DO NOT OPEN THIS QUESTION PAPER UNTIL YOU ARE TOLD TO DO SO

Enterprise Pillar Management Level

E2 Enterprise Management
Thursday 1 March 2012
Instructions to candidates
You are allowed three hours to answer this question paper. You are allowed 20 minutes reading time before the examination begins during which you should read the question paper and, if you wish, highlight and/or make notes on the question paper. However, you are not allowed, under any circumstances, to open the answer book and start writing or use your calculator during this reading time. You are strongly advised to carefully read all the question requirements before attempting the question concerned (that is all parts and/or subquestions). ALL answers must be written in the answer book. Answers or notes written on the question paper will not be submitted for marking. ALL QUESTIONS ARE COMPULSORY. Section A comprises 5 questions and is on pages 2 to 4. Section B comprises 2 questions and is on pages 5 and 6. The list of verbs as published in the syllabus is given for reference on page 7. Write your candidate number, the paper number and the examination subject title in the spaces provided on the front of the examination answer book. Also write your contact ID and name in the space provided in the right hand margin and seal to close. Tick the appropriate boxes on the front of the answer book to indicate which questions you have answered.

TURN OVER

The Chartered Institute of Management Accountants 2012

E2 Enterprise Management

SECTION A 50 MARKS
[You are advised to spend no longer than 18 minutes on each question in this section]

ANSWER ALL FIVE QUESTIONS IN THIS SECTION

Question One
Many organisations are making decisions to outsource some of their activities. However, when considering the option to outsource, organisations must consider the transaction costs which may be incurred. These will be influenced to some extent by the specificity of the assets required for the contract.

Required: (a)
Describe FOUR types of transaction cost which organisations could incur if they use an outside supplier for an input or service. (4 marks) Explain what is meant by the term 'asset specificity', providing examples of THREE different types of asset specificity. (6 marks) (Total for Question One = 10 marks)

(b)

Question Two
Risk management is an important aspect of managing a project in order to ensure that the project objectives are completed successfully and with the minimum of undesirable events. The task of managing risk is to ensure that the organisation makes effective use of a risk process that has a series of well defined steps.

Required: (a)
Describe the steps that a project manager should include in the process of risk management. (6 marks) Explain TWO strategies that a project manager might implement to address a project risk. (4 marks) (Total for Question Two = 10 marks)

(b)

Section A continues on the opposite page

Enterprise Management 2 March 2012

Question Three
YT is the Finance Manager of SBM Magazine Publishing Company. He has recently had his appraisal and was expecting that he would get a good review, since he felt that he had met all of his targets for the year, although at a personal cost of working exceptionally long hours. YT was therefore surprised when his line manager, RP, suggested to him that he was not using his staff effectively and should be delegating more work to his team. Whilst RP commented that YT had achieved the department's objectives, he suggested that delegating more would be mutually beneficial to YT and his team as well as being in the long term interests of the company.

Required:
Explain the benefits of delegation from the point of view of YT, the Finance Manager, and also his team. (Total for Question Three = 10 marks)

Question Four
Z works for HS Company and has been asked to undertake an assessment of any health and safety issues that may be potential hazards in the department which she manages. Zs response was that she did not see the need to undertake the assessment as her department only had computers and a photocopier and she did not see what hazards they could cause. Z felt that her time would be better spent delivering company objectives as that would be more cost beneficial.

Required:
(a)
Describe the types of hazards that might be found in Z's department. (4 marks)

(b)

Illustrate the benefits to a company from having a robust health and safety procedure. (6 marks) (Total for Question Four = 10 marks)

Section A continues on the next page

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March 2012 3 Enterprise Management

Question Five
M has recently joined the board of X Company, a major listed confectionary manufacturer. The company was established as a family business over a century ago and members of the founding family still occupy many of the senior board positions. When directors are due to retire they are usually replaced by other family members. The Board is reluctant to make any external appointments, M being an exception. M has noted that there are seven executive board members and only two non-executive members. On doing some homework about each of the directors, M discovered that all of the directors were from similar backgrounds. At the first board meeting after Ms appointment, the board papers for discussion were handed out at the start of the meeting. The agenda included discussion of a major contamination issue that had occurred in one of the manufacturing plants but when this point was to be discussed at the meeting it was discovered that the board papers for discussion had been omitted. One of the major institutional investors had expressed concern over the incident. At the subsequent board meeting the executive chairman commented that the company had outperformed in its sector in the past year and that the shareholders should therefore trust him to run the company as he sees fit.

Required:
Analyse the corporate governance issues facing X Company. (Total for Question Five = 10 marks)

(Total for Section A = 50 marks)

End of Section A Section B starts on the opposite page

Enterprise Management

March 2012

SECTION B 50 MARKS
[You are advised to spend no longer than 45 minutes on each question in this section]

ANSWER BOTH QUESTIONS FROM THIS SECTION 25 MARKS EACH

Question Six
S Company has been awarded the contract for the refurbishment of a local hotel. The overall timescale for the project has been agreed at 30 weeks (a very fast completion for this sort of project). The timescale is not flexible as the hotel needs to re-open to host the wedding of a very famous and influential music star. In order to meet this deadline the project has no contingency. All other information about the project is vague as the hotel only produced a brief document outlining the requirements of the project. No definite specification was included in the document with the hotel commenting 'we are not the experts; we will let them tell us what we need; after all they should know.' B has been assigned as project manager and has focused on selecting the project team which has meant that no detailed plan has yet been produced. When one of the project team members asked about the tools and techniques to be used on the project, B seemed unsure about which ones would be most beneficial and suggested that he was going to rely on project management software. The project team is concerned about the lack of control on the project as there appear to be no project milestones. Due to the amount of other project work in S Companys order book, some of the core staff have had to be released from the hotel refurbishment project. This has meant that phase one of the project is now two weeks late and the first stage payment from the hotel is therefore also delayed. It has been brought to Bs attention that the hotel would like to add additional activities to the original project specification and wants a meeting to discuss the implications of the changes to the overall project progression. B has asked about the project initiation document which he feels should form the basis for the discussion of the changes. B has been told that the 'brief document' compiled by the hotel is the only document available.

Required: (a)
Explain to S Company the purpose of a project initiation document and what should have been included in the document for the hotel refurbishment project. (10 marks) Explain the problems that are threatening the success of the hotel refurbishment project and the ways in which B can minimise the threats identified. (15 marks) (Total for Question Six = 25 marks)

(b)

Section B continues on the next page

TURN OVER
March 2012 5 Enterprise Management

Question Seven
RF and JT are both former international rugby players who, when they retired, formed their own business, WFH Trading Company. The company that they established initially manufactured replica sports shirts and its own branded casual wear bearing their names and unique logo. The main route to market at the outset was through the companys own mail order catalogue. As the business has developed it has diversified into a wide range of related products such as footwear, outdoor clothing and accessories. To date, the growth of the business has tended to happen opportunistically rather than being a planned approach. However, in recent months it has become clear that the two partners, RF and JT, have quite different views on the future direction that WFH Trading Company should take. JT feels strongly that, given the stage of the company in its lifecycle, it is now time to take a more formal and planned approach to the businesss development. In particular, having recently attended a business seminar on strategies for growth he is suggesting that the company could benefit from undertaking formal planning using the rational approach to strategy development. JT feels that this would help the company evaluate the alternatives for future growth. As part of this process, he is keen to look at new products and routes to market, including the internet and also investing in retail outlets. RF, however, thinks that it is best to let the strategy and developments for the business emerge. His entrepreneurial spirit leads him to remain unconvinced of the benefits of spending too much time on planning and is reluctant to change from what the company is currently doing which, in his opinion, has proved so successful for them both so far.

Required: (a)
Explain, with reference to WFH Trading Company, the main stages involved in the formal/rational approach to strategy development. (13 marks) Evaluate both the benefits and disadvantages of the formal/rational approach to strategy development for WFH Trading Company. (12 marks) (Total for Question Seven = 25 marks)

(b)

(Total for Section B = 50 marks)

End of Question Paper

Enterprise Management

March 2012

LIST OF VERBS USED IN THE QUESTION REQUIREMENTS

A list of the learning objectives and verbs that appear in the syllabus and in the question requirements for each question in this paper. It is important that you answer the question according to the definition of the verb. LEARNING OBJECTIVE
Level 1- KNOWLEDGE What you are expected to know.

VERBS USED
List State Define

DEFINITION
Make a list of Express, fully or clearly, the details of/facts of Give the exact meaning of

Level 2 - COMPREHENSION What you are expected to understand.

Describe Distinguish Explain Identify Illustrate

Communicate the key features Highlight the differences between Make clear or intelligible/State the meaning or purpose of Recognise, establish or select after consideration Use an example to describe or explain something

Level 3 - APPLICATION How you are expected to apply your knowledge.

Apply Calculate Demonstrate Prepare Reconcile Solve Tabulate

Put to practical use Ascertain or reckon mathematically Prove with certainty or to exhibit by practical means Make or get ready for use Make or prove consistent/compatible Find an answer to Arrange in a table

Level 4 - ANALYSIS How you are expected to analyse the detail of what you have learned.

Analyse Categorise Compare and contrast Construct Discuss Interpret Prioritise Produce

Examine in detail the structure of Place into a defined class or division Show the similarities and/or differences between Build up or compile Examine in detail by argument Translate into intelligible or familiar terms Place in order of priority or sequence for action Create or bring into existence

Level 5 - EVALUATION How you are expected to use your learning to evaluate, make decisions or recommendations.

Advise Evaluate Recommend

Counsel, inform or notify Appraise or assess the value of Propose a course of action

March 2012

Enterprise Management

Enterprise Pillar

Management Level Paper

E2 Enterprise Management

March 2012

Thursday Session

Enterprise Management

March 2012