its dedicated flagship stores
wherein customers can have tangible experience before buying Console.
The patent on Console is expiring in a year’s time. The management has decided that after
the expiry of patent, it would continue offering Console to existing customer base by using
current marketing mix strategy. However, to counter competitors and meet large untapped
markets of middle and low-end potential customers, a standard and economical Console
variant would also be introduced.
Required:
By using 4 P’s of marketing mix:
(a) explain the existing marketing strategy of GIL. (06)
(b) evaluate the management’s decision to continue the existing marketing strategy for
high-end customers after the expiry of the patent. (02)
(c) recommend the marketing strategy for the standard and economical Console variant. (07)
Q.5 Blue Ocean, a marketing agency in Karachi, offers digital marketing solutions. There has been
a considerable change in the consumer buying behavior post COVID-19. Therefore, the board
has requested Huzaifa, Marketing Head, to find and propose a training program on the
subject. He is also authorized to nominate 3 candidates who would accompany him for that
training program.
Huzaifa who is eager to visit Dubai Expo 2020, got excited and started looking for possible
training programs in Dubai only and finally found one there. However, he also knows that
similar programs at much lower pricing are also offered in Karachi.
Required:
Carry out a mirror test for Huzaifa. (04)
Q.6 Aspire Textile Mills (ATM) has nationwide operations. It is considering expanding its
customer base in European market. The management has approached potential customer
there who has requested ATM to share its Corporate Social Responsibility (CSR) policy and
related reporting.
ATM has no formal CSR policy in place. Some random CSR activities are performed due to
local pressure groups that have questioned ATM’s increasing environmental footprint and
lack of social contributions.
The management is considering adopting formal CSR policy and its reporting to stakeholders.
However, one of the board members has shown concern of likely increase in costs.
Required:
(a) Advise the steps that ATM may take in formulating its CSR policy. (05)
(b) Evaluate the board member’s concern that CSR program and related reporting would
result in increased costs. (02)
(c) Recommend two measures that ATM may take to reduce environmental footprint and
two measures to increase social contributions. (02)
(d) Suggest the reporting framework that ATM may adopt for sustainability reporting. (02)
Q.7 The hand wash soap market of Parash, a tourist friendly metropolitan city in Asia, can be
categorized by two product variants: bar soap and liquid soap. Before 2019, only two standard
size of the variants were offered in the market i.e. 3.5 inches’ soap bar and 500 ml liquid soap
bottles.
In January 2019, Khalid established a new company called Soapsy in Parash to fill the gap in
the market. Soapsy makes 2 inches travel size ‘mini-soap bars’ and 200 ml ‘mini-liquid soap’
bottles for air travellers. The bars and liquid soap are designed to be used 9 to 10 times for
standard quantity usage. To-date, Soapsy has been extremely consistent in its approach and
offerings with no observable changes to the internal workings of the company. It remains the
only company catering to travellers in Parash. Presented below is the quantity of each product
sold during the period specified:
2019 2020 2021

Mar Jun Sep Dec Mar Jun Sep Dec Mar Jun Sep
Mini-soap bar 5 4 4 3 1 1 1 3 3 3 3
Soapsy
Mini-liquid soap 12 14 16 18 2 2 2 35 38 40 42
Soap Standard soap bar 2200 2400 2600 2800 3800 4200 4500 4800 5000 5200 5400
Industry
Trend Standard liquid soap 1200 1400 1600 1800 3200 4300 5000 5400 5600 5800 6000
Note: The figures presented are in multiple of 10,000.
Required:
(a) Comment on the appropriateness of the gap chosen by Soapsy. (03)
(b) Analyse information provided in the case and identify possible reasons of slump in sales
in 2020. (06)
(c) Advise future strategies to Soapsy on how they can tackle a slump in sales like
experienced in 2020. (04)
Q.8 The Vocal Limited (TVL) is a medium-sized publishing house. TVL’s magazines are
recognized for quality contents and catchy images. The content for magazines is mostly
outsourced to well-known content writers which is then edited in-house before sending to
distributors and retailers.
Hunain, CEO, is concerned over significant downfall in sales and profitability over the past
two years. In a recent meeting, Zarnish, Distribution Head, pointed towards the emerging
trend of e-reading and emphasized that TVL should consider e-publishing its magazines as
well. She suggested that TVL may duplicate its existing brand identity to e-publishing.
Zarnish also mentioned that e-publishing would facilitate direct interaction with targeted
customers and adoption of Customer Relationship Management (CRM) system could assist
in attracting and retaining them.
The existing IT team at TVL comprises of two officers who are involved in day-to-day
administrative and basic technical support. Hunain understands that setting up e-publishing
would involve cost but he is optimistic that it is a one-time cost which could be recovered in
no time as e-publishing would have an immediate positive effect on the profitability of the
company.
Required:
(a) Discuss the potential challenges to e-publishing that TVL may encounter. (06)
(b) Comment on CEO’s viewpoint that e-publishing would involve one-time cost that
would be recovered immediately. (03)
(c) Evaluate Zarnish’s suggestion of duplicating the existing brand identity for e-publishing.
Suggest the other possible alternatives of e-branding that may also be considered. (04)
(d) Discuss how CRM system could assist TVL in attracting and retaining the targeted
customers. (05)
(THE END)
Suggested Answers
A.1 SB followed international scale operations / standardization strategy to expand its

business in Sirania. It tried to replicate its standard product and approach to selling coffee
in Sirania by shipping coffee directly from its central plant in Amerita.
The benefits of such a strategy are that SB can keep a tight control on the standard
product offerings thereby ensuring consistent product quality. Also, it can reap benefits of
economies of scale in its product offerings, thereby it helps to obtain cost-minimizing
balance between production costs and distribution costs.
However, such a strategy makes it difficult to cater to variations in the local market
needs.
It is clear that international scale operations/standardization strategy was unsuccessful in

Sirania. To be successful in Sirania, SB must understand that critical success factors
(CSF) for Sirania are different from Amerita and tackle them accordingly. Following are
the CSF for Sirania:
 Local taste
 Social drink
 Neighborhood café culture
 Personalized service
 Acceptance by the local clientele
 Popular tourist spots
To tackle the CSFs, SB should have followed the international diversity strategy, also
called multi-domestic strategy. In this strategy, the company recognizes the differences in
customer needs in each different country, and bases its strategy on the view that most or
all value-adding activities must be located in the country where the target national market
is located. In each country, the product is adapted to suit the unique requirements of the
local customers.
SB should have adapted their business to tackle the CSF’s in Sirania as follows:
 It should offer menu according to the local taste.
 It should improve its service to reflect the local culture.
 It should not open all the branches at once, instead, it should grow organically to
stand a better chance to be accepted by the community.
 It should open cafes in neighborhoods where the market of such drinks lie in
Sirania.
 It should continue operating cafes at tourist spots (all lakes) as tourists like SB’s
coffee.
 It should also consider collaboration strategies with local businesses who
understand the local environment in Sirania. The strategies may include strategic
alliances, joint ventures, franchising, etc.
Page 1 of 9
Suggested Answers
A.2 (a) Company A

Current stage:
It is in Phase 2 (Period of growth through direction) of Greiner’s growth model. In
this phase:
 the entity is more structured with a ‘traditional’ management hierarchy.
 formal systems are present.
 growth happens through direction, formal procedures and systems.
Crisis to be expected:
Crisis of autonomy is to be expected. As the entity grows, the hierarchical
management structure would become inefficient. The control systems and
reporting systems are designed for close control from the top by senior
management. However, management control from the top would not be as
effective as it used to be. Top management is far away from actual operations, and
‘local’ managers know much more about how the business functions in their area
of operations.
Company B
Current stage:
It is in phase 3 (Period of growth through delegation) of Greiner’s growth model.
In this phase:
 the entity is reorganized, with much more authority delegated to ‘local’
managers.
 the entity is organized in divisions, which might be profit centers. Central
management receives reports from the divisions, but divisional managers take
most of the decisions about how the division should be run.
 central management concentrates much more on strategy and business
expansion.
Crisis to be expected:
Crisis of control is to be expected. As the business continues to grow, central
management would realize that they are losing most of their own authority, and
that the local managers are becoming perhaps too powerful and unaccountable.
(b) The industry analyst is not entirely right.
Basically, anything that results in company B to increase its rate of growth (i.e.
increase in size of the company in a relatively less time), in phase 1 and phase 2 of
Greiner’s model, could be the reason for its relatively rapid growth. Therefore,
yes, it is possible that a better sales and marketing team could be more efficient in
bringing in new business from the market, which would result in a higher profits
and consequently increase in the size of organization. As a result, the company
can grow quickly and reach the ‘crisis’ stage faster.
However, there could be numerous other reasons on how the company evolved so
rapidly and successfully e.g. better operations team, efficient innovation
mechanisms, better planning and control systems, effective customer relations
team, etc.
Also, ability to handle ‘crisis’ more effectively and efficiently may also be a reason
to evolve more rapidly, for example, the ability to adopt to change efficiently
should help the organization to evolve more quickly, ability of the management
team to predict and tackle crisis better should help them be prepared for the crisis
ahead of time, etc.
Page 2 of 9
Suggested Answers
A.3 (a) Before deciding upon which disciplinary action to take, management has to keep
in mind the very purpose of it. The goal is to guide the employees towards a better
performance or an appropriate conduct. The process has to be constructive and
should not be meant for punishing the employees.
In the given case, if all the information holds true then Laiba’s continuous below
par performance might be detrimental to the company in the long-run as other
staff may also start believing that there are no disciplinary actions in place if
desired results are not achieved. However, the dismissal should be considered as a
last resort when other progressive disciplinary actions fail to gain employee’s
attention.
Faraz could have taken following alternative disciplinary action(s) before finally
deciding to dismiss Laiba:
Written warning(s)
Faraz had verbally warned Laiba. So, the next alternative could have been a
written warning(s) in the form of a letter discussing the problem area, impact of
issue and consequences of repeated occurrences.
Suspension without pay / reduction of pay within a class

Faraz could have suspended Laiba for a certain number of working days and dock
the pay for the number of days suspended or reduced her pay for the same position
and work. However, it should be in line with the company’s policy and as per
employment contract of Laiba.
Demotion to a lower classification

Another alternative could have been a demotion. However, this disciplinary action
would need to be backed by a reasonable expectation that Laiba would perform
well at the lower position.
(b) Shortcomings in the performance appraisals of Laiba along with suggestions for
improvement are discussed below:
 Laiba saw performance appraisals as an occasion for criticism from Faraz. It
is recommended that a more constructive approach can be adopted whereby
employees are encouraged to understand and improve their performance
rather than seeing it as some form of confrontation.
 It appears that appraisal interviews were one-sided as Faraz mostly talked
about Laiba’s weaknesses and failures and ended the interviews by giving his
assessment of her competence. It is recommended to adopt more
participative approach whereby staff should also be given an opportunity to
answer back and share their opinions.
 It appears that performance appraisal is an annual event as Faraz had barely
interacted with Laiba other than for annual appraisal interviews. It is
recommended that more frequent appraisal should be performed (quarterly,
half-yearly) and there should also be a follow-up action plan in place.
 It appears an appraiser bias (personal bias on an old age) is involved as
claimed by Laiba. It is recommended to provide training to appraisers to
learn how to avoid any prejudice or discrimination against staff for personal
reasons and focus on objective performance-driven reasons.
 It appears that Faraz only verbally warned her and no formal records of
performance appraisal interviews are maintained. It is recommended that
whatever targets or objectives for the employee are agreed, should be
recorded and documented as these will provide the basis for follow-up action
and feedback.
Page 3 of 9
Suggested Answers
(c) The senior management may follow the following disciplinary process:
 Establish the facts of the case. This is particularly important as Laiba has
claimed that Faraz has treated her discriminatorily. If Laiba’s claim is correct
then Faraz should be questioned for his action. The purpose at this point of
time is to collect and collate all relevant evidence.
 If it is established that there exists a disciplinary case that needs to be
answered, then intimate Laiba for a disciplinary meeting through a written
notice. The notice should contain all necessary details about the case so that
Laiba has the opportunity to prepare well to answer the points likely to be
raised at the disciplinary meeting.
 At the disciplinary meeting, Laiba should be given fair opportunity to answer
the case, ask questions, present evidence, call witness or accompany by a
companion as well.
 After the disciplinary meeting, the decision taken by the management should
be informed to Laiba. It might be appropriate to give her a written warning(s)
to be followed by progressive disciplinary actions.
 Laiba should be given a right to appeal if she feels that action against her is
wrong or unjust. In case she appeals, it should be heard impartially and
without any unreasonable delays. The decision of the appeal should be
communicated to her in writing.
A.4 (a) By using 4 P’s of marketing mix, the existing marketing strategy of GIL is
explained as follows:
Product
GIL is pursuing ‘product differentiation’ strategy. According to this strategy,
product is differentiated by means of unique design, packaging or features that are
not available in the market. The customers of GIL seem happy to enjoy the unique
experience which otherwise is not available from other competitors.
Price
GIL is pursuing ‘market skimming price’ strategy. According to this strategy,
higher price is charged to maximize the profits at the early stage of product life.
This strategy seems justified as GIL has patent over the unique design and ultra-
advanced features of Console that are not being offered by the competitors and
targeted high-end customers are willing to pay premium price.
Place
GIL is pursuing strategy of selling Console through dedicated website and flagship
stores wherein customers can have the real feel of the product before buying it.
Promotion
GIL is pursuing a pull strategy of promotion. This strategy aims at getting the
end-consumer to buy the product. GIL is achieving this objective by means of
celebrities’ endorsements and positive word of mouth.
Page 4 of 9
Suggested Answers
(b) The management’s decision to continue the existing marketing strategy for high-
end customers is less likely to be successful unless:
 GIL has strong customer loyalty who would continue to buy its console
irrespective of availability of Console’s variants at varying rates from the
competitors of GIL.
 GIL would be able to continue to differentiate Console from its competitors.
This can be achieved by adding new unique features (design, packaging, etc.)
that are either difficult to imitate or get them patented from copying by the
competitors.
(c) GIL may pursue following marketing strategy for standard and economical
variant Console:
Product
Pursue cost leadership strategy by seeking to become the least-cost producer. The
aim would be creating the same value as competitors but at a lower cost.
However, for this strategy, GIL would need to have an excellent system of cost
control to cut down costs that do not add much value.
Price
Pursue market penetration pricing strategy. It would involve charging low price
with the aim to build customer demand quickly and winning a large share of the
potential market.
Place
Add new avenues for place where customers can buy the product. This may
involve development of a distribution network to get Console to the places where
customers want to buy it for example, major retail outlets.
Promotion
Adopt aggressive promotional strategy. This may include push strategy by using
marketing tools such as low prices and generous credit terms to persuade the
distributors to buy and stock-up Consoles, offering special discounts to customers,
etc.
A.5 Huzaifa may carry out a mirror test by asking following questions to himself:
 Is proposing Dubai for training program legal? If it is not legal then I should not be
proposing it.
 What will other people think? Particularly key stakeholders such as board of
directors (who has shown trust on me in proposing a training program), colleagues
(who might feel bad that I put personal interest over organizational interest),
family (who may consider that I am fulfilling my desire of visiting Dubai Expo
2020, at the cost of the company), etc.
 Is it ethically correct? Can I see in the mirror a person who has acted in a moral
and ethical way and whether I can justify my actions from an ethical perspective?
Page 5 of 9
Suggested Answers
A.6 (a) ATM may take following steps in formulating its CSR policy:
 Decide the code of ethical values.

 Establish the existing position in terms of its code of ethical values and
decide the position it would like to reach in the future.
 Set realistic targets for achieving the desired position.
 Identify the key stakeholders whose opinions matter the most or whose
views ATM wishes to influence (European customers and pressure group).
 Select the reporting process through which ATM would communicate its
CSR achievements to the key stakeholders.
 Define the monitoring procedures through which actual achievements can
be compared with the targets and necessary actions can be taken on a timely
basis.
(b) The board member’s concern is not entirely correct. The adoption of CSR
program and related reporting would add new costs but it would also assist ATM
in portraying itself as a company that acknowledges its ethical and corporate social
responsibilities. This would result in improved reputation among stakeholders in
particular customers from European market and local pressure group. Therefore, it
is advised that ATM to perform cost vs benefit analysis before making the final
decision.
(c) ATM may take following measures to reduce its environmental footprint and
increase social footprint:
Environmental footprint measures:

 Adopting green procurement policies.
 Encouraging waste minimization and waste management by adopting
policies on reducing pollution and recycling waste.
Social footprint measures:

 Achieving employee diversification in terms of appropriate ratios of male,
female and minority groups.
 Making donations to communities and sponsorships of social events.
(d) ATM may adopt ‘Triple bottom line’ as its reporting framework for sustainability
reporting. Its aim is to encourage companies to recognize social and
environmental issues in their business models and reporting systems. This
reporting framework is also encouraged by Global Reporting Initiative (GRI)
which is an internationally recognized non-profit body that promotes
sustainability reporting.
Page 6 of 9
Suggested Answers
A.7 (a) Soapsy has rightfully picked the correct strategic gap as there are only two product
variants in the market, any other variant would strategically be a gap in the market
e.g. different size of the soap bars and liquid soap bottles other than the standard
ones.
The target customers, air travelers, usually have space and weight limitations,
hence, smaller sized portions of soap bar and liquid soap bottles is a viable
solution for the purpose.
There could be other strategic gaps as well such as different colors, shapes,
fragrances, etc.
(b) Standard soap industry trend:

The ‘standard-size’ soap industry showed consistent growth up until Dec 19, after
which, Mar 20 showed a huge surge in the quantity of both of the types of
products sold. Although, liquid soap showed a bigger percentage increase (i.e. 78%
up) than the soap bars (i.e. 36% up). After 2020, both the product types kept the
high usage volume and showed consistent growth.
Probable reasons:
 Change in consumer behavior is likely caused by changes in external
environment after Dec 19. The trend shows that people are consuming more
liquid soap bottles and soap bars that are a common house hold / indoors
product for hand wash. The surge in the demand may be due to people
spending more time at home or indoors, also, there may be a need to clean
hands more often.
 Infectious disease (e.g. covid-19) that spreads through touch may require
people to stay indoors, such a scenario may result in an abrupt change in
demand of the product which may change consumer behavior, attitude and
usage of standard soaps.
Soapsy:
Mini-soap bar trend:
It showed a gradual decline up until Dec 19, after which, Mar 20 showed a steep
decline in the number of products sold. After 2020, the product continued to level
off and did not sell beyond 30,000 units.
Probable reason:
The product may not be accepted in the market. This may be because soap bars
that are expected to be used 9 to 10 times are difficult to keep as they can get wet
and dissolve quickly, which can be a messy outcome for a traveler.
Mini-liquid soap:
It showed consistent growth in sales up until Dec 19, after which, Mar 20 showed
a steep decline in the number of products sold. From Dec 2020, it shows a huge up
surge in sales, way more sales than before 2020 (i.e. 94% increase). After 2020, the
mini-liquid soap keeps the improved sales figures and shows consistent growth
hereon forth.
Probable reasons:
 The liquid bottles are less messy to keep and are easily managed for 9 to 10
times of usage.
 The change brought about by the change in consumer behavior, which is
likely caused by the environment or external factors to the company, for
example, an infectious disease that causes people to wash hands frequently.
Page 7 of 9
Suggested Answers
Overall comments:
For the slump in sales that almost brought Soapsy business to a halt may have
happened due to reduced air travel (e.g. caused by air travel restrictions) that
decreased the need for travelers to carry soap with them.
(c) Should the circumstances of 2020 occur again, Soapsy could:

 Cut down the production until the environment becomes favorable again.
 Analyze other gaps in the market and serve it.
 Use alternate channels where the ‘mini-products’ could be viable e.g. trains,
restaurants, buses, etc.
 Make bigger soaps (or soap bundles) and bottles to serve the change in
consumer behavior to use more hand wash soap.
 Follow the trend i.e. make standard soaps, given the capability is available.
This will mean directly competing and getting into strategic space served by
existing market players. For this, Soapsy can utilize the following strategies:
 Cost leadership – try to reduce cost and hence price of the standard
soap.
 Differentiation – make the product different from others e.g. by using
different colors, shapes, fragrance, etc.
 Focus – try to serve the needs of a niche market e.g. restaurants, etc.
A.8 (a) TVL may encounter following potential challenges to e-publishing:

 An IT infrastructure would be needed to support e-publishing that would
involve high costs such as development of website, availability of high
bandwidth, facilities for online payment, etc. This would particularly be
challenging as TVL’s declining profitability is the key concern of CEO.
 The existing IT team comprises of only two staff who are involved in day-
to-day basic administrative and technical support. For e-publishing, TVL
would either have to hire a specialist IT team or recruit new members or to
arrange the training for the existing IT staff to have necessary knowledge
and skills to successfully operate e-publishing.
 E-publishing would facilitate direct interaction with customers which
appears to be absent currently. This would call for marketing and customer
relationship skills which could either be met by hiring a marketing team or
outsourcing to marketing specialists having knowledge of e-marketing and
dealing with customer queries and related matters.
 The existing supply chain involves the content writers, distributors and
retailers. The e-publishing would likely change the existing business model
significantly. Particularly, distributors and retailers may raise objections and
either call for revised pricing/commission or refuse to continue the business
with TVL.
(b) The CEO’s viewpoint is not correct because:

 the website for e-publishing would need to be kept up-to-date in terms of
new uploads and edits as well as a dedicated technical team would also be
required to ensure 24/7 support. Therefore, the assumption of on-time cost
is not entirely true.
 it will take time to develop a website, recruit and train staff, marketing and
attracting the customers to make a purchase from website. So, the
assumption of CEO that it would have an immediate positive impact on the
profitability of the company might not hold true either.
Page 8 of 9
Suggested Answers
(c) Zarnish’s suggestion of duplicating the existing brand identity would be effective
as developing and gaining recognition of new brand identity would involve time,
skills and costs. However, if TVL fails to duplicate its existing brand identity
(quality content and catchy images) effectively for e-publishing, its existing brand
identity would also get damage.
The other possible alternatives for e-branding that may also be considered:
 Extend the existing brand by creating the slightly different version of it. This
would allow the association with the existing brand as well as also suggest
to the customers that the e-publishing offered by TVL might be different.
 Partnership with an existing e-brand. For example, partnership with the
established online bookstores or e-libraries. This would give an immediate
access to the existing customer base of partnering organization.
 Create a new brand for e-publishing. It would allow TVL to break free from
the perceptions associated with the old brand name which customers might
have perceived as too traditional.
(d) CRM could assist TVL in attracting and retaining the targeted customers as
follows:
 Collecting customer information. It would assist in identifying and
categorizing targeted customers according to their interests.
 Storing customer information. It would help in creating a customer database
where all the customer information would be kept up-to-date.
 Accessing the information when needed. It will retrieve the desired
customer information which could assist in improved personalized customer
services.
 Analyzing customer behavior. It would help in providing better customer
experience when they interact with TVL as staff dealing with these
customers would be well-informed about their purchasing patterns.
 Monitoring of key customer management performance indicators, such as
number of customer complaints. It would help in minimizing customer
complaints.
(The End)
Page 9 of 9
SUBJECT SESSION
Business Management and Strategy Certified Finance and Accounting
Professional (CFAP) Examination
Winter 2021
Passing %
Question-wise
Overall
1 2 3 4 5 6 7 8
06% 28% 50% 33% 60% 52% 08% 74% 36%
General comments
The overall result in this paper was consistent with the previous session result of 33%. It has been
commonly observed during the last many sessions that performance in the less frequently
examined questions [In the current session, Q.1 (international business operations) and Q.7
(strategic gap)] were below average which reflected selective studies.
Question 1
 Examinees seemed incognizant of concept of international business operations as strategies

such as international scale operations and international diversity were barely discussed.
 The requirement of Critical Success Factors (CSF) was either ignored or only 1-2 relevant
CSFs were correctly identified and discussed.
 There was lot of repetition of the same points. The adaption of business strategy in accordance
with the needs of locals was in particular repeated with different wordings.
 Some examinees suggested Porter’s generic strategies such as cost leadership, differentiation
and focus that had barely any relevance in the given context.
Question 2
 Examinees not aware of Greiner’s growth model opted for guesswork and ended with mostly
reproducing the information from question.
 Instead of explaining the expected crisis, many examinees opted to discuss the strategies to
respond to the expected crisis.
Page 1 of 3
Examiners’ Comments on Business Management and Strategy – CFAP Examination Winter
2021
 Many examinees wrongly identified and discussed the existing growth phase of Company B
and the crisis expected to be faced by it.
 Some examinees restricted the evaluation of industry analyst’s comments to the extent of
agreeing or disagreeing only without giving any adequate justification.
 Some examinees wasted time in discussing the benefits of divisionalization that had no direct
relevance to the given requirement of the question.
Question 3
 The evaluation of disciplinary action was weak as examinees mostly focused on suggestion of
other alternative disciplinary actions.
 While discussing the shortcomings in the performance appraisals, some examinees offered
answer in general by highlighting all shortcomings available discussed in the study text and
did not consider the given case scenario.
 Instead of offering suggestion for improvement against each shortcoming, many examinees
opted to offer suggestions in general.
 While discussing the disciplinary process, the steps such as ‘establishing the facts’ and ‘giving
an opportunity to appeal against the decision’ were mostly missed out.
Question 4
 Examinees did not identify the relevant strategies such as ‘product differentiation’ or ‘market
skimming price’. Instead, offer general discussion that often mismatched with the actual
strategies.
 In part (b), large number of examinees discounted the fact that company’s product had strong
customer base that was willing to pay premium price.
 In part (c), some examinees wrongly construed standard and economical console variant as
two separate variants and wasted time in offering different strategies for them.
Question 5
 The mirror test was carried out on the basis of questionnaire only and explanation against each
question was missed out by many examinees.
 Some examinees focused on giving the final decision instead of explaining how to reach to
that final decision which is the main purpose of carrying out the mirror test.
Question 6
 Instead of advising the steps that must be followed in formulating the CSR policy, examinees
discussed the factors that must be considered before deciding the CSR policy.
 Some examinees wasted time in discussing the role of management in deciding and
implementation of CSR program.
Page 2 of 3
Examiners’ Comments on Business Management and Strategy – CFAP Examination Winter
2021
Question 7
 Examinees restricted their answers to the extent of whether the chosen gap was correct or not
without offering any adequate reasoning to validate their answers.
 In part (b), many examinees restricted their analysis to the extent of direction of the trend only.
Some examinees discussed the competitors’ tactics or questioned the management’s policies
despite the fact that it was clearly indicated in the question that there were no observable
changes to the internal workings of the company and it had no direct competitors.
 Many examinees could only offer 1-2 future strategies correctly in the event of slump in sales
in future.
 Lot of repetition of similar points with different wordings or under various paragraphs was
noted in parts (b) and (c) of the question
Question 8
 Instead of using the information given in the case scenario, examinees opted to offer
challenges of e-business in general.
 Some examinees repeated the same point of increased cost under various paragraphs. For
example, cost of development of website, cost of maintaining the website, cost of providing
the facilities for online payment, etc. were discussed under different paragraphs under the
impression that these were distinct points.
 In part (b), many examinees restricted the discussion from the perspective of one-time cost
only and ignored the other aspect of immediate payback of investment. Some examinees
surprisingly agreed with CEO’s viewpoint and failed to offer any valid arguments.
 In part (d), examinees opted to mention the functions of CRM in single statements and failed
to discuss how each function of CRM could assist an organization in attracting and retaining
the targeted customers.
(THE END)
Page 3 of 3

Mark(s)
A.1 Evaluation of existing strategy 3.0
0.5 mark for each critical success factor 3.0
01 mark for suggestion of each improvement 5.0
A.2 (a) Explanation of growth phase of Company A 2.0

Explanation of expected crisis for Company A 2.0
Explanation of growth phase of Company B 2.0
Explanation of expected crisis for Company B 2.0
(b) Evaluation of industry analyst’s comments 2.0

Arguments 3.0
A.3 (a) Evaluation of disciplinary action taken 2.0

01 mark for each suggestion of other disciplinary alternative 2.0
(b) 0.5 mark for identification of each shortcoming 2.0

01 mark for each suggestion 4.0
(c) 01 mark for recommendation of each step of disciplinary process 5.0
A.4 (a) 1.5 marks for explanation of strategy under each ‘P’ of existing marketing mix
of GIL 6.0
(b) Evaluation of management’s decision 2.0
(c) Up to 02 marks for recommendation of strategy under each ‘P’ of marketing

mix 7.0
A.5 0.5 mark for raising each question 1.5

Up to 01 mark for discussion under each question raised 2.5
A.6 (a) 01 mark for each step 5.0
(b) Evaluation of board member’s concern 2.0
(c) 0.5 mark for recommendation of each measure 2.0
(d) Suggestion of reporting framework 1.0

Explanation of reporting framework 1.0
Page 1 of 2
Mark(s)
A.7 (a) Explanation of the gap identified by Soapsy 1.0
Arguments/comments on the gap identified by Soapsy 2.0
(b) Analysis of soap industry trend 1.0

Analysis of Soapsy trend 2.0
01 mark for identification of each possible reason and overall comment 3.0
(c) 01 mark for suggestion of each strategy 4.0
A.8 (a) Up to 02 marks for discussion of each potential challenge 6.0
(b) Disagreeing with CEO’s viewpoint 0.5

Arguments 2.5
(c) Evaluation of Zarnish’s suggestion 2.0

01 mark for suggestion of each alternative 2.0
(d) 01 mark for discussion of each point 5.0
(THE END)
Page 2 of 2

Strategy and Performance Measurement

(i) Answer all SEVEN questions.
Q.1 Elite Limited is engaged in manufacturing and selling single product ‘Alpha’. The sales
function is led by Babar who likes to involve his team in key decision making and gives them
free hand in meeting day to day challenges. He believes that his team comprises of
professionals who are highly motivated and need minimum support.
At the beginning of the year, Babar shared the following bonus scheme with his sales team:
Sales target
< 2,000 2,000 to 3,999 4,000 to 4,999 5,000 or more
(units)
One month gross Two months’ Three months’
Bonus No bonus
salary gross salary gross salary
The details of targets achieved by his sales team is given below:
Farheen – she is a self-motivated person. She sold 4,500 units. Babar believes that Farheen
could have met that level of target by utilizing lesser resources.
Shahzaib – he is the star performer. He sold 5,000 units. Given his potential, it would not
have been surprising for Babar if Shahzaib had sold more than 5,000 units during the year.
Kinza – she has methodical approach. She sold 2,000 units. During the year, there was an
opportunity for her to capture a large potential client. However, she failed to capitalize on it
in a fear that failure to capture that client may also affect her performance in meeting the
minimum target.
Zubair – he joined Babar’s team a year ago. He could sell 1,500 units only. He was determined
to meet the target for bonus and now believes that support from Babar could help him in
meeting the targets in future.
Required:
(a) Evaluate the performance of each team member of Babar. Also suggest the
improvements, if any, in the existing bonus scheme. (10)
(b) By using McGregor’s Theory X and Theory Y, discuss the management style of Babar.
Would you suggest change in the management style? (06)
Q.2 Yasir Ahmed is a pharmacist and an entrepreneur who has developed an expert system for
doctors that recommends possible medications available in the hospital pharmacy. The system
maintains a database of medications, their generic formula and possible symptoms for which
they are prescribed. When a doctor inputs the patient’s symptoms or a generic formula in the
system, it matches them with appropriate medications present in the database and presents
the doctor with different options of the possible medications. The system also contains a
glossary of technical terms used by pharmacists and their explanations.
Required:
Explain how the system presented above meets the essentials of a successful expert system. (06)
Strategy and Performance Measurement Page 2 of 4
Q.3 Dream Home Limited (DHL), property developer, has strong reputation for constructing
luxurious homes at the prime locations of Green Land (a country known for its landscapes).
DHL’s niche market comprises of affluent customers who seek state-of-the-art homes.
As per DHL’s policy, the homes are constructed and handed over to the customers within a
promised time of 12 months. This also gives DHL a competitive advantage over its
competitors who usually take 18-24 months to construct similar homes.
Green Land faced recession in the last year. However, during the current year 2021 i.e.
termed as recovery period by economists, the demand for homes has increased by an
estimated 25% from 2019 i.e. pre-recession period. The extracts of financial performance of
DHL for 2019 and 2021 are given in the enclosed Annexure.
During the period of recession, the board of DHL made some aggressive decisions including:
 acquiring 2,500 plots when the prices of plots went down by almost 40%. The acquisition
was financed through bank loan under a covenant that the entire loan will be immediately
repayable if gearing level (Debt / Debt + Equity) at book value exceeds 65% at any time.
 transformation from traditional marketing to digital marketing strategy. The marketing
team has taken various measures to communicate the unique designs and features that
DHL has been offering to the targeted customers.
In the recovery period, the profitability of DHL has improved significantly. However, the
management faced different set of challenges. One of the construction materials was short in
supply. Therefore, an alternative material was imported which caused delay in completion of
some homes by 3-6 months. Further, some customers have requested some design
modifications and management is considering to charge additional amount as imported
material has already resulted in additional costs. However, in the past, DHL has not charged
customers for such modifications.
Required:
(a) Evaluate the financial performance of DHL during 2021 in comparison with 2019. (15)
(b) Discuss the non-financial performance and recommend the improvements that may
need management’s attention. (06)
ANNEXURE
Extracts of statements of profit or loss (Rs. in million)
2021 2019
Revenue 65,000 42,750
Cost of sales (32,500) (28,500)
Gross profit 32,500 14,250
Marketing expenses (2,700) (1,800)
Selling and admin expenses (80% variable) (1,250) (1,000)
Operating profit 28,550 11,450
Interest expense (3,400) (1,710)
Profit before tax 25,150 9,740
Extracts of statements of financial position (Rs. in million)

2021 2019
Property, plant and equipment 5,000 4,200
Inventory (mainly plots) 48,750 32,500
Bank loan 40,000 18,000
Share capital (Rs. 10 per share) 500 500
Retained earnings 25,000 20,000
Other relevant data

Number of homes sold 650 570
Number of plots held in inventory 2,400 1,000
Competitors’ average sales price of homes
(Rs. in million) 80 68
Q.4 Kashan, FCA, has recently retired as CEO from Falcon (Pvt.) Limited (FL), having reputation
for good business practices. FL has been the tax client of Epitome Consultants (EC), for over
10 years. The Senior Tax Partner at EC, Asif, who has also been the tax partner of FL,
approached Kashan to join them as HR partner and also proactively supported his
appointment. Kashan found the position and pay attractive and joined EC.
In the recent partners’ meeting, Kashan, has been assigned a task to reason out the high staff
turnover with suggested improvements. The investigation has revealed that tax department
has the highest staff turnover mainly because of aggressive nature of Asif who often gets
offensive and has even fired some staff members because of differences of opinion with him.
Kashan has informally discussed Asif’s behaviour with another partner who advised him not
to include this matter in his findings report for next partners’ meeting. He informed that Asif
is the senior partner and usually has final say in all key matters and he might not appreciate
Kashan’s bringing the matter of his behaviour in the partners’ meeting.
Required:
(a) Discuss the threats to compliance with fundamental principles of ethics that Kashan
might be subject to. (06)
(b) Explain the fundamental principles of ICAP’s code of ethics that Asif may be
compromising. Also explain these principles from the perspective of Kashan if he agrees
not to include the matter of Asif’s aggressive behaviour in his finding report for next
partners’ meeting. (09)
Q.5 Nila Pani has emerged as a beautiful new tourist spot due to the creation of a small dam that
is about 5 hour drive away from Islamabad. It offers scenic views of green mountains and blue
water. Nila Pani has already attracted three hotels: Premier Hotel, Star Hotel and Nila Pani
Inn that charge Rs. 10,000, Rs. 3,000 and Rs. 800 per day, respectively. The rooms are all of
same size with a capacity of four persons. About three days’ stay is usually enough to cover
all the activities that include boating, hiking, and horseback riding for about Rs. 2,000 each.
It also has small restaurants around the dam that offer unique food experience. It is no surprise
that Nila Pani is quickly gaining attraction among weekend travellers. Although, it must be
said that the roads do not extend out to the spot yet and an experienced driver is needed to
tackle the challenges of the commute. Toyota GLi or Toyota Prado are recommended for the
journey and can be rented out for a return journey from car rental companies for Rs. 10,000
and Rs. 35,000 respectively.
Holiday Travels (HT) is a well-established local tour operator. HT wishes to capture the
growing market for Nila Pani and has already conducted site and market research. It was
found that a couple of travel companies who are direct competitors of HT have already
discovered the spot and are offering following four-person packages for three days:
 Package A : Rs. 70,000 (Included: Premier Hotel room and Toyota Prado return fare)
 Package B : Rs. 30,000 (Included: Star Hotel room and Toyota GLi return fare)
 Package C : Rs. 14,000 (Included: Nila Pani Inn room and Toyota GLi return fare)
HT also wishes to develop 3 days’ weekend packages for all the three hotels with minimum
20% profit on each package.
Required:
(a) Provide all the four-person package options possible with respect to hotel and vehicle
type and highlight the gaps in the market. (04)
(b) Recommend the most appropriate package option for each hotel from (a), and suggest
possible Porter’s competitive strategies for it. (13)
(c) HT’s representative has devised a Premier Hotel package targeting affluent families in
Islamabad. To promote the package, he is planning to place an advert in the national
newspaper and directly call people in posh areas of the city. Analyse the promotional
strategies devised by HT. (04)
Q.6 Kolachi Nihari (KN) is a new restaurant that is becoming popular for its unique taste of nihari.
It is using traditional methods of promotion such as billboards, brochures and promotional
vouchers to attract the customers.
KN has a bustling dine-in, takeaway and delivery business. However, the telephone calls for
deliveries are too many to handle and there are numerous complains of erroneous order
taking. KN is considering to develop its own web-portal or use an e-intermediary to handle
the order taking aspect of the business.
Required:
(a) Explain why using e-intermediary would be a better option for KN than developing its
own web-portal. (08)
(b) Explain the existing promotion strategy of KN. Also, suggest how it could be different
if KN decides to select the platform of e-commerce. (05)
Q.7 Secure Access Ltd. (SAL) is an IT company that provides access control solutions to offices.
SAL’s solution is an integrated system that has both hardware and software components. For
a typical 800 to 1000 sq. ft. office with a main entrance and an exit, SAL follows a standard
plan. The network analysis and activity table for the standard plan are presented below.
Activity Task Duration (Working days)
A Requirement Analysis 5
B System Design 5
C Frontend Programming 10
D Backend Programming 12
E Test Programming 5
F Hardware Installation 10
G Network Setup 5
H System Integration 5
I System Testing 7
J Training/Support 5
K Handover/Go Live 2
Diagram:
A new customer has agreed with everything about the standard project except the timeline.
He has asked SAL’s manager to reduce the minimum project timeline. In an effort to serve
customer requirement, the manager has proposed the following to SAL’s management:
(i) The first part of Activity G, i.e. setting up of LAN cables and wiring, takes 3 days before
they are connected with the hardware. Therefore, this first part of Activity G can be
started simultaneously with Activity F. The remaining part of Activity G can start right
after activity F. This will reduce the float and overall timeline by 3 days.
(ii) Activity E constitutes of three parts: testing of frontend programming
(Duration: 2 days), backend programing (Duration: 2 days) and all programming
together (Duration: 1 day). Since Activity C finishes first, it can be tested by itself first.
The rest of the Activity E can be done after Activity D. This will reduce the float for
Activity E and overall timeline by 2 days.
Required:
Analyse the proposals in detail and recommend your approval for each. (08)
(THE END)

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ICAP ATTEMPTWISE

(UPDATED TILL SUMMER-2022 ATTEMPT)

By the Grace of Almighty Allah, I am pleased to present the

suggested answers of past ICAP examinations.

commenting or printing of these answers is strictly prohibited.

Final Examinations Winter 2002

December 13, 2002

BUSINESS MANAGEMENT (MARKS 100)

Q.5 (a) What should be the process of training in an organization? (05)

Q.7 (a) What do you understand by “Segmentation” and “Targeting” (04)

Final Examination Summer 2003

June 05, 2003

BUSINESS MANAGEMENT (MARKS 100)

He therefore decided to implement the following procedures immediately:

q The leasing proposals would have to be approved as under:

On investigation, you were able to ascertain that

(b) Why is succession planning considered a critical part of effective corporate

Q.4 Strategy evaluation can be achieved through measuring organizational performance.

Final Examinations Winter 2003

December 04, 2003

Business Management (MARKS 100)

*Estimated from consolidated industry figures.

Q.3 Human Resource Management is a strategic approach to acquiring, developing,

Q.4 Can the efficiency of an organization be measured in non-financial ways? If yes,

Q.5 Explain the following terms:

Q.7 Do you agree that “international business is really a collection of domestic

Final Examinations Summer 2004

June 09, 2004

BUSINESS MANAGEMENT (MARKS 100)

Director Marketing is however, reluctant to take a head-on war with the

Q.3 (a) What is the essence of a `learning organisation’? Elaborate. (02)

Q.6 A manufacturer of cosmetics and toiletries introduced a new product to increase

Q.9 Why is it advisable to integrate HR development activity with a company’s strategic

Final Examinations Winter 2004

December 09, 2004

BUSINESS MANAGEMENT (MARKS 100)

(b) Can the performance of a business organization be measured in non-financial

(c) A major international cigarette company is running advertisements about how it

The Board of Directors is meeting to conduct a marketing strategy review of the

You, as Head of Strategic Planning, have been asked to present your

(b) The interview is an extremely popular and effective method of selecting

Q.4 Quality has become an increasingly important factor in determining business

• Transfer technology and help develop local industry

Final Examinations Summer 2005

June 09, 2005

BUSINESS MANAGEMENT (MARKS 100)

• An HR / Operational Management standpoint, to fix the working conditions and bring

Explain with examples, the above classification. (08)

Final Examinations Winter 2005

December 08, 2005

BUSINESS MANAGEMENT (MARKS 100)

(a) Please comment on the above statement. (04)

Q.6 Inter departmental conflict is an important issue in any organization. A number of

Final Examinations Summer 2006

June 08, 2006

BUSINESS MANAGEMENT (MARKS 100)

(a) Strategic management is solely a top management job. (03)

(c) You are a consultant appointed to facilitate introduction of change in one of

(b) Market Segmentation is based on the recognition of the diverse needs of

Elaborate with at least 2 examples each (06)

• Prices must be brought at par with competition.

Q.7 In selecting candidates for employment, interviews are often supplemented by

(a) Differentiate between push and pull strategies. (04)

Final Examinations Winter 2006

Fixing of prices in collaboration with competitors.

in-depth knowledge of their products, their strengths and special customer